Core views
On April 12, the company released its 2023 annual report, and the performance was in line with expectations. The company's main product restructuring factor VIII overcame increased competition and collection adjustments throughout the year, and sales achieved rapid sales volume, which led to a significant increase in the company's performance; it is expected that the pace of volume expansion will be maintained in 24 years, and approval for children's indications will further drive sales growth. The anti-CD20 monoclonal antibody successfully entered the national medical insurance catalogue at the end of 2023, laying the foundation for sales volume in 24 years; after the approval of the two biosimilar drugs, they continued to push forward online and hospitalization efforts in various regions, bringing in additional performance. The company has a rich research pipeline, providing a solid foundation for future growth.
occurrences
The company released its 2023 annual report, and the performance was in line with expectations
On April 12, the company released its 2023 annual report, achieving: 1) operating income of 1,887 million yuan, up 84.46% year on year; 2) net profit to mother - 396 million yuan, loss reduced by 23.70% year on year; 3) net profit without return to mother - 64 million yuan, loss decreased by 83.91% year on year. The results were in line with previous expectations.
Brief review
The rapid expansion of restructuring VIII factors led to a sharp increase in performance in the fourth quarter of 2023. In the fourth quarter of 2023, the company achieved operating income of 508 million yuan, an increase of 36.28% over the previous year; net profit due to mother - 176 million yuan, an increase of 51.28% year on year; net profit without return to mother - 73 million yuan, and loss decreased by 14.31% year on year. In 2023, the company achieved a sharp increase in revenue and a sharp narrowing of profit losses, mainly due to the rapid release of the main product recombinant human coagulation factor VIII. Among them, the reduction in net profit to mother was less than deducted from non-operating expenses, mainly due to a sharp increase in the company's external donations, which led to a 137.55% year-on-year increase in non-operating expenses.
The recombinant VIII factor was rapidly released, and the commercial product matrix began to take shape. In 2023, the company's restructured human coagulation factor VIII products achieved sales of about 1.78 billion yuan, an increase of more than 77% over the previous year. Despite facing the challenges of increased competition and price reduction in collection, the company actively responded with flexible and effective market strategies to ensure that all key provinces won the procurement bid. At the end of January 2023, recombinant factor VIII was approved for use in children under 12 years of age, bringing new impetus to performance growth. In terms of other products, the company's CD20 monoclonal drug repatumab successfully entered the national medical insurance catalogue in December 2023, laying the foundation for the 2024 product to enter more hospitals and open up sales space. The two bioanalogues, adalimumab and bevacizumab, were successively approved for marketing in June 2023. They were all approved for the original research drug at once. In the second half of 2023, they will be connected to the Internet and hospital in various regions. The company's commercial product range is gradually increasing, and the product matrix is beginning to take shape. It is expected to continue to drive performance growth in the future.
Investment in R&D continues to be strengthened, and R&D pipelines are gradually being enriched. The company continues to increase its R&D investment, with an overall R&D investment of 1,217 billion yuan in 2023, an increase of 25.06% over the previous year. In terms of the R&D pipeline, the 14-valent HPV vaccine SCT1000 began phase III clinical research in August 2023, and all 18,000 subjects were enrolled within 2 months. Marketing applications for the two indications of PD-1 monoclonal antibody SCT-I10A monotherapy for first-line treatment of head and neck squamous cell carcinoma and first-line treatment with bevacizumab for liver cancer were accepted in November 2023 and January 2024 respectively. IL-17 monoclonal antibody SCT650C has carried out phase Ia clinical trials in Australia. Currently, domestic clinical trial approval has been obtained and phase IB/II clinical research has been initiated. In addition, SCTC21C, a monoclonal antibody product independently developed by the company for the treatment of CD38+ hematological malignancies, SCTB35, a double antibody product used to treat CD20-positive B-cell non-Hodgkin lymphoma, and SCTB14, a dual antibody product used to treat various solid tumors, have all received clinical approval and will begin clinical research one after another.
