Matters:
The company announced its 2023 annual report, achieving revenue of 3.276 billion yuan (-8.58%), net profit attributable to mother of 210 million yuan (-31.75%), net profit after deduction of 212 million yuan (-26.17%), and EPS of 0.25 yuan/share.
The company's performance fell short of expectations.
At the same time, the company released its report for the first quarter of 2024, achieving revenue of 647 million yuan (-23.90%), net profit of 64 million yuan (+28.38%), and net profit of 55 million yuan (+29.40%) after deduction.
The 2023 profit distribution plan is: 125 million yuan (tax included) for every 10 shares.
Ping An's point of view:
Asset impairment affects performance in the short term. In 2023, the company's net profit to the mother was 210 million yuan (-32%), which declined sharply. The main reason was that the net profit to the mother was reduced by 90.32 million yuan due to preparations for the price drop in heparin sodium raw materials. At the same time, the company's non-recurring profit and loss in 2023 was -2.74 million yuan, compared to 19.49 million yuan the previous year, which also had a certain impact on the net profit to the mother. According to customs data, the price of heparin raw materials has dropped sharply since the second half of 2023. The average export unit price in December 2022 was 10,650 US dollars/kg, compared to 5,356 US dollars/kg in December 2023. Considering that the price of heparin APIs is currently in the bottom range, we think it is expected to bottom up in 2024.
The nuclear drug sector maintained steady growth, and heparin APIs were a factor influencing marginal profit in 2024. In terms of sector revenue, the nuclear medicine sector's revenue in 2023 was 1,017 billion yuan (+11.20%), of which FDG revenue was 420 million yuan (+12%), Yunke injection revenue was 240 million yuan (+20%), and Tech-standard drug revenue was 100 million yuan (-3%), maintaining steady growth; API business revenue was 1,678 billion yuan (-18.61%), of which heparin APIs revenue was 1,326 billion yuan (-24%). The heparin API business is expected to recover as prices bottomed out, so there is a marginal impact on profit in 2024 Factors: Pharmaceutical product revenue of 400 million yuan (-17.20%) is mainly due to a drop in the bid price of the core product Nafloparin Calcium Injection. As enoxaparin and daxaparin are approved for marketing, the formulation business is expected to resume positive growth.
R&D investment is mainly in the direction of nuclear drugs, and the varieties under development are progressing smoothly. In 2023, the company invested 313 million yuan (+77%) in R&D, of which nuclide drug research and development accounted for 77%. Currently, tetracycline has been submitted and is awaiting CDE approval. Sodium fluoride injections have been submitted for marketing. APN1607 is in the pre-NDA data compilation stage, Technetech GSA completed phase 3 and is in the NDA preparation stage, fluorine [18F] siruitide injections are in phase 3 clinical, fluorine [18F] fibrinostatin injections have completed phase 1 clinical trials, and 177Lu-LNC1003 and 177Lu-LNC1004 are both in phase 1 clinical phase in China and the US. The company's core products under development are progressing smoothly, and it is expected that 2024 will usher in a harvest period.
The entire nuclear medicine industry chain has obvious advantages. Short-term performance pressure does not change long-term development potential, and maintains a “highly recommended” rating. Major events in the nuclear medicine and AD sector followed one after another in 2023. Novartis Pluvicto earned US$980 million (+261%), and Lantheus's core product, the PET imaging agent Pylarify targeting PSMA, made revenue of US$851 million (+61%), making the nuclear drug market potential increasingly prominent. Considering the pressure on heparin APIs and the expected continuation of high R&D investment, we adjusted our net profit forecast for 2024-2025 to 298 million yuan or 371 million yuan (the original forecast was 470 million yuan and 608 million yuan), and the estimated net profit for 2026 is 448 million yuan. As a domestic nuclear drug leader, the company has obvious advantages in the overall industry chain layout. Although short-term performance is under pressure, it has not changed its long-term growth potential, and we believe that the market has fully responded to the company's performance expectations. The current stock price is 37 times PE in 2024, maintaining a “highly recommended” rating.
Risk warning. 1) R&D risk: The company's core products under development may have failed or progress falls short of expectations. 2) Risk that the price of heparin APIs falls short of expectations: The rebound rate of heparin APIs may fall short of expectations. 3) Risk of mature nuclear drug products falling short of expectations: Mature nuclear drug products are affected by factors such as competitive patterns and policies, and there is a possibility that the volume will fall short of expectations.