2023 results fall short of our expectations
The company announced its results for the first quarter of 2023 and 2024: in 2023, the company's revenue was 3.28 billion yuan, down 8.6% year on year, in line with our expectations; net profit to mother was 210 million yuan, down 31.7% year on year, lower than our expectations, mainly due to the company's calculation of heparin sodium API inventory to reduce prices. In the first quarter of 2024, the company's revenue was 650 million yuan, down 23.9% year on year, and net profit to mother was 64.33 million yuan, up 28.4% year on year, in line with our expectations.
Development trends
The nuclear drug sector grew steadily in 2023, leading to optimized gross margins. In 2023, the company's nuclear drug sales revenue was 1,017 billion yuan, an increase of 11.2% over the previous year. Among them, 18F-FDG injection revenue was 420 million yuan, an increase of 12.0% year-on-year. Yunke injection's revenue was 244 million yuan, an increase of 19.5% over the previous year. In 2023, the company's overall gross margin 1 was 44.9%, an increase of 1.9 percentage points over the previous year. According to the company's announcement, as of April 2024, the company has put into operation 7 nuclear drug production centers focusing on single-photon drugs, 20 nuclear drug production centers with mainly positrons, 2 other operation centers, and 8 positron nuclear drug production centers under construction. We believe that the company's nuclear drug business is expected to maintain healthy development.
The API and formulation business is under short-term pressure. In 2023, the company's API segment's sales revenue was 1.68 billion yuan, down 18.6% year on year. Among them, revenue from heparin API products was 1.33 billion yuan, down 23.9% year on year; in the first quarter of 2024, the company's API segment revenue was 290 million yuan, down 29.9% year on year. Mainly due to overseas customers digesting inventory, the demand and price of heparin sodium APIs declined. The company's pharmaceutical business had sales revenue of 40 billion yuan in 2023, down 17.2% year on year, and revenue of 92.93 million yuan in the first quarter of 2024, down 39.9% year on year, mainly due to nadroparin calcium collection.
Multiple pipelines are in phase III maturity, and innovative nuclear drugs are close to harvesting. According to the company's announcement, as of April 2024, the company's sodium fluoride injection has submitted a marketing application; the 99mTc-GSA injection is in the pre-NDA preparation stage, and APN-1607 is undergoing pre-NDA data preparation; fluorine [18F] siruitide injection and fluorine [18F] afapeptide injection are undergoing phase III clinical trials.
Profit forecasting and valuation
Considering the decline in the price of heparin APIs, we lowered the company's 2024 net profit forecast of 31.4% to 297 million yuan, and introduced the 2025 net profit forecast of 361 million yuan, up 41.8%/21.2% year-on-year respectively. Considering the healthy growth of the company's nuclear drug business, we maintained an industry rating and lowered the target price by 4.3% to 17.8 yuan, corresponding to the 2024/2025 price-earnings ratio of 49.3 times/40.7 times.
The current stock price corresponds to a price-earnings ratio of 38.3 times/31.6 times in 2024/2025, with 28.7% upside from the target price.
risks
The risk of falling prices of heparin APIs and the risk of R&D failure.