Revenue growth led to a reduction in the expense ratio. Non-operating expenses increased sharply year-on-year in 2023. The company achieved gross profit of 1,833 billion yuan (+85.26%) and a gross profit margin of 97.11% (+0.42pct), which remained stable. The company's annual sales expenses were 436 million yuan (+64.72%), sales expense ratio 23.11% (-2.77pct); management expenses of 150 million yuan (+13.84%), management expense ratio 7.93% (-4.92pct); R&D expenses of 1,148 million yuan (+29.59%), R&D expenses rate of 60.84% (-25.76pct); financial expenses of 108 million yuan (+22.96%), financial expenses ratio of 5.73% (-2.87pct). Sales expenses increased dramatically, mainly due to the further expansion of the company's marketing team and the simultaneous increase in corresponding market sales expenses. The revenue side increased dramatically, leading to a significant reduction in all cost rates.
The company's net operating cash flow in 2023 was 383 million yuan, an increase of 45 million yuan over the same period last year, mainly due to a sharp increase in products sold and an increase in cash received. The company's accounts receivable at the end of 2023 amounted to 371 million yuan, accounting for 13.65% of total assets, an increase of 41.73% year-on-year, mainly due to a sharp increase in product sales revenue. In 2023, the company's non-recurring profit and loss was $332 million, with a year-on-year increase of 169.49%, including non-operating expenses of 404 million yuan, an increase of 137.55% over the previous year, mainly due to a sharp increase in the company's external donations.
2024 outlook: Recombinant VIII is expected to maintain the pace of release, and antibody drugs bring new performance. We continue to be optimistic about the company's development prospects as a domestic innovative drug company: with competitive production capacity and cost advantages, the main product, Recombinant VIII, achieved significant sales growth in 2023, and is expected to maintain the pace of dosage in 2024, and its market share will continue to increase; approval of pediatric indications will further drive revenue growth. In terms of antibody drugs, the anti-CD20 monoclonal antibody successfully entered the national medical insurance catalogue at the end of 2023, laying the foundation for sales volume in 2024; the two biosimilar drugs continued to be promoted online and hospitalized after approval, which is expected to bring additional performance in 2024. The company has a rich research pipeline, and many innovative drug products have entered the clinical stage, providing a solid foundation for the company's future growth.
Profit Forecasts and Investment Ratings
Excluding revenue and profit related to the COVID-19 vaccine, we expect the company to achieve operating income of 2,654 billion yuan, 3.461 billion yuan and 4.125 billion yuan respectively in 2024 to 2026, and net profit to mother of 209 million yuan, 483 million yuan and 769 million yuan respectively. It is expected to turn a loss into a profit in 2024, which will increase 131.0% and 59.3% year-on-year from 2025 to 2026, respectively, equivalent to EPS of 0.47 yuan, 1.08 yuan and 1.73 yuan/share, respectively. , 40.1X, and 25.2X. The purchase rating is maintained by comprehensively considering the progress of the company's R&D pipeline and future commercialization value.
Risk analysis
1. Market competition increases risk: Currently, there are many hematogenous and recombinant 8-factor products on the market, and many domestically produced recombinant 8-factor products are under development. The company's related products are facing fierce competition in terms of group entry and future market sales.
2. Product sales progress falls short of expectations: The company's revenue mainly comes from restructuring eight-factor products. If the commercialization progress of the company's main products falls short of expectations, it may affect the company's profit level and valuation.
3. New product development and launch progress falls short of expectations: In the process of developing new products, various emergencies may occur and the R&D progress may be delayed, which may increase the company's development costs. In terms of clinical trial results, products with good results in early or mid-term clinical trials may not have the same performance in later clinical trials. Clinical trial results for drugs under development may fall short of expectations, further causing delays in the time for the company to obtain drug registration approvals for candidate drugs, obtain drug registration approvals that are narrower than expected, and even unable to obtain drug registration approvals.