Revenue in '23 increased 3.30% year over year, and net profit to mother increased 9.55%. The company achieved operating income of 975 million yuan in 2023, +3.30% year on year; realized net profit of 120 million yuan, +9.55% year over year; realized net profit after deduction of 110 million yuan, +9.08% year on year; basic earnings per share was 0.20 yuan, compared to 0.18 yuan in the same period last year.

Both gross profit margin and net profit margin have risen, and expenses are well controlled. The company's gross margin in 2023 was 25.52%, +0.79pct year-on-year. On the cost side, the cost rate for the 2023 period was 9.85%, -0.44pct, of which sales expense rate/ management expense rate/ R&D expense rate/ financial expense ratio were 2.01%/5.29%/2.68%/-0.13%, respectively, +0.12pct/-0.14pct/-0.06pct/-0.36pct, respectively. The company's net profit margin in 2023 was 13.07%, up 0.83 pct year over year.

Revenue from the gelatin and by-products business increased by 5%, while revenue from the collagen business declined by 33%. By product, the company's gelatin series products and by-products achieved operating income of 614 million yuan/45 million yuan/0.03 billion yuan/308 million yuan/0.04 billion yuan/0.04 billion yuan, respectively, +5.35%/-33.15%/+40.17%/+8.06%/-25.58%, respectively, with gross margins of 27.11%/28.59%/9.41%/21.88%/42.90% year-on-year, +0.87pc+ 6.22pct/-40.08pct/+0.46pct/-14.53pct The company has a history of production and operation for more than 60 years, always puts product quality first, actively establishes a strict, perfect and industry-leading production quality management system, and continuously improves system guarantee capabilities. The company establishes a high-standard gelatin and collagen production base, organizes enterprise production quality management work in strict accordance with national regulations and quality standards, continuously implements and strengthens the quality awareness of all employees, establishes a quality culture for all employees, and integrates product quality control measures throughout the company's business operation system to ensure product safety and quality stability.

The company actively exploits the advantages of listed companies' capital operation platforms, relies on the collagen industry to extend the industrial chain vertically, strengthen the layout of the downstream hollow capsule field, cultivate sales channels, and form integrated management, laying a solid foundation for the company's rapid development in the field of health. Currently, the company has an annual production capacity of 13,500 tons of gelatin and 4,300 tons of collagen.

A new intelligent industrialization project for hollow capsules was put into operation, adding a production capacity of 15 billion hollow gelatin capsules per year.

On March 29, 2024, the company issued the “Notice Concerning the Commissioning of Some Fund-raising Projects”. The “New Intelligent Industrialization Project for Hollow Capsules” has been completed and recently put into production. Yiqing Biotech will add 15 billion capsules per year to produce empty gelatin capsules, and the entire project will have an annual production capacity of 39 billion hollow capsules after delivery. The commissioning of the above projects indicates that the scale of the company's hollow capsule business will be further expanded. It will continue to promote the highly collaborative development of the company's gelatin business and upstream and downstream of the hollow capsule business, and enhance the company's core competitiveness and development potential. In addition, on the basis of the original hollow capsule production process, the company's new convertible hollow capsule intelligent production expansion project will further strengthen the fully automated and fully intelligent control of the entire process, and be equipped with a fully automated intelligent three-dimensional warehouse to build 32 new intelligent fully automated hollow capsule production lines to greatly improve the level of intelligent manufacturing, improve production efficiency, and improve product quality uniformity and stability, so as to better meet the diverse needs of the market. After the project is completed and put into operation, Yiqing Biotech will have an annual production scale of nearly 70 billion hollow capsules, making it a professional hollow capsule production base with the highest production capacity of single hollow capsules in China, with a complete range of products and a high degree of intelligence. In the future, the company will fully unleash the scale effect, further promote the implementation of the company's big health strategy, and gradually achieve long-term scale benefits under the joint impetus of factors such as brand effect, high-quality customer resources, technology accumulation, and production management experience.

Investment advice: The company focuses on the entire natural collagen industry chain and has formed a production, R&D, sales and service system for high-quality bone marrow base - gelatin - collagen - nutritional health products/medicinal materials, and has formed a good technical reserve, brand effect and customer reputation. In recent years, the company has further accelerated the pace of strategic implementation, continuously improved management efficiency, actively stepped up technological innovation, and developed extended products around gelatin, collagen, and hollow capsules, all of which have a layout in the fields of “medicine, health, food, and beauty”. With the rapid development of the collagen industry and the continuous increase in public health awareness, the company's revenue is expected to continue to grow. We predict that the company's 2024-2026 EPS will be 0.22 yuan, 0.24 yuan, and 0.26, respectively, and the corresponding PE will be 22.0X, 20.1X, and 18.7X, respectively, maintaining an investment rating of “increased holdings”.

Risk warning: management risk, increased risk of market competition, risk of price fluctuations of major raw materials, risk of capital raising investment projects falling short of expectations, policy risks