Key points of investment
Incident: Tasly released its 2024 quarterly report. During the reporting period, it achieved revenue of 2,049 billion yuan (-1.73% compared to the same period last year), net profit to mother of 295 million yuan (+11.58%, adjusted from the same period last year), and net profit after deducting non-return to mother of 294 million yuan (+5.22% year-on-year, adjusted from the same period last year).
The pharmaceutical industry achieved steady growth under a high base. In 24Q1, the pharmaceutical industry/pharmaceutical business achieved revenue of 1,809/226 million yuan respectively, +4.83%/-33.74% year-on-year. By product, traditional Chinese medicine/chemical pharmaceuticals/chemical raw materials/biopharmaceuticals achieved revenue of 14.41/2.90/0.21/0.57 billion yuan, compared to +3.83%/+11.67%/+0.01%/-0.16%; by treatment field, cardiovascular, anti-tumor/cold fever/liver disease treatment/others achieved revenue of 12.52/0.55/1.13/1.41/247 million yuan, +7.63%/+31.74%/-36.84%/+4.62%/+19.94%.
Profitability is rising steadily. The gross margin for 24Q1 was 67.17% (+1.66pct, compared with the same period last year), 73.68%/67.12%/65.81%/83.87%/60.30% for cardiovascular/anti-tumor/fever/liver disease treatment/others, respectively, -2.19/+2.88/+2.12/+0.35/+1.84pct. The sales/management/R&D expense ratio was 33.83%/3.55%/9.73%, +1.58/-0.45/+1.79pct (compared to the same period last year); the operating profit margin was 18.22% (-0.32pct, adjusted from the same period last year), and the net profit margin after deducting non-return mother was 14.33% (+0.95pct, adjusted from the same period last year).
The quality of operations is basically stable. The number of accounts receivable turnover days in 24Q1 was 33.48 days, down 2.35 days from the previous year. Net cash flow from operating activities was -324.05% year-on-year (adjusted for the same period last year), mainly due to the fact that the amount of discounted bank acceptance notes collection was lower than the same period last year.
Accelerate the development of digital traditional Chinese medicine. The company accelerated integration into the national strategic science and technology system, successfully established a national key laboratory for the creation of modern traditional Chinese medicine, and signed a contract with HUAWEI CLOUD to jointly build a large-scale model of traditional Chinese medicine. By the end of 2023, the company had a R&D pipeline covering 98 products under development, of which 36 were in clinical trials, 26 were in clinical phase II and phase III, and 9 innovative traditional Chinese medicines were in phase III clinical research, including Anshen Dipping Pills, Qingshu Granules, Back Pain Relief Tablets, Antewei Granules, Citrus Milk Detoxification Capsules, Lianxiaxou Granules, T89 to treat chronic stable angina pectoris symptoms and T89 to treat acute plateau syndrome (AMS); Anshen Dipping Pills, T89AMS, Puyouke bloody brain All cases were enrolled in the stroke indication phase IIc validation test and amigumab phase IIb clinical trial.
Maintain a “buy” rating. The estimated net profit for 2024-2026 is 13.87/15.47/1,718 billion yuan, up 29.48%/11.56%/11.03% year-on-year, and EPS is 0.93/1.04/1.15 yuan, corresponding to PE16.05x/14.39x/12.96x. Considering that the company has strong brand power and R&D strength, it maintains a “buy” rating.
Risk warning: R&D innovation risk, policy adjustment risk, cost fluctuation risk