Incidents:
The company released its annual report for 2023, and achieved revenue of 10.318 billion yuan (yoy -17.67%), net profit to mother of 1,352 billion yuan (yoy -42.76%), after deducting non-return net profit of 1,265 billion yuan (yoy -45.58%). In the first quarter of 2024, the company achieved revenue of 2,523 billion yuan (yoy -35.89%), net profit attributable to mother of 304 million yuan (yoy -74.73%), after deducting net profit of 292 million yuan (yoy -75.18%).
The impact of a high base is gradually being digested, and the non-respiratory business continues to grow
Affected by the COVID-19 pandemic in 2022, demand for respiratory drugs increased, prompting the company to rapidly release products such as Lianhua Qingfeng. Affected by the high base in 2022 and high social inventories, the company's respiratory products achieved annual revenue of 3.305 billion yuan (yoy -51.90%) in 2023. Apart from respiratory products under pressure due to the epidemic, all other businesses have maintained steady growth. Its central cerebrovascular products achieved revenue of 4.709 billion yuan (yoy +12.71%), revenue from other patented products of 435 million yuan (yoy +13.82%), and revenue of other products of 1,869 million yuan (yoy +69.72%).
Continue to promote innovative traditional Chinese medicine research and development, and have abundant pipeline reserves
In 2023, the company invested 935 million yuan in R&D, accounting for 9.06% of revenue, and is at the leading level in the same industry. Currently, the company has a total of 14 patented Chinese medicines, of which 10 are included in the national medical insurance catalogue, 5 are included in the national essential drug catalogue, and 10 are included in expert consensus, diagnosis and treatment guidelines, and recommended medications in university textbooks. The products developed by the company cover diseases of the respiratory system, endocrine system, digestive system, neurological system, gynecology, pediatrics, etc. During the reporting period, Tongluo Mingmu capsules were approved for marketing, and Chaihuang Liancheng capsules completed phase III clinical research. Pediatric Lianhua Qinggang granules and Luopangtong tablets are in phase III clinical stage, which is expected to provide continuous impetus for the company's development.
Profit Forecasts, Valuations, and Ratings
Considering that social inventory still needs to be digested, the business for the first quarter of 2024 is still in the adjustment period. We expect the company's revenue for 2024-2026 to be 113.86/125.41/13.717 billion yuan, respectively, with corresponding growth rates of 10.35%/10.14%/9.38%; net profit to mother for 2024-2026 will be 15.32/17.59/1,990 billion yuan, respectively, with corresponding growth rates of 13.27%/14.83%/13.10%, respectively; EPS is 0.92/1.05/ 1.19 yuan/share, corresponding PE is 21/18/16 times, respectively, and 3-year CAGR is 13.73%. Since the company is a leader in traditional Chinese medicine innovation, it is recommended to stay alert.
Risk warning: risk of declining profits, risk of fluctuations in raw material supply and price, risk of sales falling short of expectations, etc.