Event: Company releases 2023 annual report and 2024 quarterly report

In 2023, we achieved revenue of 2.69 billion yuan, an increase of 15.75% year on year, achieved net profit of 368 million yuan, an increase of 36.54% year on year, and realized net profit without deduction of 340 million yuan, an increase of 36.91% year on year; the sales expenses ratio was 48.6%, a decrease of 3.8 pct year on year.

In 2024, Q1 achieved revenue of 591 million yuan, a year-on-year increase of 17.74%, achieved net profit of 126 million yuan, an increase of 63.44% over the previous year, and realized net profit without deduction of 106 million yuan, an increase of 53.9% over the previous year. The sales expense ratio was 40.5%, a year-on-year decrease of 5.7pct.

Various businesses grew steadily in 2023, and the paste pipeline promoted formulations in an orderly manner: OTC continued to be developed, ketoprofen was included in medical insurance, and solid oral formulations continued to be collected and released: in 2023, the company's pharmaceutical revenue was 2.24 billion yuan, up 15.9% year on year. Among them, loxoprofen sodium gel patch revenue was 1.54 billion yuan, up 18.7% year on year, and oral solid preparation revenue was 690 million yuan, up 9.9% year on year; in 23, the company gradually expanded the market share of loxoprofen sodium gel patch hospitals and expanded OTC channels at the same time to achieve parallel channel development; Ketoprofen was successfully included in medical insurance, and two varieties were successfully selected and collected; three types of solid oral formulations were successfully selected and collected to achieve price in exchange for quantity.

Raw materials: The company has many varieties, mature processes, and a leading market rate for some products; in 2023, the company's API business revenue was 170 million yuan, up 29.9% year on year, pharmaceutical excipient revenue was 180 million yuan, up 7.6% year on year, and plant extract revenue was 0.7 billion yuan, up 21.6% year on year. As of '23, the parent company has successfully developed 83 types of raw materials and 86 kinds of pharmaceutical excipients. There are many products and a complete range. Some products have a high market share and a clear competitive advantage.

The paste pipeline is rich, and the harvest period is about to begin: According to the company's annual report, the company is developing more than 15 topical formulation products, of which 7 are declared for production, including lidocaine gel paste, loxoprofen sodium patch, flubiprofen gel paste, pepper musk gel paste, indomethacin gel paste. The company has a rich layout of paste pipelines and will usher in the harvest period.

Profit forecasting and investment advice

According to the adjusted profit forecast based on regular reports, we expect net profit to be 5.2/68/890 million yuan respectively for 24-26 years (51/650 million yuan for 24-25 years, respectively). The company's performance is outstanding, and the product matrix is formed, and there is plenty of long-term growth momentum. Refer to comparable company valuations. The target market value for 24 years is 15.5 billion yuan, and the corresponding target price is 44.9 billion yuan, maintaining a “buy” rating.

Risk warning

Risk of product sales and promotion falling short of expectations; increased risk of industry competition; risk of policy fluctuations; product development falling short of expectations.