2023/1Q24 results are largely in line with market expectations
The company announced 2023 and 1Q24 results: revenue of $2.24 billion in 2023, +10.5% year on year, net profit of -$72 million (vs22 (adjusted caliber, same below)), net profit of -$99 million (vs22 was -$97 million); 1Q24 revenue of $7.0 billion, +15.0% year on year, net profit of 5.06 million yuan, net profit to mother of 5.06 million yuan, net profit of -132.6% year on year. Market expectations. Looking ahead to the future, the company's Tongyan Acupuncture “Asafei” will go on sale in late April. We believe it is expected that it will be launched relatively quickly, the product pipeline is rich, and we are optimistic about the growth prospects of the company's medical and aesthetic business.
Development trends
1. The pharmaceutical business and trade business led to rapid revenue growth in Q1, and the launch of Tongyan Acupuncture is expected to contribute to the increase.
The company's revenue in 2013/1Q24 was +10.5%/+15.0% year-on-year, respectively. By business: 1) Pharmaceutical business:
Revenue in '23/1Q24 was +29.5%/+9.3% year on year, of which the pharmaceutical industry's revenue in '23/1Q24 was -8.5%/-0.9% year on year, mainly due to factors such as some products not winning the bid and industry collection; pharmaceutical business revenue was +63.5%/+15.7% year over year; 2) Trade business: revenue of -35.6% year over year. We believe 1Q24 revenue is expected to grow rapidly, driving overall revenue growth; 3) Medical and aesthetic business: 7.62 million yuan in '23, We expect to contribute to revenue growth in the future as “Isafei” is approved for sale in January and marketed in late April.
2. Changes in business structure led to a decline in gross margin, and Q1 profitability was under pressure in the short term. The company's gross margin for '23/1q24 was -4.3/-4.3ppt to 23.6%/20.9%, respectively, mainly due to an increase in the share of pharmaceutical commercial and trade revenue with low gross margin; on the cost side, sales rates in '23/1Q24 were -4.1/-2.5ppt to 18.0%/12.1%, respectively, management rates were -0.6/-0.6ppt, respectively, and R&D rates were flat at +0.3 ppts/ year over year, respectively. At the same time, affected by the base of investment income of 200 million yuan brought about by the transfer of shares in 1Q23, the companies' net interest rates to mother were +0.5/-3.9ppt to -3.2%/0.7% year-on-year, respectively, after deducting non-net interest rates of +0.3/-1.3ppt to -4.4%/-0.3% year-on-year, respectively.
3. Tongyan acupuncture is expected to be released quickly. Subsequent pipeline reserves are abundant, and the medical and aesthetic business is optimistic about the broad growth space.
Looking ahead, we believe: ① Tong Yan Pin: According to the company announcement and product launch, since it was approved at the beginning of the year, Tong Yan Pin has held many medical training sessions and Hainan injection practice sessions, and signed contracts with more than 70 starting agencies in late April. The product has outstanding differentiation advantages, high doctors' approval, and the follow-up sales team continues to expand, which is expected to be released more quickly; ② Hyaluronic acid: Korea Humedix's latest injectable dual-phase cross-linked sodium hyaluronate gel has progressed smoothly. By the end of 23, all test groups had been completed; ③ Collagen: Two recombinants III have been completed Project development of collagen fillers. In addition, the pipeline for fat dissolving and table hemp products is progressing smoothly. We are optimistic about the broad growth space of the company's medical and aesthetic business in the medium to long term.
Profit forecasting and valuation
Maintain 24-25 profit forecasts. Current stock prices correspond to 24-25 54/31x P/E. Maintaining an outperforming industry rating, considering that the launch of Tongyan Needle is expected to boost medium- to long-term growth space, the target price was raised by 30% to 12.7 yuan. At the same time, considering that childcare products are still in the early stages of being marketed in 24 years, we switched our valuation to 25-year equivalent 36x P/E, with 17% room for growth.
risks
Competition in the industry has intensified; research progress and new product promotion have fallen short of expectations; regulations have become stricter.