Announcement: Baiyang Pharmaceutical released its 2023 Annual Report and 2024 Quarterly Report.
The return to the two-vote system on the revenue side has been remarkable, and the company has been adhering to the dividend strategy for a long time. In 2023, the company's revenue was 7.564 billion yuan, an increase of 0.72% over the previous year. If calculated after reverting to the two-ticket system business, the company achieved revenue of 8.585 billion yuan. Net profit attributable to mother was 656 million yuan, up 29.55% year on year; net profit after deducting non-return to mother was 635 million yuan, up 25.14% year on year. In the first quarter of 2024, the company's revenue was 1,661 billion yuan, down 1.5% from the previous year. If calculated after reverting to the two-ticket system, the company achieved operating income of 1,783 million yuan and net profit to mother of 166 million yuan, an increase of 35.60% over the previous year. After deducting net profit of 165 million yuan from non-mother, an increase of 30.71% over the previous year. In 2023, the dividend was 400 million, and the payout ratio reached 61.03%. Online channel revenue was 670 million yuan, an increase of 46% over the previous year. Wuweikang, a household electrocardiograph invested by the company, officially launched online sales.
Operating conditions by business segment in the first quarter of 2023 and 2024:
(1) Brand operation business: Revenue of 4.40 billion yuan in 2023, an increase of 18.91% over the previous year. If calculated after reverting to the two-ticket system business, the brand operation business achieved revenue of 5.420 billion yuan. The gross margin of the brand operation business was 43.17%, down 2.95pp. Gross profit reached 1,899 billion yuan, accounting for 83.78% of gross profit, which is the company's main source of profit. Revenue for the first quarter of 2024 was 919 million yuan, an increase of 0.22% over the previous year. If calculated after reverting to the two-ticket system, the brand operation business achieved operating income of 1,041 million yuan, and the brand operation business achieved gross profit of 406 million yuan, accounting for 82.14% of gross profit.
DiQiao series: Revenue of 1,897 billion yuan, up 16.53% year on year. If calculated using the two-vote system, revenue was 1,987 billion yuan, up 15.91% year on year. Diqiao focuses on the “imported calcium” category and continues to launch multiple product regulations to meet the different needs of various consumers for calcium supplementation.
Hailu: Revenue of 640 million yuan, a year-on-year increase of 49.88%. While accurately covering the “dry eye” market, the company actively promotes the “gentle eye protection, regular drops of sea dew” brand promotion, highlighting the product advantages of Hailu's “macromolecular, preservative-free, patented device”.
Anritsu: Revenue of 238 million yuan. If the calculation is restored to the two-vote system, revenue is 276 million yuan. The company continues to carry out academic promotion and collaboration with hospitals, pharmacies and e-commerce to stabilize the brand position of “imported original saxagliptin”.
Newt Schuma: Revenue of 83 million yuan, up 44.36% year over year. The company focuses on scenarios such as disease nutrition and weight management, and continues to establish the brand positioning of Newt Schuma's “medical grade nutritional products”.
(2) Wholesale distribution business: Revenue of 2,774 billion yuan in 2023, a year-on-year decrease of 19.23%, and gross margin of 12.16%. The 2024Q1 wholesale distribution business achieved revenue of 643 million yuan, a year-on-year decrease of 5.02%. The main reason for the sharp decline in wholesale business revenue in 2023 is that the company focused on core brand operations, reduced the scale of the wholesale distribution business, and sold its subsidiary Beijing Wanwei Pharmaceutical Co., Ltd. in August 2022.
(3) Retail business: Revenue of 360 million yuan in 2023 is basically the same as the same period last year. The retail business achieved revenue of 92 million yuan in the first quarter of 2024, an increase of 6.98% over the previous year. The company sells pharmaceutical products directly to consumers through a combination of offline self-operated pharmacies and online sales. By adopting different sales strategies for different sales channels, the company accurately targets customer groups that focus on different aspects. The company's offline retail model mainly sells pharmaceuticals to customers through self-operated pharmacy chains, as a beneficial complement to the hospital's existing outpatient pharmacies or inpatient pharmacies; online retail is carried out with online platforms and pharmaceutical e-commerce flagship stores set up on well-known third-party e-commerce platforms such as Tmall and Jingdong.
The company insists on providing better healthcare products and services to the whole society, optimizing the allocation of health industry resources through professional management, and continuously promoting pharmaceutical technology innovation.
The company has formed a multi-brand matrix in the four major categories of OTC, DaHealth, OTX and other prescription drugs, intensive medicine such as oncology, and high-end medical devices, and products in related fields are constantly increasing. The company not only opens up to upstream customers as an open commercialization platform and cooperates with outstanding external pharmaceutical companies, but also enters the development of cutting-edge domestic First in Class innovative pharmaceutical devices through equity cooperation between parent company Baiyang Group and national research institutes. After the cooperative products are approved for marketing, listed companies will prioritize commercialization rights and gradually establish their own innovation incubation platform. Starting in 2023, the company gradually ushered in a harvest period in high-end medical devices invested and incubated by the parent company. Suzhou Tongxin Medical Technology Co., Ltd. was the first to commercialize a fully magnetic levitation artificial heart, and high-end medical device products such as electromagnetic positioning puncture guidance devices from Beijing Midis Medical Technology Co., Ltd., and household electrocardiographs from Beijing Wuweikang Technology Co., Ltd. have also entered the commercialization stage one after another; in terms of innovative drugs, the company helped Guangdong Radionuclide Conjugate Drug (RDC) 99mTc-3pRgd2 independently developed by Guangdong Ruidio Technology Co., Ltd. is a nuclear medicine in China The first self-developed Class 1 innovative drug in the field. It has now completed phase III clinical trials in China and is about to enter the commercialization stage.
Investment advice: We predict that the company's net profit for 2024-2026 will be 840 million yuan, 1,089 million yuan, and 13.36 billion yuan respectively, up 28.0%, 29.6%, 22.7% year-on-year, and EPS of 1.60, 2.07, and 2.54 yuan respectively. Considering the company's leading domestic CSO, the continuous increase in commercial platform value and the continuous accumulation of operating project experience, we give it 25-30 times PE in 2024, corresponding to a reasonable value range of 40.0-48.0 yuan, giving “superior to big “City” rating.
Risk warning. The risk of tightening health insurance policies; the risk of price limits for medical insurance drugs; the risk of increased market competition; the risk of drug development failure; the risk of management risks brought about by the expansion of business scale; and the risk of concentration of brand operations.