Incidents:
The company released the 2023 annual report and the report for the first quarter of 2024. The full year of 2023 achieved operating income of 52,918 billion yuan (YoY +38.30%), net profit of 8.070 billion yuan (YoY +7.04%), net profit of 7.915 billion yuan (YoY +5.40%); 2023Q4 achieved operating income of 13.646 billion yuan (YoY +14.58%) in a single quarter, net profit of 1,540 billion yuan (YoY -20.31%), net profit of 1,535 billion yuan (YoY +20.31%). YoY -20.03%); 2024Q1 achieved revenue of 11.396 billion yuan (YoY +2.00%) and net profit to mother of 1,458 billion yuan (YoY -28.26%) in a single quarter, after deducting non-net profit of 1,455 billion yuan (YoY -28.36%).
Comment:
Performance during the reporting period was slightly lower than expected, and agency product revenue continued to rise. The company's revenue exceeded 50 billion yuan in 2023, and the Q1 performance in 2024 declined year-on-year, and the performance was slightly lower than expected. We believe it was mainly due to a decline in gross margin and an increase in sales expenses due to changes in the company's revenue structure. In 2023, the company's agent products achieved sales revenue as a share of 98.05% of operating revenue. Of these, the nine-valent HPV vaccine was issued in batches of 36.55,800 units (YoY +136.16%), and the four-valent HPV vaccine was issued in batches throughout the year (YoY -26.27%). It is expected that 9-valent HPV will gradually replace 4-valent HPV in the first quarter of 2024, and the 4-valent HPV vaccine will receive only 2 batches per year (YoY -26.27%). Issued in batches. Affected by the lower gross margin of 9-valent HPV compared to 4-price, Q1 companies' gross margins decreased by 6.72% and 4.25% year-on-year in 2023 and 2024, respectively. In October 2023, the company reached a cooperation with GSK to exclusively represent GSK's major single recombinant shingles vaccine. We believe that sales expenses will continue to increase in order to strengthen sales team building and increase marketing efforts for this product. Sales expenses increased 24.04% and 10.83% year-on-year in Q1 of 2023 and 2024, respectively. At the end of 2023, the company had 3,990 sales staff (YoY +18.79%).
Acting for MSD 5 product renewals, GSK's major single products are expected to establish a second growth curve for the agency business. On January 21, 2023, the company and MSD completed the renewal of agreement products for the continuous procurement of HPV vaccine, pentavalent rotavirus vaccine, etc.; in the first quarter of 2024, the company obtained the first batch issuance certificate as an exclusive agent for the GSK recombinant shingles vaccine. Currently, it has been issued in 25 batches by the Central Inspection Institute. We expect sales to be achieved in the second quarter. GSK's RSV vaccine for the elderly received implied approval for CDE clinical trials in June 2023, and the company will become GSK's exclusive partner.
R&D investment is growing rapidly, and the in-house research pipeline continues to be rich. In 2023, the company invested 1,345 billion yuan (YoY +20.82%), accounting for about 130.81% of the revenue of independent products; the number of R&D personnel increased to 927, an increase of 14.87% over the same period last year. The company's self-developed 23-valent pneumococcal polysaccharide vaccine was approved for marketing; the quadrivalent influenza lysis vaccine is under review; the freeze-dried human rabies vaccine (MRC-5 cells) has completed clinical trials. During the reporting period, the company plans to acquire 100% of Chenan Biotech's shares in cash. After the acquisition is completed, the company's business will expand to metabolic fields such as diabetes.
Profit forecast: We expect the company's 2024-2026 revenue to be 601.21 billion yuan, 707.45 billion yuan, and 76.264 billion yuan, respectively, with year-on-year growth rates of 13.61%, 17.67%, and 7.80% respectively, and net profit to mother of 95.60, 115.39, and 13.494 billion yuan respectively. The year-on-year growth rates are 18.46%, 20.71%, and 16.93%, respectively. Corresponding to the current stock price PE, it was lowered to a “recommended” rating.
Risk warning: Product sales fall short of expectations, R&D progress falls short of expectations, risk of market policy adjustments, etc.