Jiangsu Wuzhong achieved operating income of 2,240 billion yuan (+10.55%) in 2023, and realized net profit of -72 million yuan to mother.

The 2024Q1 company achieved operating income of 703 million yuan (+14.97%) in a single quarter and achieved net profit of 0.5 billion yuan to mother.

The company's gross margin for the first quarter of 2023 was lower than the same period last year, but the sales expenses ratio also declined compared to the same period last year. The medical and aesthetic business can be expected in the future. AestheFill has been approved to obtain evidence, and 75 initial launch institutions were listed in April 2024.

Maintain the buy rating.

Key points to support ratings

The company's revenue-side performance grew steadily, and the gross margin of the pharmaceutical sector business in 2023 was under downward pressure. Jiangsu Wuzhong achieved operating income of 2,240 billion yuan in 2023, an increase of 10.55% over the previous year, and achieved net profit of -72 million yuan to mother. The company's gross margin in 2023 was 24.27%, down 4.34pct year-on-year, mainly due to the decline in gross margin in the pharmaceutical sector. The company's sales expenses ratio was 18.01% in 2023, a year-on-year decrease of 4.12pct. The company's revenue in the pharmaceutical sector in 2023 was 1,840 billion yuan, up 29.46% year on year, gross margin was 27.78%, down 10.76pct year on year. In the first quarter of 2024, the company achieved revenue of 703 million yuan in a single quarter, an increase of 14.97% over the previous year, and achieved net profit of 0.5 billion yuan to mother. The company's gross margin for the first quarter of 2023 was lower than the same period last year, but the sales expenses ratio also declined compared to the same period last year.

Actively strengthening the medical and aesthetic layout, AestheFill's approved medical and aesthetic business can be expected in the future. The company actively promoted AestheFill's registration review in 2023 and received the “Medical Device Registration Certificate” in January 2024. In addition, aestheFIL's launch agency press conference was held in Beijing on April 23, and the list of the first 75 partner organizations was announced, including Shanghai Art Star, Shanghai Fuai, Shenzhen Sunshine, and Shenzhen Unilige. AestheFill is a regenerative medical and aesthetic injection product developed by REGEN, a well-known Korean medical and aesthetic company. As of April 2024, it has been sold in more than 60 countries and regions around the world. Furthermore, the company actively promoted clinical work on injectable biphasic crosslinked lidocaine-containing sodium hyaluronate gel products introduced from Humedix in Korea, and completed the enrollment of all subjects in 2023. In terms of medical and aesthetic team building, as of April 2024, the total number of employees of Wu Zhong Aesthetics, Shang Li Huimei, and Datou Medical had exceeded 100. Most of the core personnel came from top medical and aesthetic companies at home and abroad.

The collagen layout continues to advance, and cutting-edge technology is being introduced in a diversified manner. The company relies on the R&D and industrialization foundation of Zhongkai Biopharmaceutical Factory in the field of recombinant protein drugs to deeply lay out the field of recombinant collagen. In July 2022, Wu Zhong Aesthetics and the Hangzhou International Science and Technology Innovation Center of Zhejiang University established the “Biological and Molecular Intelligent Manufacturing Platform-Wu Zhong Aesthetic Recombinant Collagen Joint Laboratory” to carry out innovative research on recombinant collagen. The Joint Laboratory innovatively uses AI-driven protein design technology and high-throughput bio-casting devices to develop recombinant type III collagen. In October 2023, Wu Zhong Aesthetics signed an “Investment and Technical Cooperation Agreement” with Nanjing Dongwan to obtain the other party's exclusive distribution rights and exclusive development rights for recombinant human collagen raw materials in the field of cooperation. The collagen is expressed through the CHO cell system, and the test report issued by the China Food and Drug Administration Research Institute believes that it has a collagen three-helix structure. Currently, Wu Zhong Aesthetics and Nanjing Dongwan are jointly promoting related medical and aesthetic implant products developed based on this recombinant human collagen raw material.

valuations

The company's pharmaceutical business faced a certain pressure on gross margin and adjusted profit expectations. The company's net profit for 2024, 2025, and 2026 is expected to be 107 million yuan, 228 million yuan, and 324 million yuan, corresponding to EPS of 0.15 yuan, 0.32 yuan, and 0.45 yuan, respectively. According to the closing price on April 25, 2024, the price-earnings ratio is 69.2 times, 32.4 times, and 22.8 times, respectively. (In January 2024, net profit due to mother for 2024 and 2025 is expected to be 120 million yuan and 229 million yuan, respectively, and EPS 0.17 yuan and 0.32 yuan, respectively.) The approval and listing of the company's medical and aesthetic products is expected to provide the company with room for revenue growth and profit improvement, and maintain the purchase rating.

The main risks faced by ratings

Risk of product launch failure, consumer market fluctuations, risk of product promotion falling short of expectations, and risk of changes in industry policies.