Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved total operating revenue of 10.06 billion yuan, an increase of 15.7% year on year; net profit to mother of 2.80 billion yuan, up 13.2% year on year; net profit after deducting non-return to mother was 2.85 billion yuan, an increase of 15.3% year on year. In a single quarter of 2024, the company achieved operating income of 3.171 billion yuan (+20.58%), net profit to mother of 975 million yuan (+26.61%), and net profit of 988 million yuan (+28.23%) after deducting non-return to mother. The 2023 dividend plan is a cash dividend of 23.2 yuan for every 10 shares, with a total dividend of 1.40 billion yuan, accounting for 50.0% of net profit returned to mother in 2023.
Focus on developing large varieties to consolidate management and improve performance. By sector, in 2023, the company's pharmaceutical manufacturing achieved revenue of 4.802 billion yuan, an increase of 25.94% over the previous year, mainly due to a sharp increase in the company's revenue for liver disease drugs and psychosocial medicine. Liver medicine and brain medicine achieved revenue of 4.463 billion yuan (+24.26%) and 266 million yuan (+60.57%) respectively. Among them, the three single products achieved sales of over 100 million yuan, but due to rising prices of natural beef yolk and other Chinese herbal medicines, the company's pharmaceutical manufacturing gross margin fell 2.93 percentage points. disease Drug use and brain medication decreased by 2.11/8.44pp, mainly due to the fact that direct material costs for liver disease medication and brain medication increased by 39.86% and 88.08% respectively; pharmaceutical distribution achieved revenue of 4.205 billion yuan, an increase of 3.6% year on year, mainly due to the company actively broadening sales channels and increasing the company's marketing publicity during the reporting period; the company expanded and strengthened its cosmetics business and achieved revenue of 707 million yuan, an increase of 11.42% over the previous year. Among them, sales of Queen's Pearl Cream reached over 100 million yuan. With the company's secondary development of large varieties, performance is expected to improve further.
R&D innovation boosts momentum, and comprehensive costs can be controlled. The company adheres to scientific and technological innovation as the core driving force for enterprise development. In 2023, the company's R&D expenses were 232 million yuan (+1.01%), the R&D cost rate was 2.31% (-0.34pp), and continued to carry out secondary development of pianzai and superior varieties, reaching more than 10 clinical studies. At the same time, it continued to promote new drug research projects, including 3 new Class 1 chemicals, 3 Class 1.1 new traditional Chinese medicine drugs, and 1 new traditional Chinese medicine Class 1.2 new drug entering the clinical research stage. In 2023, the company's sales expenses were 783 million yuan (+61.95%), and the sales expense ratio was 7.78 (+2.22pp), mainly due to the company's continuous strengthening of marketing, sales promotion and advertising expenses, including advertising in media such as CCTV, Southeast TV, etc., and landmark buildings such as Shanghai Magnolia Plaza, Beijing Wangfujing Department Store, Hangzhou outdoor big screen, and Xiamen Gaoqi Airport. At the same time, the company's sales expenses increased dramatically.
Earnings in the first quarter were impressive, with gross profit rising sharply year over year. By sector, the company achieved revenue of 1,654 billion yuan (+25.94%) in pharmaceutical manufacturing in the first quarter of 2024, due to a sharp increase in liver disease drug revenue of 1,505 billion yuan, an increase of 27.84% over the previous year. Pharmaceutical distribution achieved revenue of 1,254 billion yuan (+12.86%), and the cosmetics business achieved revenue of 200 million yuan (+83.18%), mainly because the company continued to promote the construction of cosmetics business projects, added five production lines for pearl cream, pearl cream, water lotion, hoses, and cream filling, and continuously create popular cosmetic products. The company's gross profit increased 17.98% year-on-year in the first quarter of 2024. On the one hand, it benefited from the company's price increase in May 2023, and on the other hand, due to the company's cost reduction and efficiency improvements. The company's sales expense ratio, management expense ratio, and R&D expense ratio were -0.29pp/ -1.37pp/-0.73pp, respectively.
Profit forecasting and investment advice. The company's net profit due to mother in 2024-2026 is estimated to be 3.38 billion yuan, 3.84 billion yuan, and 4.39 billion yuan. The corresponding PE is 43, 38, and 33 times, respectively. It is recommended to keep an eye on it.
Risk warning: Risk such as cost control falling short of expectations, sales of core products falling short of expectations, and rising costs.