Event: On April 29, 2024, the company released its 2023 Annual Report and 2024 Quarterly Report. In 2023, the company achieved operating income of 1,263 billion yuan, a year-on-year increase of 25.24%, net profit of 289 million yuan, an increase of 37.19% over the previous year, and net profit after deducting non-return to mother of 261 million yuan, an increase of 26.38% over the previous year. 2024Q1, the company achieved operating income of 336 million yuan, a year-on-year increase of 11.08%, net profit to mother of 82 million yuan, an increase of 79.14% over the previous year, and net profit after deducting non-return to mother of 82 million yuan, an increase of 87.43% over the previous year.
The share of high-margin formulation & API products has increased, and profit margins are on the rise. In 2023, the company's overall gross margin was 55.92%, up 4.3 pct year on year, mainly because the company launched the formulation sales business, and the gross margin of the formulation sector reached 87.74%, increasing the overall gross profit margin; net margin was 22.90%, up 1.35 pct year on year; net margin after deduction was 20.71%, up 0.2 pct year on year. 2024Q1's overall gross margin was 53.68%, net margin was 24.49%, and net margin after deduction was 24.48%, a significant increase over the same period last year. It is estimated that this is mainly due to the increase in the volume of pharmaceutical products and the share of high-margin API products. In terms of expense ratio, in 2023, the company's sales expense ratio was 7.98%, up 4.03pct year on year, mainly due to sales of the company's first pharmaceutical product, related sales expenses increased; management expense ratio was 13.44%, which was basically the same; R&D expense ratio was 10.84%, down 0.79pct year on year; financial expense ratio was -1.30%, up 1.44pct year on year, mainly due to exchange rate changes; 2024Q1 company sales, management, R&D, and financial expenses rates were 7.19%, 11.13%, and 8.62, respectively % and -3.47%, a decrease compared to the full year of 2023.
The main business is growing steadily, and cardiovascular and anti-tumor products are growing rapidly. In 2023, the sales revenue of the company's APIs and intermediates business was 1,059 billion yuan, an increase of 16.06% over the previous year. Its central vascular product revenue was 300 million yuan, up 26.94% year on year, mainly due to good sales of eplerone and bepidoic acid, further expanding market share; revenue of anti-tumor products was 244 million yuan, up 73.63% year on year, mainly due to the increase in sales of APIs such as abiraterone acetate. After years of market cultivation, as the commercialization of generic drugs from new and old customers accelerated, sales of abiraterone acetate grew rapidly; Women's health products began to be marketed in 2021, and achieved operating income of 189 million yuan compared to the previous year's basic The respiratory system category achieved operating income of 163 million yuan, up 7.48% year on year; operating income of neurological products was 74 million yuan, down 26.74% year on year, mainly because competitors' price cuts had a certain impact on the company's sales in the European market; operating income of anti-infective products was 0.18 million yuan, a decrease of 60.32% year on year, mainly due to changes in first-line drug use for HIV treatment in Brazil; trade products achieved operating income of 105 million yuan, an increase of 18.88% year on year; pharmaceutical product didroprogesterone tablets in June 2023 Listed, achieving sales revenue of 90 million yuan in the first year of listing.
The first domestic prototype of didroprogesterone tablets was approved, and a major breakthrough was made in the integration process of APIs and formulations. In June 2023, the company's didroprogesterone tablets were approved by the NMPA for marketing as the first domestic model. This is the company's first approved formulation product, marking a major breakthrough in the company's “active drug+formulation” integrated strategy. In order to cooperate with the launch of didroprogesterone tablets, the company set up a formulation marketing team of nearly 20 people to be responsible for the national marketing of the product. By the end of 2023, didroprogesterone tablets had been connected to the Internet in 24 provinces and cities, and 1,058 hospitals (including community outpatient clinics) had achieved sales revenue of 89.85 million yuan in 2023. According to data from PharmacoIntelligence Network, in recent years, Abbott Pharmaceuticals' overall sales of didrogesterone tablets in public hospitals in China have shown an upward trend, reaching 1,404 billion yuan in 2023. Due to the huge market size and the company's integrated API and formulation advantages for this product (currently, there are only 2 companies in the world that control large-scale production of didroprogesterone APIs, Orient and original research companies), didroprogesterone tablets are expected to bring considerable revenue and profit contributions to the company in the future.
Investment advice: The commercialization of the company's characteristic high-barrier APIs and intermediates is expected to support steady profit growth, and the company's technology & product layout in the field of small nucleic acids & peptides is expected to open up medium- to long-term growth space. We expect the company's revenue for 2024-2026 to be 16.24, 20.20, and 2,425 billion yuan respectively, up 28.62%, 24.42%, and 20.01% year-on-year net profit of 3.94, 5.15, and 659 million yuan, with year-on-year increases of 36.2%, 30.65%, and 27.92%. The current stock price corresponding to 2024-2026 PE is 25/19/15 times, covering for the first time, giving it a “recommended” rating.
Risk warning: risk of market competition, risk of market promotion falling short of expectations, risk of new product development falling short of expectations.