The revenue scale expanded steadily, and profit grew rapidly, maintaining that the “Buy” rating company achieved revenue of 9.655 billion yuan in 2023 (+7.32% year over year, all the figures below); net profit to mother of 2,823 billion yuan (+30.04%); net profit after deducting non-return to mother of 2,692 billion yuan (+32.72%). 2024Q1 achieved revenue of 2.03 billion yuan (+0.6%); net profit attributable to mother of 845 million yuan (+24.9%); net profit after deducting non-return to mother of 726 million yuan (+19.83%). In terms of profitability, gross margin was 81.52% (-1.39pct) in 2023, and net margin was 29.28% (+5.14pct). On the cost side, the 2023 sales expense ratio was 41.5% (-4.22pct); the management expense ratio was 3.86% (-0.19pct); the R&D expense ratio was 4.81% (-1.34pct); and the financial expense ratio was -2.67% (-1.71pct). We are optimistic about the development of the company's core business sectors such as pediatrics and the potential increase brought about by the introduction of BD products, and maintain the original profit forecast. We expect net profit to be 30.22/34.11/38.39 billion yuan from 2024 to 2026, EPS is 3.28/3.70/4.16 yuan, and the current stock price is 13.4/11.9/10.6 times, maintaining a “buy” rating.

Revenue growth for clean-up and detoxification, pediatric and respiratory products is impressive. Demand for core products remains at an excellent level. In the pharmaceutical industry, clean-up and detoxification products achieved revenue of 3.38 billion yuan (+17.68%), digestive revenue of 1,687 billion yuan (-4.6%), pediatric revenue of 2,741 million yuan (+13.01%), respiratory revenue of 640 million yuan (+9.74%), cardiovascular revenue of 84 million yuan (-12.75%), gynecology revenue in the pharmaceutical industry, in 2023 100 million yuan (-14.64%); in the pharmaceutical business sector, sector revenue was 359 million yuan (+2.66%). Specifically, market demand for the main varieties Pu Di Lan anti-inflammatory oral liquid and children's tempeh clean-up granules increased over the same period, and sales channels continued to expand, helping the company achieve positive growth in overall performance.

The reform helped improve the quality and efficiency of management. BD introduced and enabled sustainable business development. The company reform continued to advance in 2023, built a management model more suited to the company's development in the fields of R&D, capital, marketing, etc., and the business operation was stable and orderly. At the same time, it closely followed medium- and long-term development strategies and market needs, enabled epitaxial expansion through commercial expansion, and reached a total of 4 BD collaborations, including 1 polymerase acid protein inhibitor ZX7101A to treat or prevent influenza, 1 TCM targeted drug penetration treatment device, and 2 medical device products for gynecology and ophthalmology, respectively, to enrich the existing treatment pipeline and enable the sustainable development of the company's business.

Risk warning: Risk of policy changes, increased market competition, and product sales falling short of expectations.