Return to mother increased 12% in 1Q24
The company announced 1Q24 revenue, net profit attributable to mother, and deducted non-net profit of 20.5, 3.0, and 290 million yuan, with year-on-year changes of -2%, 12%, and 5%. We expect a net profit of 11.8/13.1/1.46 billion yuan (+10%/+11% yoy) to the mother in 2024-26. Considering that the company is one of the leaders in modern traditional Chinese medicine, Dandi AMS's US declaration and biotechnology company loss reduction, we will give 2024 PE a valuation of 22 times (Wind's unanimous expectation is 17x the average value of the company), and the target price is 17.30 yuan, maintaining the “gain” rating.
Traditional Chinese medicine is expected to continue to grow steadily from 2024 to 2025
1Q24 Chinese medicine business revenue increased 4% year on year, and gross margin was stable year on year. We expect revenue to grow steadily in 2024:1) We estimate single-digit revenue growth for compound Danshen Dipping Pills. Alliance Collection will achieve price in exchange for volume, and we expect steady growth from 2024 to 2025 as sugar net indications continue; 2) We estimate 1Q24 single-digit growth in serum brain, and double digit growth in Qi Shen and yiqi is expected to continue the growth trend in 2024; 3) We estimate that Danshen polyphenolic acid and probiotics will continue to grow in 2024; 3) We estimate that salvia ginseng polyphenolic acid and probiotics will continue to grow in 2024; 3) We estimate that salvia ginseng polyphenolic acid and probiotics will continue to grow in 2024; 3) We estimate that salvia ginseng polyphenolic acid and probiotics will continue to grow in 2024; 3) We estimate that salvia ginseng polyphenolic acid and probiotics will continue to grow in 2024; 3) We estimate that salvia ginseng polyphenolic acid and probiotics will continue to grow in 2024; Double-digit revenue growth for Fumai 1Q24 Marginal improvements in the competitive landscape are expected to achieve a high-base growth trend; 4) Cold and fever 1Q24 fell 37%, mainly due to the decline in sales of Agastache Zhengqi Droplets and Cyanxinolide Drops.
Chemical pharmaceuticals are recovering, and biopharmaceuticals are gradually reducing losses
Revenue from chemical formulations in 1Q24 increased 12% year on year, and sales volume recovered by about 10%. We expect the chemical sector to recover in 2024, with Shui Lin Jia and minodronic acid contributing to the rapid growth, and several pipelines will enter the reporting stage. Biopharmaceutical 1Q24's revenue was basically the same year on year. As Puyuk's stroke indication phase III clinical trial comes to an end (2024E production report, 2025E approval), it is expected to drive Biologics to continue reducing losses in 24-25.
Research and development is expected to welcome many prominent Chinese medicine pipelines from 2024 to 2025, such as Dandi AMS (International) and the Chinese Medicine Innovative Drug Report. R&D continues to soar high. Since 2018, R&D expenses have been 600 to 900 million yuan, and the R&D rate is 5% to 10% (excluding commercial), ranking in the top 3 listed Chinese medicine companies. We expect R&D to blossom: 1) The company independently develops and releases 20 innovative Chinese medicine pipelines. The Phase III project includes Dandi AMS (international), angina pectoris (international), and anshendi (in the process of data clean-up) Tong Ning et al., phase II Nearly ten projects are expected to be submitted for NDAs one after another from 2024 to 2025; 2) We expect the global phase III clinical trial of Dandi AMS to enter the data clean-up phase. 2024 is expected to uncover the facts and become the first proprietary Chinese medicine to be submitted for an NDA in the US, which is expected to drive the revaluation of Dandi and pipeline values.
Risk warning: The collection price is linked nationwide, the risk of exclusive drug collection, and the R&D progress falls short of expectations.