Non-net profit of 1,506 billion yuan was deducted in 2023, and the savings and fee reduction benefits were obvious. Revenue of 11.478 billion yuan was achieved in 2023, a year-on-year decrease of 27.41%, mainly due to lower product sales prices. After deducting non-net profit of 1,506 billion yuan, a year-on-year decrease of 22.05%. The gross profit margin for the whole year was 25.6%, a slight decrease of 0.08 percentage points from the previous year, and the net interest rate was 13.65%, up 2.29 percentage points from the previous year. It was mainly due to the company's cost reduction measures and simultaneous cost reduction due to procurement savings, as well as the strengthening of cost control, reduction in soil restoration costs, and a decrease in R&D costs in '23. The company did a good job of cutting production consumption, saving energy, and managing maintenance and auxiliary materials costs, saving more than 100 million yuan throughout the year.
The operating conditions of the subsidiary. Among the major holding subsidiaries, Jiangsu Youshi achieved operating income of 2.02 billion yuan, a year-on-year decrease of 37.59%, and net profit of 347 million yuan, a year-on-year decrease of 45.41%; Jiangsu Youjia achieved operating income of 5.485 billion yuan, a year-on-year decrease of 7.16%, and net profit of 842 million yuan, a year-on-year decrease of 1.47%.
The operating conditions of each sector. In 2023, original pharmaceuticals achieved revenue of 7.384 billion yuan, a year-on-year decrease of 22.20%; pharmaceuticals achieved revenue of 1,666 billion yuan, a year-on-year decrease of 1.22%; trade achieved revenue of 2,224 billion yuan, a year-on-year decrease of 49.06%; and other businesses achieved revenue of 1.61 million yuan, a year-on-year decrease of 16.09%.
The gross profit margin of original drugs was 30.16%, a year-on-year decrease of 1.37 percentage points; the gross profit margin of formulations was 27.39%, a year-on-year decrease of 19.67 percentage points; the gross profit margin of trade was 9.96%, an increase of 4.05 percentage points; and the gross profit margin of other businesses was 28.26%, a year-on-year decrease of 0.89 percentage points.
Product sales have increased and prices have decreased. Judging from operating data, in 2023, the company achieved sales of 96,500 tons of original drugs, a year-on-year increase of 10.4%, an average price decrease of 29.54% year-on-year, a year-on-year increase of 35,700 tons of formulation (undiscounted), an increase of 2% over the previous year, and a 3.5% year-on-year decrease in average price. According to Baichuan information, the average price of glyphosate in 2023 was 33,000 yuan/ton, down 48% year on year, kung fu methrin 140,000 yuan/ton, down 33% year on year, bifenthrin 180,000 yuan/ton, down 39% year on year, and cypermethrin 67,000 yuan/ton, down 25% year on year.
The construction of the project progressed rapidly. In 2023, the company used Liaoning Youchuang as the main battleground for project construction, with the goal of building a world-class digital flagship factory and focusing on the construction of the first phase of the project. The first phase of the Huludao Phase I project will be commissioned and put into operation in 2024, accelerate the second phase construction, and speed up the preparation of the Youchuang Phase II project list. The commissioning of the Youjia Phase 4 Phase 2 project was completed at the end of November 23, which quickly achieved production results and simultaneously accelerated the promotion of the Youjia Phase 5 project. Among them, the budget investment for the first phase of the Youchuang project was 3.478 billion yuan, with a cumulative investment of 760 million yuan, accounting for 22% of the budget.
Profit forecast. Due to the sharp drop in product prices, we expect the company's net profit to be 17.27 billion yuan, 20.47 billion yuan, and 2,342 billion yuan respectively in 2024-2026 (the original forecast for 2024-25 was 2.78 billion yuan and 2,361 billion yuan).
Referring to the valuation of comparable companies in the same industry, we gave 2024 18 times PE (originally 20x in 2023), corresponding to a target price of 76.5 yuan (-21%), and gave it a “superior to the market” rating.
Risk warning. New orders fell short of expectations; raw material prices fluctuated.