Incidents:
The company released its annual report for 2023, which achieved revenue of 6.733 billion yuan (yoy +12.21%), net profit of 592 million yuan (yoy +65.19%), after deducting net profit of 554 million yuan (yoy +14.60%). In the Q4 quarter, the company achieved revenue of 1,549 billion yuan (yoy +2.40%), net profit attributable to mother of -32 million yuan, and net profit of non-return to mother of 0.43 million yuan (yoy +7.75%).
Traditional Chinese Medicine Health has accelerated its development, and brand building has achieved remarkable results
In 2023, the company's traditional Chinese medicine health business achieved revenue of 4,544 billion yuan (yoy +16.13%), accounting for 67.49% of the company's total revenue, an increase of 2.28 pct over the previous year. The company's all-category traditional Chinese medicine business achieved revenue of 3.625 billion yuan (yoy +16.60%), the specialty chemicals business achieved revenue of 2,391 billion yuan (yoy +2.98%), and the specialty health consumer goods business achieved revenue of 580 million yuan (yoy +21.28%), and other businesses achieved revenue of 137 million yuan (yoy+) 49.29%). The company sold 17 product series worth over 100 million yuan, an increase of 2 over the previous year. Products above 100 million yuan achieved total sales revenue of 4.619 billion yuan (yoy +12.93%), accounting for 68.6% of the company's total revenue, an increase of 0.44pct over the previous year. Sales revenue of the core product “Kangenbei” brand intestinal inflammation series products was nearly 1.3 billion yuan, an increase of 28% over the previous year.
Continue to increase investment in research and development, and develop traditional Chinese medicine and chemical medicine collaboratively
In 2023, the company invested 312 million yuan in R&D (yoy +18.80%), accounting for 5.29% of the annual industrial revenue. The company established 57 new R&D projects throughout the year and obtained 20 newly authorized patents, including 11 invention patents, laying a good front-end foundation for product echelon construction. In the field of innovative traditional Chinese medicine, the application accepted the registration of traditional Chinese medicine Class 2.1 improved innovative medicine for throat cleansing tablets, and was approved for clinical approval of the new traditional Chinese medicine category 1.2 ivy leaf extract and oral solution; in the field of specialty chemicals, registration approval for risperidone oral solution drugs was obtained, azithromycin for injections, piperacillin sodium for injections, and tazobactam sodium for inhalation. There are a total of 20 clinical approvals for inhaled pirfenidone solutions.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-2026 to be 76.45/85.19/9.395 billion yuan, respectively, with corresponding growth rates of 13.55%/11.43%/10.28%; 2024-2026 net profit to mother will be 6.93/7.87/888 billion yuan, respectively, corresponding growth rates will be 17.18%/13.56%/11.78%; EPS will be 0.27/0.31/0.34 yuan/share, respectively, corresponding PE is 19/17/15 times CAGR It's 14.15%. Referring to comparable company valuations, we gave the company 22 times PE in 2024, with a target price of 5.93 yuan/share, maintaining a “buy” rating.
Risk warning: risk of declining profits, risk of fluctuations in raw material supply and price, risk of sales falling short of expectations, etc.