Incident: The company released its annual report for the year 20223 and the quarterly report for 2024. In 2023, it achieved operating income of 7.564 billion yuan (yoy +0.72%), net profit attributable to mother of 656 million yuan (yoy +30%), and net profit of 635 million yuan (yoy +25%). The first quarter of 2024 achieved operating income of 1,661 million yuan (yoy -2%), net profit attributable to mother of 166 million yuan (yoy +36%), and net profit of 165 million yuan (yoy +31%) after deducting non-return to mother net profit of 165 million yuan (yoy +31%).
Comment:
Focus on brand operation business and continuously optimize profitability. ① In 2023, the company's brand operating business generated 4.4 billion yuan (yoy +19%), the wholesale business achieved revenue of 2,774 billion yuan (yoy -19%), and the retail business generated 360 million yuan (basically flat). As the company continues to focus on core brand operations and reduce the scale of the wholesale business, the company's total revenue increased by only 0.72% in 2023. However, due to the high gross margin and net interest rate of the brand operation business, the growth rate of the company's net profit to mother was higher than the revenue growth rate. ② 2024Q1 2024Q1 revenue fell 2% year-on-year due to the termination of cooperation in some varieties of the company's brand operation business and continuous compression of the superimposed wholesale business. As the share of brand operations gradually increased and the scale effect gradually became apparent, the net interest rate of 2024Q1 increased 2.84 percentage points year-on-year (the net interest rate of 2024Q1 was 9.93%).
The Diqiao series of products generated nearly 2 billion yuan in revenue, and the “Brand Highway” helped the rapid development of many varieties.
① In 2023, the company's core brand Diqiao series of products achieved revenue of 1,897 billion yuan (yoy +17%). In 2023, the company continued to focus on the “imported calcium” category. In terms of product specifications, Diqiao introduced new product regulations for liquid calcium in small yellow bars (including various product regulations such as calcium zinc small yellow bars, calcium DK health products, vitamin D small yellow bars, etc.) to meet the calcium supplement needs of different consumers. Currently, Diqiao has been certified by Euromonitor as “No. 1 in the domestic imported calcium supplement market for eight consecutive years”, and has received many awards such as vitamins and minerals, the brand with the highest store staff recommendation rate in 2023, and the China Non-Prescription Drug Association Gold Single Product. ② Based on its own “brand management system”, Baiyang has helped many brands achieve significant growth.
For example, Hailu generated 640 million yuan in revenue in 2023 (yoy +50%), maintaining Hailu's position as a leader in the retail eye drops market. At the same time, the company established the brand positioning of Newt Schuma's “medical grade nutritional products”, and in 2023, Newt Schuma achieved revenue of 83 million yuan (yoy +44%).
Since 2023, innovative drugs & high-end medical devices have gradually entered the harvest period: ① Starting in 2023, the company gradually ushered in a harvest period in high-end medical devices invested and incubated by the parent company. Suzhou Tongxin Medical Technology Co., Ltd. was the first to commercialize fully maglev artificial hearts. High-end medical device products such as electromagnetic positioning puncture guidance devices from Beijing Midis Medical Technology Co., Ltd., and household electrocardiographs from Beijing Wuweikang Technology Co., Ltd. have also entered the commercialization stage one after another. ② In terms of innovative drugs, Baiyang Group helped Guangdong Radionuclide Conjugate (RDC) 99mTc-3pRGD2 independently developed by Guangdong Radiotechnology Co., Ltd. and is the first Class 1 innovative drug independently developed in the field of nuclear medicine in China. It has now completed phase III clinical trials in China and is about to enter the commercialization stage. In the future, it will become the company's major product in the field of innovative drugs.
Profit forecast: We expect the company's revenue for 2024-2026 to be 8.573 billion yuan, 99.28 billion yuan, and 11.435 billion yuan respectively, with year-on-year growth rates of 13%, 16%, and 15%, respectively, and net profit to mother of 851 million yuan, 1.11 billion yuan, and 1,444 billion yuan, respectively. The PE corresponding to the current stock price is 19 times, 14 times, and 11 times, respectively.
Risk factors: Market competition increases risk, risk of termination of agent product cooperation, drug quality risk, product introduction progress falling short of expectations, risk of dependence on a single product.