Incidents:
The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved revenue of 3.276 billion yuan, a year-on-year decrease of 8.58%, achieved net profit due to mother of 210 million yuan, a year-on-year decrease of 31.75%, and realized net profit withheld from mother of 212 million yuan, a year-on-year decrease of 26.17%. The annual results were lower than expected. In the first quarter of 2024, the company achieved revenue of 647 million yuan, a year-on-year decrease of 23.90%, achieved net profit of 64 million yuan, an increase of 28.38% over the previous year, and realized net profit withheld from non-mother of 55 million yuan, an increase of 29.40% over the previous year. The first quarter results were in line with expectations.
Heparin disrupted performance, and nuclear drugs showed a recovery trend
By business, in 2023, heparin APIs in the company's API business achieved revenue of 1,326 billion yuan (down 23.88% year on year), mainly due to insufficient demand in the heparin industry, backlog of raw materials from downstream customers, and a decline in procurement volume; the nuclear drug business resumed growth trend and achieved annual revenue of 1,017 billion yuan, up 11.20% year on year. 18F-FDG and Yunke injections increased by 12.00% and 19.52% year on year, respectively. In 2023, the company made preparations for a price drop in heparin sodium API inventory, resulting in lower than expected profit for the whole year. The 2024Q1 revenue decline was mainly due to weak demand in the heparin business.
Nuclear drug centers and leading nuclear drug layout
In 2023, the company put into operation 2 positron nuclear drug centers. It has invested in 7 single-photon drug-centered nuclear drug centers, 20 positron-based nuclear drug centers, and 8 positron nuclear drug centers under construction. In terms of nuclear drug layout, on the one hand, the company cooperated with the research institute to develop an electron accelerator to solve the preparation of some isotopes. On the other hand, testing and diagnostic nuclear drug products such as fluoserutide, fluorafapeptide, 99mTc-GSA, APN-1607, and rhenietidronic acid are in phase III clinical or above. 99mTc-labeled tidronotrexide products have been submitted for publication, and the sodium fluoride injection bone scanning imaging agent has been submitted for marketing.
Profit Forecasts, Valuations, and Ratings
Due to the temporary weakness in heparin business demand and the resumption of large-scale hospital equipment purchases, we have adjusted our forecast. The company's revenue for 2024-2026 is 33.76/36.28/3.869 billion, respectively, with year-on-year growth rates of 3.08%/7.46%/6.63%, and net profit to mother of 3.14/3.66/ 425 million, respectively. The year-on-year growth rates are 49.72%/16.68%/15.90%, EPS is 0.38/0.44/0.51 yuan/share, respectively, and the 3-year CAGR is 26.49% In view of the company's leading nuclear pharmacy layout, with reference to comparable company valuations, we gave the company 42 times PE in 2024, with a target price of 15.99 yuan, maintaining a “buy” rating.
Risk warning: Heparin business risk of decline; nuclear drug marketing falls short of expectations; nuclear drug center construction falls short of expectations