1Q24 After deducting non-profit, the increase was 9%
The company announced 1Q24 revenue of 1.85 billion yuan, net profit to mother of 120 million yuan, and deducted non-net profit of 110 million yuan, a year-on-year change of -3%, -9%. The decline in revenue was mainly due to a year-on-year decrease in foreign aid business. The decline in revenue to the mother was mainly due to one-time income and delays in government subsidies (other income+net income from investment decreased to 0.3 billion yuan year over year), which did not match endogenous performance. We expect revenue and profit performance to be high before and after in 2024 (the prescription drug policy is expected to be clear in the second quarter, the base figure is low due to more deductions in 4Q23, and government subsidies are expected to be repaid later). We expect net profit to the mother of 5.6/7.1/890 million yuan (+26%/26% yoy) from 2024 to 35x PE (comparable to the company's average value of 21x, given a certain premium considering the company's performance growth potential), with a target price of 25.82 yuan to maintain the “buy” rating.
The year 2023 will be adjusted, and the year 2024 will be adjusted. 2025 will accelerate to catch up with the five-year 10 billion plan, and the 2023 integration year (Yan Wei became the new vice chairman/party committee secretary/president, marketing organizational changes began in September and three divisions were formed; Kunming Pharmaceutical joined 39 Commercial Road in March and established the Kunming Pharmaceutical Commercial Road in 2024).
There are still partial adjustments in 2024, and there is uncertainty about the prescription drug policy in the second quarter. The company disclosed its strategic plan for 2024-2028. The strategic goal is to double revenue by the end of 2028 and reach 10 billion yuan in industrial revenue through endogenous development and epitaxial expansion. It is committed to becoming the first stock in the Yinfa Health Industry. The industry's revenue in 2023 (oral doses+injections) is about 4.1 billion yuan, corresponding to the 2024-2028 compound revenue growth target of about 20%. Excluding commercial companies (KPC Commercial's 2023 revenue of 3.37 billion yuan and net interest rate of 0.8%), we estimate an industrial net interest rate of 9.6% in 2023.
The Kunming Traditional Chinese Medicine 1381 Division is gradually starting
We expect Premium Sinopharm (Kunming Traditional Chinese Medicine 1381 Division) to perform well in 1Q24, with an increase of 20% to 25% from 2024 to 26:1) Benefiting from advertising and large-scale retail chains, the performance of large single products is outstanding. In 1Q24, Shenlingjian's spleen and stomach increased 50% year over year, Xiang Shuping increased 26% year over year, and liver treatment increased by more than 80% year on year; 2) The division implements “product sorting, establishing commercial channels, brand driven, promotion strategies”. Through the 39 Jiu Pharmaceutical Commercial Road, Iron Shelf Project, and the dandelion plan, the middle end has a large long-term revenue stream. potential; 3) We anticipate net interest rates It is still at a low level, and there is room for exploration.
777 focuses on pure sales in the first quarter, and subsequent shipments are rising quarterly. In 1951, we expect 1Q24 revenue from the Bloodplug Oral Series (777 Division) to be slightly pressured, 2Q24 will accelerate, and increase by 25-30% in 2024-26:1) 1Q23 has a high base (softgels up more than 80% year over year, oral series up 38% year over year), 1Q24 focuses on pure sales, and revenue is under pressure. Shipment from 2Q24 may match pure sales, and revenue is expected to increase season by quarter; 192) 51 Division 1Q24 revenue under pressure Mainly due to the policy wait-and-see period, the company actively controlled deliveries and high base (1Q23 freeze-drying increased by more than 40% year-on-year), focusing on talent matching, organizational transformation, and academic promotion in 2024. We expect revenue to maintain steady growth from 2024 to 26.
Risk warning: Channel integration falls short of expectations, prescription drug industry policy risks, and asset restructuring falls short of expectations.