Introduction to this report:
The company released its 2024 quarterly report. Revenue grew steadily, and profit slightly exceeded expectations. Benefiting from continued improvement in fee control capacity, continued high profit growth, and improved operating capacity, it is expected that subsequent performance will continue to grow.
Key points of investment:
Maintain an “Overweight” rating. The company released its 2024 quarterly report, achieving revenue of 2,403 billion yuan (+0.6%), net profit of 845 million yuan (+24.9%), and net profit of 726 million yuan (+19.8%) after deducting non-net profit of 726 million yuan (+19.8%). Revenue increased steadily, and profit slightly exceeded expectations, which is expected mainly due to increased fee control and improved profitability. The 24-26 EPS was maintained at 3.28/3.58/3.93 yuan, respectively. Referring to the industry average, the 2024 PE was given 16X, and the target price was raised to 52.48 yuan, maintaining the “gain” rating.
Profitability has improved markedly, and fee control guarantees a high profit growth rate. The gross margin of 2024Q1 in a single quarter was 81.1%, which remained stable; the net margin increased to 35.25%, up 6.9pct/7.0pct year over year, respectively, the highest value in nearly ten years, and profitability improved markedly. Among them: (1) The sales expense ratio was 41.2%, down 4.4 pcts compared to 23Q1. It is expected mainly due to ① the continuous increase in the share of core products outside the hospital, while the out-of-hospital sales expenses rate is lower than within the hospital; ② the hospital simultaneously adopted fee control measures. (2) The financial expense ratio is -3.9% (-2.3 pct year on year), which is expected to generate more interest income, mainly due to an increase of 3.9 billion yuan in monetary capital in 24Q1 compared to 23Q1. (3) Management/R&D cost rates were 3.8%/4.8% respectively, with a year-on-year average of +0.3 pct, which remained stable. We expect that with further control of sales expenses, it is expected that strong profitability will be maintained, and the high profit growth rate is expected to be maintained.
Operational capacity has improved, and accounts receivable have been significantly reduced. 24Q1 accounts receivable amounted to RMB 1,956 million, a decrease of RMB 290 million from 23Q1. Accounts receivable decreased significantly on the basis of a slight increase in revenue; cash received from sales of goods and provision of labor was RMB 3.426 billion, +310 million yuan /+1,183 billion yuan, respectively, and repayment capacity improved markedly. As of 2024/3/31, the company had cash of 11.39 billion yuan, with sufficient capital to prevent operating risks and provide financial support for future potential BD projects. The overall business situation continues to improve and is expected to continue in the future.
Catalysts: Sales of core products exceeded expectations, BD projects continued to advance, and new products were successfully commercialized
Risk warning: policy risk, collection risk, risk of core product sales falling short of expectations