Incidents:
On April 27, Pailin Biotech released its 2023 Annual Report and 2024 Quarterly Report. The company achieved revenue of 2,329 billion yuan (-3.18%), net profit to mother of 612 million yuan (+4.25%), and net profit after deducting non-return to mother of 565 million yuan (+9.08%) for the full year of 2023. In the first quarter of 2024, the company achieved revenue of 436 million yuan (+67%), net profit to mother of 122 million yuan (+116.31%), and net profit after deducting non-return to mother of 108 million yuan (+196.98%). The company's performance is in line with expectations, with high growth in 2024Q1. Under the guarantee of rapid growth in pulp harvesting, the full year of 2024 is expected to achieve high growth.
The amount of pulp collected in 2023 will exceed 1,200 tons, and the product side is expected to release it quickly in 2024:
2023Q4 achieved revenue of 964 million yuan (+4.63%) and net profit to mother of 286 million yuan (+20.34%). In the second half of 2023, the company's plasma supply shortage problem was improved, the product side resumed good growth, 2024Q1 continued its rapid growth trend, and the demand side for blood products such as isopropyl continued to be strong. In 2023, Pasfique's Longjiang, Gannan, Bayan, and Qing'an pulp stations were certified for mining. Deyuan pulp supply returned to normal. Thanks to the joint efforts of new and old pulp stations, pulping volume increased significantly year-on-year in 2023, exceeding 1,200 tons, laying a solid foundation for product-side growth in 2024. The company currently has 38 pulp stations, ranking third in the industry. As of 2024.4.27, 34 of the company's 38 pulp stations are being harvested, and the remaining 4 pulp stations are awaiting completion and inspection.
With the inspection and mining of the completed pulp station by Pacifico and the continuous improvement of the pulp supply capacity of the Deyuan Pulp Station, the company's pulp collection volume is expected to continue to grow at a high rate in 2024. In terms of fresh pulp stations, the company is expected to develop pulp station layouts at pulp stations in other provinces with the help of Shaanxi Coal, and accumulate momentum for long-term growth.
Improving quality and efficiency continues to advance, and there is good room for improvement in profitability:
In 2023, the company's sales expense ratio, management expense ratio, R&D expense ratio, and financial expense ratio were 12.26% (-4.35pp), 7.74% (+0.86pp), 3.42% (+0.29pp), and -2.47% (-0.17pp), respectively; the net sales margin reached 26.26% (+1.82pp). After the entry of Shaanxi Coal, the quality and efficiency of the company's operations and management were gradually improved. Expenses were well controlled during the period, and profitability is expected to continue to improve. In terms of research and development, the company is developing more than 10 products at a rapid pace. Fibrinogen is carrying out clinical trial data and on-site verification of registration, and research work on a new generation of hydroxypropyl continues to advance. With the advancement of the company's research pipeline, the successive launch of products, and the improvement of process technology, the company's slurry profit has good room for improvement.
Investment advice:
We expect the company's 2024-2026 net profit to be 7.8/9.4/1.10 billion yuan, respectively, and the corresponding EPS is 1.07/1.29/1.50 yuan, respectively. The PE corresponding to the current stock price is 27.96/23.22/19.93 times, respectively. We continue to recommend and give a “buy” rating.
Risk warning:
The amount of pulp collected falls short of the expected risk; the risk of product sales falling short of the expected risk; the launch of a new product falls short of the expected risk.