Key elements of the report
On April 19, 2024, the company released its 2023 annual report and 2024 quarterly report.
In 2023, the company achieved operating income of 10.058 billion yuan (+15.69%), net profit of 2,797 billion yuan (+13.15%), net profit of non-return to mother of 2,854 billion yuan (+15.26%); 2023Q4, the company achieved operating income of 2,458 million yuan (+ 18.29%), net profit of 392 million yuan (-6.67%), net profit of non-return to mother of 413 million yuan (-0.24%); 2024Q1, the company achieved operating income of 3.171 billion yuan (+20.58%) ), net profit of 975 million yuan (+26.61%), net profit of non-return to mother of 988 million yuan (+28.23%).
Investment highlights:
High growth in core products, pressure on gross margins
In 2023, Angong's three single products, Gyuhuang Pills, Pien Tsai Gan, and Lianbao, achieved sales of over 100 million yuan.
Liver disease medication achieved revenue of 4.463 billion yuan (+24.26%), gross profit margin of 78.79% (decrease of 2.11 percentage points); cardiovascular medication achieved revenue of 266 million yuan (+60.57%), and gross profit margin of 38.71% (decrease of 8.44 percentage points). The increase in the price of upstream raw materials for Pien Tsai Gong and Angong Niuhuang Pills led to a decline in product gross margin. Direct material costs for liver disease medication and cardiovascular medicine increased by 39.86% and 88.08%, respectively, year on year in 2023.
With 2024Q1, liver disease medication achieved revenue of 1,505 billion yuan (+27.84%), gross profit margin of 75.75% (year-on-year decrease of 4.47 percentage points); cardiovascular and cerebrovascular drugs achieved revenue of 117 million yuan (-3.23%), and gross profit margin of 16.02% (year-on-year decrease of 25.98 percentage points).
Cosmetics turned a loss into a profit in 2023, with high 2024Q1 growth
In 2023, the company's cosmetics business achieved revenue of 707 million yuan (+11.42%), turning a loss into a profit, a gross profit margin of 62.18% (an increase of 1.58 percentage points), and sales of Queen Brand Pearl Cream reached over 100 million yuan in 2023. Driven by the “Pien Tsai” + “Empress” brands, the company's cosmetics business is based on the new stage of Chinese cosmetics development, strengthening brand marketing, expanding and strengthening the whitening category, and cultivating super products. It is expected to drive global online and offline growth in the future.
2024Q1, the cosmetics business achieved revenue of 200 million yuan (+83.18%) and a gross profit margin of 68.26% (an increase of 7.59 percentage points over the previous year).
2024Q1 The total reduction in the three cost rates
In 2023, the company's overall gross profit margin was 46.76% (up 1.12 percentage points), and the net profit margin was 28.35% (down 0.67 percentage points). In terms of expense ratios, the sales expense ratio was 7.78% (up 2.22 percentage points), the management expense ratio was 3.65% (down 0.16 percentage points), and the financial expenses ratio was -0.08% (up 0.64 percentage points), and the total cost ratio of the three categories was 11.35% (up 2.70 percentage points).
2024Q1, the company's overall gross profit margin was 47.26% (year-on-year decrease of 1.04 percentage points), and net profit margin was 31.50% (year-on-year increase of 1.20 percentage points). In terms of expense ratios, the sales expense ratio was 5.20% (down 0.30 percentage points year on year), management expenses ratio 2.42% (down 1.38 percentage points year on year), financial expenses ratio 0.10% (up 0.08 percentage points year on year), and the total cost ratio of the three categories was 7.72% (down 1.59 percentage points year on year).
Profit forecast and investment suggestions: The company's core product, Pien Tsai, is scarce. The new product, Angong Niuhuangyuan, has an obvious competitive advantage, and the cosmetics business is performing well. According to the company's performance disclosure and fundamental analysis, the profit forecast is adjusted. Revenue for 2024/2025/2026 is estimated to be 11.640 billion yuan, 13.280 billion yuan, 15.059 billion yuan (12.450 billion yuan/14.649 billion yuan/- before adjustment), corresponding to net profit attributable to mother of 3.465 billion yuan, 4,082 billion yuan, and 4.731 billion yuan (before adjustment: 3,728 billion yuan/4.350 billion yuan/-), corresponding to EPS 5.74 yuan/share, 6.77 yuan/share, 7.84 yuan/share. The corresponding PE was 39.93/33.90/29.25 (corresponding to the closing price of 229.35 yuan on April 23, 2024), maintaining the “buy” rating.
Risk Factors:
Risk of insufficient supply of raw materials: Shortage of resources and rising prices have challenged the supply of raw materials for Pien Tsai, and will put upward pressure on the cost of Pien Tsai Gong and its series of products in the future; risk that research and development will not meet expectations: the company lays out multiple new drugs under development, and product development is in the pre-clinical and clinical research stages, respectively. Due to the special nature of drug research and development, it has the characteristics of long cycle, many steps, and high risk, and is easily affected by certain unpredictable factors; there are many brands in the Angong gyuhuang pill market, and the company's product launch time is relatively late