The 2024 quarterly report was released. The company achieved operating income of 1.3 billion yuan (+41.28% year-on-year, same below), net profit to mother of 146 million yuan (+125.55%) in Q1 2024, after deducting net profit of 110 million yuan (+83.93%). The main difference in deductions due to the mother is a government subsidy.
The rapid increase in performance exceeds market expectations, and is expected to mainly drive performance growth in the pharmaceutical sector. The company's raw materials are mainly calcium pantothenate (vitamin B5). According to Wind data, the domestic price of calcium pantothenate in Q1 in 2024 was 57.5 yuan/kg, down 53.06% from the previous year. The company's API sector should be at a relatively low level. It is expected that the first quarter will mainly drive performance growth in the pharmaceutical sector.
New and owned products completed the market layout. The results of cost reduction and efficiency were remarkable, and profit side growth was impressive in the first quarter.
In 2024, the company's return to mother and non-net profit growth rate was relatively rapid in Q1. On the cost side, the company achieved remarkable results in reducing costs and increasing efficiency. In Q1 of 2024, the company's sales expenses ratio was 23.74% (-2.87pct), the management expense ratio was 6.75% (-2.43pct), while the R&D expenses rate was 4.52% (-0.54pct), which is basically the same as the R&D cost rate for the same period last year.
Focusing on the “big product” strategy, the revenue of the pharmaceutical sector continues to grow. The company's domestic pharmaceutical business is mainly based on its own products. In 2023, the company's pharmaceutical products (own) revenue was 2.10 billion yuan (+21.72%). In 2024, the company expects to achieve 2 overseas products over 100 million products and 4 products over 50 million, and plans to build a product portfolio around Elishu to introduce 8-10 new varieties in the Asia-Pacific market and emerging markets; achieve 9 domestic products over 50 million; by the end of the year, the first synthetic biology product will have trial production conditions.
The innovative drug Yilishu has completed registration in China, the US, and Europe, and the innovation pipeline will usher in a harvest period. 1) Sales volume is imminent in China, the US, and Europe: in China, the first batch was shipped at 23.6 and covered by medical insurance in the same year; in the US and Europe, it was approved on 23.11 and 24.3, respectively. 2) We expect Yilishu to complete the MAH transfer in '24, contributing 72 million milestone revenue. 3) Looking at the market size, the CIN market is 7 billion US dollars, and the peak sales value of Yilishu is expected to exceed 5 billion yuan.
Clinical trials for F652 indications are progressing smoothly. Hyruan ONE has high clinical value and is expected to become a single product with a peak value of 2 billion yuan. In 2024, the company plans to complete the key clinical trial program for F652 ACLF indications, start enrollment, and complete the recruitment of 30% of patients for the AH Phase II clinical trial. Hyruan ONE, a dingan-crosslinked sodium hyaluronate injection, was approved in China in April 2023 and included in the national medical insurance catalogue in December 2023. The product can be administered once every 6 months to relieve knee pain, and is expected to become popular in the Chinese market soon.
Increase investment in R&D, and continue to expand pipelines, laying the foundation for implementing large-scale strategies. 2024Q1 spent 59.88 million yuan on R&D, an increase of 26% over the previous year. In terms of innovative drugs, 2 products with a European and American layout are in the pre-clinical stage; in terms of bioanalogues, three third-generation insulins are in the preclinical stage. In terms of traditional Chinese medicine, the Innovative Chinese Medicine Broken Gold Detox Capsule is in clinical phase I. Compound Silver Flower Detox Granules have enrolled more than 150 children with influenza (wind fever certificate) phase III clinical trials; Maqin cough tablets have received approval for proprietary Chinese medicine registration in Singapore, making it the company's second traditional Chinese medicine core product to successfully register overseas.
Profit forecasting and valuation. We are optimistic about the performance flexibility brought about by the company's innovation pipeline and the continued implementation of the “big single product” strategy. 2024 is expected to usher in a reversal of performance. The net profit to mother for 2024-2026 is expected to be 5.52/7.05/922 million yuan, a growth rate of 200%/28%/31%, and the corresponding PE is 28X/22X/17X.
Maintain a “buy” rating.
Risk warning: Product sales performance falls short of expectations; customer expansion falls short of expectations; international business risks.