Key points of investment
Incident: The company announced results for the first quarter of 2024. In 24Q1, the company achieved revenue of 3.243 billion yuan (-4.99%, same below), net profit to mother of 608 million yuan (+4.45%), deducted non-net profit of 590 million yuan (+3.57%), and cash flow from operating activities of 924 million yuan in a single quarter.
The gonadotropin and diagnostic reagents sector grasped the growth rate of market demand, and the overall revenue profit was in line with expectations: by sector, the chemical formulation sector had revenue of 1,586 billion yuan (-2.3%), of which ① the sex stimulants sector had a low base of 807 million yuan (+39.9%) last year, improved demand this year, and the newly launched tripraline microspheres were rapidly released into national health insurance; ② the psychiatric sector brought about 150 million yuan (+10.1%), and the newly launched varieties of bunanserin tablets and quetiapine sustained-release tablets led to increased sales; ③ 5.89 million yuan in the digestive sector 100 million yuan (- 25.7%). Mainly, iprazole injections were affected by the price reduction in medical insurance negotiations. In the future, it will focus on tertiary and key level-2 hospital terminals to promote the coverage of empty hospitals and the development of departments with new indications. ④ The diagnostic reagents and equipment segment generated revenue of 236 million yuan (+60.3%), and the company seized the opportunity of influenza to reap significant growth. ⑤ The APIs and intermediates segment generated revenue of $955 million (-3.9%). ⑥ Traditional Chinese medicine preparations amounted to 389 million yuan (-29.6%). The decline was mainly due to the high COVID-19 base in 23Q1. As the company develops online channels for traditional Chinese medicine, we expect the Chinese medicine sector to return to the expected growth rate.
Optimistic about the accelerated implementation of high-end formulations and biopharmaceutical pipelines, with incremental products contributing to peak sales of 6.5 billion yuan:
Proactive areas: ① triprorelin microspheres (already on the market) and ② goserelin sustained-release implants (phase I clinical trial, 2027E launch). The market in 2023 corresponds to 1.5 billion yuan and 3.8 billion yuan, respectively. Imported products still account for 90% + share, and are expected to quickly achieve 30% import substitution, contributing 500 million yuan and 1.1 billion yuan in revenue. ③ Mental field: The production of aripiprazole microspheres has been accepted, and octreotide microspheres have entered BE clinical trials. Using the company's original psychiatric channels, long-term dosage forms meet urgent clinical needs and psychiatric competition is relatively blue. We expect aripiprazole sales to peak at about 900 million yuan. ④ Biological products: Simeglutide diabetes indications are expected to be produced in 24Q2. 24m2 of weight loss indications will enter phase III. The dual market space for diabetes and weight loss will exceed 100 billion yuan. We forecast a peak sales value of 2 billion yuan. ⑤ IL-17A/F dual-target monoclonal antibody (phase III clinical trial, 2027E launch). The psoriasis+ankylosis market has about 570+5.6 million people. It is expected to be the first IL-17 dual-target monoclonal antibody in China. We forecast a peak sales value of 1.5 billion yuan. ⑥ IL-6R tocilizumab (approved) for approximately 4.2 million patients with moderate to severe rheumatoid arthritis, we forecast a peak sales of 500 million yuan.
Profit forecast and investment rating: The performance is in line with expectations. We maintain our profit forecast. We expect the company's 2024-2026 revenue of 131.4/139.7/14.83 billion yuan; net profit of 21.9/25.0/2.83 billion yuan, corresponding to the current stock price PE of 17/15/13 ×, respectively. Considering that the company's valuation is low, and long-term optimism that the launch of the company's innovative new products will bring rapid performance growth, high barriers to complex formulations and exclusive patented products, high dividends, and strong stability in the main business, maintaining a “buy” rating.
Risk warning: product price reduction, new drug research and development, fluctuating raw material prices, pharmaceutical policy uncertainty.