Brief performance review
On the evening of April 26, the company released its 2023 annual performance report. During the reporting period, the company achieved operating income of 817 million yuan, an increase of 6.83% over the previous year; net profit attributable to shareholders of listed companies was 255 million yuan, an increase of 7.87% year on year; net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was 243 million yuan, an increase of 6.57% year on year. Revenue for the first quarter of 2024 was about 301 million yuan, up 14.61% year on year; net profit attributable to shareholders of listed companies was about 112 million yuan, up 20.08% year on year.
Management analysis
The implementation of production capacity has laid a solid foundation for the release of the company's performance. By the end of '23, in terms of production capacity construction for specialty APIs and key intermediates projects, all 7 workshops have completed plant construction. Of these, 1 workshop has completed completion acceptance, 3 workshops are undergoing trial production, 1 workshop has completed equipment installation, and 2 workshops are awaiting equipment installation. In terms of production capacity construction of the formulation project, the high-activity formulation workshop of 12,654 square meters and the oral solid preparation workshop of 16,809 square meters have all completed plant construction and equipment installation. The implementation of various projects will effectively break through production capacity bottlenecks and provide reliable production conditions for large-scale production and sales of products.
The innovative drug business is progressing steadily. Currently, the company is developing a new class 1.1 drug to treat ischemic stroke. The phase II clinical trial of brozopent sodium has been completed and is yet to enter phase III clinical trials.
Product competitiveness and cost control capabilities are outstanding, and gross margin has increased steadily: in 2023, the company achieved a gross profit margin of 55.05%, an increase of 3.55 pct; in the first quarter of 2024, the company achieved a gross profit margin of 58.29%, a year-on-year decrease of 0.6 pct, but remained at a high level.
The CDMO business declined from 33 projects in '22 to 29 projects in '23. Nervous system revenue fell sharply by 89.8% to 12.5 million yuan. Depending on the company's product type, this part of the business may have been due to a contraction in revenue from Aierjian's AGN-H and AGN-L intermediates.
The internationalization of formulations is progressing steadily. Zhejiang Qizheng Pharmaceutical, a wholly-owned subsidiary, continues to promote the “High-end Formulation Internationalization Project”. The main products of the project are highly active targeted anti-tumor tablets/capsules and ordinary oral solid tablets/capsules. Currently, all products are progressing normally according to the project schedule, and the implementation of the project will further enhance the company's competitiveness in the formulation field.
Profit Forecasts, Valuations, and Ratings
We are optimistic about the growth of the API business and the potential for growth in the formulation business due to the release of the company's production capacity. The company's net profit for 2024-2026 is estimated to be RMB 3.12/397/491 million yuan, corresponding PE is 20/16/13 times, respectively, maintaining a “buy” rating.
Risk warning
The formulation fell short of expectations; the RMB exchange rate fluctuated; R&D progress fell short of expectations; majority shareholders reduced their holdings; the ban on restricted shares was lifted, etc.