Incident: Ling Rui Pharmaceutical released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 3.311 billion yuan (YoY +10.31%), net profit of 568 million yuan (YoY +22.09%), net profit of 534 million yuan (YoY +30.61%); 2024Q1 achieved revenue of 909 million yuan (YoY +15.27%), net profit to mother of 190 million yuan (YoY +31.55%), which surpassed the performance Expectations.
The revenue side continued to improve. By product, in 2023, patches/tablets/capsules/ointments and others achieved revenue of 20.47/2.62/7.12/1.37/150 million yuan, compared with +6.91%/+34.66%/+15.44%/-7.93%/+20.98%, respectively. Among them, the increase in tablet revenue was mainly due to the increase in revenue from Danlutong tablets.
Management capacity continues to improve. In 2023, the company's net sales margin was 17.16% (+1.66pcts year over year), and the 2024Q1 net sales margin was further raised to 20.94% (+2.66pcts year over year). It is expected to benefit from continuous optimization of sales channels. On the one hand, the company continues to strengthen distribution management through traditional channels and expand the coverage of terminal pharmacies. On the other hand, the company is deeply involved in e-commerce platforms such as JD and Tmall, and integrates e-commerce businesses to actively expand the e-commerce and instant retail industry. 2024Q1's sales expense ratio is 45.55% (year-on-year - 2.17pcts). In the future, sales channels and cost efficiency will be further optimized, and the company's profitability will continue to increase.
Cash reserves are abundant, and the dividend ratio has been further increased. As of March 31, 2024, the company's monetary capital plus transactional financial assets was 1,526 billion yuan, and cash reserves were abundant. According to the “2023 Profit Distribution Plan Notice”, the company expects to distribute a cash dividend of about 451 million yuan (tax included) in 2023, accounting for 79.41% of net profit attributable to mother, an increase of 6.68 pcts over 2022, and a further increase in the dividend ratio.
Give it an “gain” rating. The estimated net profit for 2024-2026 is 695/8.35/984 million yuan, +22.4%/+20.1%/+17.8% year-on-year, EPS is 1.23/1.47/1.73 yuan respectively, and the corresponding PE is 20.8x/17.3x/14.7x, respectively. Considering that the company has strong brand value and channel advantages brought about by marketing reforms, it was given an “increase in weight” rating.
Risk warning: risk of policy adjustments, risk of cost fluctuations, increased market competition