Incidents:
The company released its 2023 annual report, achieving operating income of 6.733 billion yuan, a year-on-year increase of 12.20%; net profit to mother of 592 million yuan, an increase of 65.19%; net profit after deduction of 554 million yuan, an increase of 14.60% year-on-year, and EPS of 0.23 yuan.
Performance growth is in line with expectations, and the overall business trend continues to improve
The company's overall performance in 2023 was in line with expectations. The net profit growth rate was much faster than the revenue growth rate. It was mainly related to the year-on-year decrease in fair price change losses due to changes in the market value of the company's shareholding company Jiahe Biotech and the company transferred 7.84% of the shares to confirm a net profit of 87 million yuan. Excluding non-recurring profits and losses, the company's non-net profit growth rate was faster than revenue growth. In 2023, the company's sales expense ratio was 33.96%, down 0.40pct year on year; management expense ratio was 8.11%, down 0.55pct year on year; R&D expense ratio was 4.43%, up 1.17 pct year on year; financial expense ratio was -0.28%, down 0.04pct year on year. Overall, the company's refined management effect was obvious. The sales expense ratio and management expense ratio decreased significantly, and the financial cost ratio remained stable. The increase in R&D expenses was related to the company's increased investment in R&D, indicating that the company's innovation and transformation continued to advance rapidly.
Traditional Chinese medicine led the company's development, and specialty health consumer products increased revenue flexibility from the company's business segment. In 2023, all categories of traditional Chinese medicines achieved revenue of 3.625 billion yuan, an increase of 16.60%; the specialty chemicals business achieved revenue of 2,391 billion yuan, an increase of 2.98% year on year; and specialty health consumer goods business achieved revenue of 580 million yuan, an increase of 21.28% year on year. Overall, the company's traditional Chinese medicine sector is developing rapidly. Among them, the sales revenue of the “Kangenbei” brand enteritis medicine series products is close to 1.3 billion yuan. Evidence-based medical research on the “Zhixin” brand Musk Tongxin Drops continues to advance and has entered multiple guidelines, which is expected to become a new growth point. The company's chemicals are growing steadily, and sales of various products such as “Jinaokang”, “Jinaikang”, and “Bitan” have reached over 100 million. It is expected to continue to grow steadily in the future.
Currently, the company's health products are mainly Kangenbei health care and functional foods, traditional supplements, etc. Currently, with the diversification of the company's sales channels, it is expected to continue to grow rapidly.
Innovative R&D continues to accelerate, and future growth momentum is sufficient
The company's research and development efforts continue to increase. Among them, the traditional Chinese medicine Class 1.2 innovative drug, Ivy Leaf Extract and its oral solution, obtained clinical approval; application for registration of the traditional Chinese medicine Class 2.1 improved new drug for throat cleansing tablets was accepted; the chemical drug Class 2.2 modified pirfenidone solution for inhalation obtained clinical approval; and the Class 1 innovative drug EVT-401 has initiated phase I clinical enrollment. It is expected that the continuous launch of new products will inject long-term development momentum into the company in the future.
Investment advice and profit forecasting
The company's main business continues to focus, brand strength continues to improve, and performance is expected to grow steadily over the long term. It is estimated that in 2024-2026, net profit attributable to the company's parent company shareholders will be 698 million yuan, 821 million yuan and 950 million yuan respectively, with corresponding earnings per share of 0.27 yuan/share, 0.32 yuan/share and 0.37 yuan/share, respectively. The corresponding PE is 18 times, 15 times, and 13 times, respectively, maintaining a “buy” investment rating.
Risk warning
The company's R&D falls short of the expected risk, the product volume falls short of the expected risk, and industry competition increases the risk.