Incident: The company released its 2023 annual report, achieving operating income of 1,814 billion yuan, -21.24%; net profit to mother of 182 million yuan, or -43.77% year on year; net profit after deducting non-return to mother of 143 million yuan, 44.43% year on year; net operating cash flow of 533 million yuan, which changed from negative to positive year; EPS (basic) 0.14 yuan. The results are in line with market expectations.
The company released its 2024 quarterly report, achieving operating income of 461 million yuan, -24.19%; net profit to mother of 104 million yuan, +21.13% year over year; net profit after deducting non-return to mother of 102 million yuan, +19.11% year over year; net operating cash flow of 171 million yuan, which changed from negative to positive year; EPS (basic) 0.08 yuan. The results are in line with market expectations.
Comment:
The heparin cycle affected current results, and the cash flow situation improved significantly: 2023Q1-2024Q1, the company's revenue in a single quarter was 6.08/4.49/4.09/3.48/ 461 million yuan, respectively, +10.14%/-23.28%/-20.07%/-46.80%/-24.19%; net profit to mother was 0.86/0.33/0.79/-0.16/ 104 million yuan, year-on-year, -32.98%/-55.06%/+18.47% /loss/+21.13% ; Net profit without return to mother was 0.86/0.26/0.54/-0.22/ 102 million yuan, +12.09%/-63.12%/-15.28% /loss/+19.11% year-on-year. The decline in the company's performance in 2023 was mainly due to a sharp drop in export prices and quantity due to a sharp drop in inventory and demand from downstream companies. The heparin industry as a whole was greatly impacted, and the company's exports of heparin APIs were also affected by this, leading to a decline in performance. By business in 2023, pharmaceutical revenue was 1,115 billion yuan, -5.67% year on year, gross profit margin 61.52%, up 0.11pp year on year; API revenue was 692 million yuan, -38.03% year on year, gross profit margin 13.37%, down 0.82pp year on year. Operating cash flow improved significantly in 2023, mainly due to a decrease in accounts receivable, an increase in repayments, and a sharp drop in the purchase unit price of key raw materials compared to the same period last year.
Featured innovative drugs are progressing in an orderly manner, and innovation and transformation can be expected in the future: in 2023, the company invested 137 million yuan in R&D, accounting for 7.57% of revenue, of which 97 million yuan was spent, and the R&D cost ratio was 5.35%. Currently, QHRD107 has entered phase II clinical trials. QHRD110 will soon complete phase I clinical trials, QHRD106 will complete phase I clinical trials, and QHRD211 will complete phase I clinical trials. As the company continues to advance its innovative pharmaceutical products, the company will open up new business areas in the future and continue to inject new momentum into long-term development.
Profit forecast, valuation and rating: Taking into account fluctuations in the heparin API cycle, net profit due to 2024-2025 was lowered to 3.08/368 million yuan (the original forecast was 3.30/429 million yuan, down 7%/14%, respectively), and the net profit for 2026 was 421 million yuan, up 69.09%/19.62%/14.34% year on year. The PE corresponding to the current stock price is 21/17/15 times, respectively. Considering that the company's competitive advantage in the heparin field is expected to continue to increase, innovative drug development is expected to bring new room for growth and maintain a “buy” rating.
Risk warning: risk of heparin price cycle fluctuations; risk of innovative drug development falling short of expectations.