Incident: On April 25, 2024, the company released its report for the first quarter of 2024. 2024Q1 achieved operating income of 10.411 billion yuan, up 2.93% year on year; net profit to mother of 862 million yuan, up 14.18% year on year; net profit after deducting non-return to mother of 838 million yuan, up 10.66% year on year.
Major business segments are growing steadily, and the pharmaceutical business and overseas medical and aesthetic medicine are under pressure in the short term. ① Pharmaceutical industry: 2024Q1, the core subsidiary of China and the US East China, revenue (including CSO business) was 3.399 billion yuan, up 10.53% year on year, and consolidated net profit of 751 million yuan, up 11.67% year on year. ② Pharmaceutical business: Revenue of 6.717 billion yuan, down 1.86% year on year, and net profit of 107 million yuan, up 1.51% year on year. The decline in revenue was mainly affected by the high base in Q1 in 2023. the pharmaceutical business is expected to return to positive growth in Q2. ③ Medical and aesthetic business: Operating revenue of 630 million yuan (excluding internal offsets), with a year-on-year increase of 25.30%. Among them, UK Sinclair's revenue was 272 million yuan, down 4.40% year on year, mainly due to the slowdown in global macroeconomic growth, which caused fluctuations in demand, and overall revenue reached Q1 business target. It is expected that the growth rate will gradually pick up starting Q2; domestic Medical-Meishin Aesthetics achieved operating income of 257 million yuan, an increase of 22.65% year on year, up 13.38% month on year 2023Q4. ④ Industrial microbiology: Revenue increased 23.00% year on year. Subsequently, with the active expansion of overseas markets, the domestic animal insurance business increased online and offline marketing and the commissioning of Hubei Meiqi Health. It is expected that the growth rate of the industrial microbiology sector will accelerate.
R&D in the pharmaceutical industry is progressing smoothly, and several products have reached important milestones. 2024Q1 invested 588 million yuan in R&D in the pharmaceutical industry (excluding equity investment), of which direct R&D expenditure was 349 million yuan, an increase of 13.96% over the previous year. ① Linacipp for injection (ARCALYST): The Chinese marketing license application for recurrent pericarditis indications was accepted in March 2024. ② HDM1005: The Chinese IND application for weight management and type 2 diabetes for overweight or obese people was approved in March 2024, and the enrollment and administration of the first Chinese phase Ia clinical study was completed in March 2024; the US IND application for overweight or obesity indications was approved in April 2024. ③ HDM2005: It is intended to be developed for the treatment of advanced solid tumors and hematoma. The Chinese IND application was accepted in March 2024. ④ Somituximab injection (ELAHERE): In March 2024, the partner announced that the product had switched from accelerated approval to full approval in the US; in April 2024, the company was approved to join the international multi-center phase III clinical study to use bevacizumab for maintenance treatment of adults with folic acid receptor alpha positive recurrent platinum-sensitive epithelial ovarian cancer, fallopian tube cancer, or primary peritoneal cancer without disease progression after second-line platinum-containing chemotherapy. ⑤ Remipirazine injection: Used in conjunction with a dynamic monitoring system for glomerular filtration rate, the marketing license application in China was accepted in January 2024. ⑥ Zewokie Orense Injection (Saekaize): Approved for marketing on March 1, 2024, with conditions for the treatment of adult patients with recurrent or refractory multiple myeloma. The company has set up a special commercial team and issued the first prescription in the country on the day it is approved for marketing.
Registration of key medical and aesthetic products has been accepted, and the product matrix is getting richer. ① MaiLi Extreme: The company's new high-end sodium hyaluronate filler containing lidocaine successfully reached the main research endpoints in China, showing good product safety data. The product's registration application for three types of medical devices in China has been accepted. ② ATGC-110: The marketing application for type A botulinum toxin introduced by the company in cooperation with ATGC in Korea has been accepted by the Korean Ministry of Food and Drug Safety (MFDS). The declared indication is to improve moderate to severe brow lines in adult patients. ③ YY001: The recombinant botulinum toxin type A introduced by the company in cooperation with Chongqing Yuyan Company has completed the enrollment of phase III clinical subjects in China.
Investment suggestions: The company's medical, aesthetic and industrial microbiology sectors are developing rapidly, the pharmaceutical industry and commercial sector are operating steadily, and innovation and transformation provide room for imagination for the company's medium- to long-term development. We expect the company's net profit to be 33.54/39.54/4.606 billion yuan in 2024-2026, up 18.13%/17.90%/16.50% year-on-year, EPS of 1.91/2.25/2.63 yuan respectively. The current stock price corresponding to 2024-2026 PE is 17/15/12 times, maintaining the “recommended” rating.
Risk warning: risk of market competition, risk of market promotion falling short of expectations, risk of new product development falling short of expectations.