2023 profit is in line with our expectations
The company announced its 2023 results: revenue of 17.861 billion yuan (YoY +16.2%); net profit of 1,669 billion yuan (YoY +17.0%), profit per share of 1.22 yuan, net profit of 1,657 billion yuan (YoY +18.4%).
Development trends
The company's core product revenue continued to grow steadily throughout the year. By product, in '23, revenue from cardiovascular products was 4.388 billion yuan, up 8.02% year on year; revenue from supplement products was 1,730 billion yuan, up 10.41% year on year; revenue from clean-up products was 615 million yuan, up 16.10% year on year; revenue from gynecological products was 377 million yuan, up 8.16% year on year; revenue from other products was 39.70 yuan, up 19.12% year on year. In addition, the parent company's revenue in '23 was 4.109 billion yuan, up 11.2% year on year, and net profit was 1,249 billion yuan, up 14.5% year on year.
Net interest rates remained stable year over year. The company's comprehensive gross profit margin in 2023 was 47.3%, down 1.5ppt year on year, mainly due to rising raw material costs; on the cost side, the company's sales expense ratio in 2023 was 19.2%, -0.7ppt; management expense ratio was 8.5%, -0.2ppt; R&D expenses ratio was 1.6%, +0.2ppt, which remained stable; the company's net profit margin in 2023 was 9.3%, which remained stable year on year, with net operating cash inflow of 1,869 billion yuan (vs. 3,094 billion yuan in 2022), mainly This is due to an increase in cash to purchase goods and receive labor payments in the current period as production increases and raw material prices rise.
Deeply cultivate brand building and strengthen retail terminal operation optimization. According to the announcement, the company established development ideas for the Imperial Pharmaceutical series of products and some mother and child brands, created a hierarchical brand matrix, and carefully studied variety resources to save internal strength for enterprise development. As of March 31, Tong Ren Tang Commercial had 1,001 stores. Tong Ren Tang Business explores the needs of different consumer groups for disease treatment, health and beauty, etc., promotes diversified marketing of retail terminals, and accelerates the development of new retail and membership system construction.
Profit forecasting and valuation
The profit forecast for 2024 remains unchanged, and an EPS of 1.58 yuan for 2025 was introduced. The current stock price corresponds to the 2024/2025 29.2/25.8 price-earnings ratio. Maintaining an outperforming industry rating, and considering market fluctuations, the target price was lowered by 10.5% to 60.85 yuan, corresponding to 43.6 times the 2024 price-earnings ratio and 38.4 times the 2025 price-earnings ratio. There is 49% room for improvement compared to the current stock price.
risks
Prices of raw materials have risen, and product marketing results have fallen short of expectations.