Performance summary: For the full year of 2023, the company achieved operating income of 21.454 billion yuan (+12.69%), net profit to mother of 2,456 billion yuan (+44.03%), net profit of 2,366 billion yuan (+43.77%); achieved gross profit margin of 52.43% (-0.09pcts), net profit ratio of 12.34% (+3.39pcts), sales expense ratio of 20.74% (-4.09pcts), management expense ratio of 5.32% (+0.44pcts), R&D expenses ratio of 9.06% (- 0.37pcts), financial expense ratio 1.09% (-1.43pcts). The company's revenue has grown steadily, mainly benefiting from the continuous enrichment and structural optimization of infusion products, the restoration of API intermediate prices, and increased revenue from cooperative projects with MSD. At the same time, cost reduction and efficiency measures have achieved remarkable results, and sales expenses and financial expenses have been effectively controlled.

The formulation pipeline continues to be rich, and demand for APIs is picking up. In 2023, a total of 45 generic drugs of the company were approved for marketing (first imitation/first 10), and 62 were declared for production. While strengthening the existing advantages in parenteral nutrition and infection, the product layout continued to be enriched in the fields of diabetes, respiratory system, etc.; at the same time, the infusion product structure continued to be optimized, and the proportion of sealed infusions increased by 4.25 pcts. In addition, benefiting from the recovery in terminal market demand, the company's main API intermediate products achieved a sharp rise in volume and price. In 2023, the revenue of antibiotic intermediate APIs was 4.843 billion yuan, an increase of 23.78% over the previous year.

The innovative layout is about to usher in a harvest period. The company's innovation pipeline is progressing in an orderly manner. In 2023, a total of 3 NDAs were accepted by the Drug Administration, and 6 clinical studies were approved for implementation. Among them, the core product SKB264 was accepted by the FDA for single-agent treatment of advanced or metastatic TNBC and included in the priority review process. At the same time, phase 3 clinical trials have been initiated for the three indications of first-line advanced TNBC, second-line HR+/HER2-breast cancer, and EGFR mutation NSCLC. Up to now, SKB264 has been identified as 4 breakthrough treatments, with significant differentiation advantages. As the research pipeline continues to advance, the company's innovative layout is about to usher in a harvest period.

Profit forecast and rating: The company is expected to achieve revenue of 236.22/268.00/31.392 billion yuan in 2024-2026, up 10.1%/13.5%/17.1% year on year; net profit to mother of 28.79/33.26/ 39.77 billion yuan, up 17.2%/15.5%/19.6% year on year. Based on the multi-wheel drive of the company's formulations and APIs, the innovative layout progresses steadily and maintains a “buy” rating.

Risk warning: risk of product price changes, increased risk of market competition, risk of changes in industry policies