Key points:
High-quality state-owned enterprises, entering a new cycle driven by innovation
The company is the core pharmaceutical platform for China Resources Group's big health business segment. It has successfully transformed from a large infusion platform to a comprehensive chronic disease pharmaceutical platform, and the overall operation of the company is steady. Currently, the pharmaceutical and biological industry has entered a stage of transformation and upgrading. The company has formulated a business strategy of “imitation nurtures innovation, and innovation drives the future”. While increasing investment in internal R&D, it continues to give full play to its advantages in mergers and acquisitions, and build technical platforms such as synthetic biology and peptides to accelerate the company's innovation and transformation. The company has a long development history and has gone through many cycles of changes in the medical industry. We believe that this round of strategic transformation of the company is expected to greatly enhance the innovative value of the company's platform.
The rich product portfolio, specialty business and large infusions are growing steadily. Chronic diseases and APIs are expected to resume (1) Specialty product portfolios are characterized by differentiation. Most varieties have exclusive or competitive advantages with a high market share. We judge that existing varieties are expected to maintain steady growth. In 2024, it was merged into Huarun Zizhu, a leading “Women's Health+Pediatric” company with strong profitability. At the same time, Zizhu's retail channels complement the company's existing channels, which is expected to drive new growth in other types of retail. (2) The impact of chronic disease platform collection is coming to an end. It is expected that it will be basically digested in 2024. The company is actively promoting generic drug development and consistency evaluation. It is expected that large-scale product echelons will be formed in the future, and the dividends of new product collection are expected to be revealed. The APIs segment focuses on empowering the formulation business to continuously improve market competitiveness. Since 2022, the company has obtained various API products and technology platforms from Zhejiang Peptide, Shenzhou Biotech and Tiandong Pharmaceutical through shareholding and mergers and acquisitions, gradually expanding upstream in the industrial chain and implementing an integrated strategy of raw materials and formulations. It is expected that as downstream pharmaceutical companies end their inventory removal, revenue from existing APIs is expected to gradually recover. (3) The large infusion sector stabilizes the company's cash flow business. The incidence of complex virus infections is still high after the epidemic, and the large infusion market is expected to maintain steady growth. At the same time, the company continues to implement the “one axis, two wings” strategy for large infusions. On the one hand, it continues to optimize the product structure, and on the other hand, it is expected that the gross margin of the large infusion sector will continue to increase.
Investment advice
We expect revenue in 2024-2026 to reach 11.07 billion yuan, 12.18 billion yuan, and 13.51 billion yuan, with growth rates of 8.3%, 10%, and 11%, respectively, and net profit to mother of 1.49 billion yuan, 1.68 billion yuan, and 1.91 billion yuan respectively, with growth rates of 11%, 13%, and 14%, respectively. EPS for 2024-2026 was 1.43 yuan, 1.62 yuan, and 1.83 yuan respectively. The current stock price corresponding to 2024-2026 PE was 14.4, 12.8, and 11.2 times, respectively, covered for the first time, giving it an “increase in weight” rating.
Risk warning
R&D transformation fell short of expectations, risk of asset and goodwill impairment, and business sector recovery fell short of expectations.