Incidents:
The company released its 2024 quarterly report. With 2024Q1, the company achieved operating income of 1,853 million yuan, a year-on-year decrease of 3.01%; net profit to mother of 119 million yuan, a year-on-year decrease of 9.41%; net profit after deducting non-return to mother was 113 million yuan, an increase of 9.11% year-on-year.
Comment:
1. 2024Q1 performance is under pressure in the short term, and structural remodeling improves quality and efficiency. Affected by factors such as business structure optimization in the commercial sector and price reduction in collection, the company's 2024Q1 revenue decreased by 3.01% year on year, and net profit to mother decreased by 9.41% year on year. At this stage, the company will continue to promote integration with China Resources 39's business and channels, optimize and reshape the business and organizational structure, and improve overall efficiency.
2. The core products of KPC are growing at an accelerated pace, and the new “777” brand has set a benchmark for the 37 industrial chain.
2024Q1, the company relied on the “Kunming Traditional Chinese Medicine 1381” boutique Chinese medicine platform to reach out to consumers through multiple online and offline channels, completed the integration of sales channels in the national retail and medical system, and continued to enhance the brand value of key products. Kun TCM Shenling Spleen and Stomach Granules increased 48.42% year on year, Shu Gan Granules increased 81.72% year on year, and Fragrant Stomach Granules increased 26.03% year on year, far exceeding expectations. At the same time, the company launched the new “777” brand, which will set a benchmark for the 37 industry chain based on Hesugong oral products, and gradually expand to a full range of production lines for health management, disease prevention, serious treatment, and post-illness rehabilitation.
3. Focus on the field of chronic diseases and drive development through innovation. The company's strategic positioning is “Yinfa Economic Health First Stock”, “Chronic Disease Management Leader, Premium Chinese Medicine Leader”. Using China Resources's layout advantages in the traditional Chinese medicine industry chain and central enterprise platform resources, the company has solidly promoted the construction of the 37 and Artemisia industry chains, stabilized the company's basic market, and continued to lay out differentiated R&D pipelines around the field of aging health. 2024Q1, the company's clonazepam injection passed the consistent evaluation of generic drug quality and efficacy, and was the first of its kind in China; the IND application for the improved new drug KPC-149 oral solution was accepted by the NMPA; KYAZ01-2011-020, a class 1 drug for ischemic stroke developed independently, completed clinical phase II clinical enrollment.
Profit forecast: We expect the company's 2024-2026 revenue to be 86.31, 95.01 and 10.476 billion yuan respectively, with year-on-year growth rates of 12.05%, 10.07%, and 10.27% respectively, and net profit to mother of 6.60, 8.82, and 998 million yuan respectively. The year-on-year growth rates are 48.34%, 33.72%, and 13.11%, respectively, corresponding to the current stock price PE, which is 25, 18, and 16 times, respectively, maintaining the “Highly Recommended” rating.
Risk warning: risk of product collection price reduction, risk of business integration falling short of expectations, risk of changes in industry policies, risk of price fluctuations in raw materials, risk of new product development falling short of expectations, risk of market development and brand building falling short of expectations, risk of sales of core products falling short of expectations, product quality risks, etc.