Key points of investment
Commercialization and internationalization continued to break through in 2023, and we are optimistic about high performance growth in 2024-2026.
Performance: 2024Q1 has a high increase in revenue and continued high R&D investment. The company disclosed 2023 and 2024Q1 results: achieved revenue of 2,456 billion yuan (YOY 3.35%) in 2023 and net profit of 348 million yuan (YOY 139.44%). 2024Q1 achieved revenue of 736 million yuan (YOY 38.4%) and net profit attributable to mother of 98 million yuan (YOY 90.95%). The net cash flow from operating activities in 2023 was 914 million yuan (YOY 198.05%). The operating conditions were good, mainly because the company strengthened dealer management and credit management, expanded sales, and actively increased cash returns.
Maintain a high level of investment in R&D, and continue to account for a high level of revenue. In 2023, R&D investment was 1.02 billion yuan (YOY 2.53%), accounting for 40.80% of revenue. 2024Q1 invested 209 million yuan in R&D, accounting for 28.44% of revenue. R&D investment continues to be high, providing good support for the promotion of the innovation pipeline.
Highlights: Continued breakthroughs in commercialization and internationalization, promising high performance growth, and the clinical pipeline progressed in an orderly manner: since 2023, Semena's second-line treatment indications, first-line treatment indications, and voumena were approved for listing, and the company's marketed products reached 5, of which 4 products entered the “National Health Insurance Catalogue”; Bemena's first-line treatment indication application was accepted by the US FDA; the CDK4/6 inhibitor BPI-16350 project “combined with fluvixime compared with placebo plus fluvizin before treatment Progressive HR+/ The phase III clinical study of “HER2- locally advanced, recurrent, or metastatic breast cancer subjects” was completed in April 2023, and is expected to bring new options for breast cancer patients; Bemena's drug clinical trial “intended for ALK positive post-operative adjuvant treatment” (adjuvant treatment after surgery) has obtained NMPA, and phase II-IIIB subjects were enrolled in 2023.
Looking ahead to 2024, we believe that ectinib post-operative support is still expected to support a high level of sales. Sales of ensartinib and befotinib are expected to increase rapidly after inclusion in health insurance. We are still optimistic that the company will enter the multi-product implementation stage in 2024. Core products such as ensatinib first-line NSCLC, befotinib second-line NSCLC, ectinib post-operative support, CM082, bevacizumab dual antibody, etc. are expected to continue to be released. After CDK4/6, ensartinib overseas and domestic ALK-positive NSCLC post-operative support, etc. will continue to drive high revenue and profit growth in 2024-2026.
Profit forecasting and valuation
Considering the intense competition from EGFR-TKI, we lowered our sales forecast for 2024-2025 for ectinib, which in turn adjusted net profit. We expect the company's EPS to be 1.06, 1.42, and 1.76 yuan in 2024-2026 (the previous forecast was 1.35 and 1.90 yuan for 2024-2025 EPS), and the closing price on April 22, 2024 corresponds to 36 times the 2024 PE, maintaining the “buy” rating.
Risk warning
Risk of product clinical development failure, regulatory risk, risk of sales falling short of expectations, risk of price drops exceeding expectations in medical insurance negotiations, and competition risk.