Incident: The company released its 2023 annual report and its quarterly report for 2014. The company achieved revenue of 2,527 billion yuan (-5.23%), net profit and net profit deducted from net profit of $0.27 billion and $63 million, turning a loss into a profit; in 24Q1, the company achieved revenue of 689 million yuan (-11.29%), net profit and net profit deducted from net profit of 41 million yuan (-59.58%) and 53 million yuan (-42.72%).
Product structure changes+rapid CDMO growth, turning loss into profit in '23: the company's performance turned loss into profit in '23, mainly 1) generic drug ingredients business increased 12.01pct to 34.41% year-on-year; 2) CDMO business with high gross margin increased 54.15% year-on-year due to continued growth in commercialization demand; 3) The company achieved certain results in cost reduction and efficiency. Management expenses fell year-on-year, with sales, management, finance, and R&D expenses rates of 3.87% (+2.09pct, respectively) ), 13.06% (-1.16pct), 1.44% (+1.82pct), 9.65% (+0.98pct)
Non-sartan APIs are growing rapidly, and CDMO+ formulations are expected to maintain a high growth rate: by business, generic drug raw materials and intermediates business achieved revenue of 2.05 billion yuan (-14.69%) in 23 years, of which non-sartan APIs achieved revenue of 206 million yuan (+45.53%) in 24 Q1. They are optimistic that non-sartan products will continue to be released in the future. At the same time, downstream customers of sartan have finished inventory and bottomed out, and the API business is expected to pick up; in addition to the original stable commercial varieties, the API business is expected to pick up; in addition to the original stable commercialized varieties, the API business is expected to pick up. Hypoglycemic and anti-tumor products also continue to be promoted, and the CDMO business is expected to maintain rapid growth; in terms of the formulation business, the company's product lineup is gradually enriching. By the end of April '24, the company had approved a total of 24 formulation varieties (involving 37 product regulations), and the 15 products that won the bid in national collection/provincial renewal in '23 will be supplied starting in '24, laying the foundation for the rapid growth of the formulation business.
Investment advice: We expect the company to achieve operating income of 29.80/35.10/4.140 billion yuan and net profit to mother of 2.76/36/444 million yuan in 2024-2026. The corresponding PE was 25.39/19.17/15.76 times, respectively, maintaining the “gain” rating.
Risk warning: risk of API price fluctuations; production capacity release progress falling short of expectations; risk of exchange rate fluctuations, etc.