occurrences

The company achieved operating income of 9.655 billion yuan in 2023, +7.32% year on year; net profit to mother of 2,823 billion yuan, +30.04% year on year; net profit after deducting non-return to mother of 2,692 billion yuan, +32.72% year on year.

The company's 2024Q1 revenue was 2.403 billion yuan, +0.60% year over year; net profit to mother was 845 million yuan, +24.90% year over year; net profit without return to mother was 726 million yuan, +19.83% year over year.

Analytical reviews

2023: Profit growth in the fourth quarter was impressive, and the cost ratio control effect was remarkable 23Q4: In a single quarter, the company's 2023Q4 revenue was 3.118 billion yuan, +0.49% year over year; net profit to mother was 889 million yuan, +51.84% year over year; net profit without return to mother was 864 million yuan, +48.48% year over year. The company plans to distribute a cash dividend of 1.30 yuan (tax included) to all shareholders. The total proposed cash dividend is 1,197 billion yuan (tax included), accounting for 42.41% of the company's net profit to mother in 2023.

23 Annual financial data: The company's overall gross margin in 2023 was 81.52%, -1.39 percentage points year on year; the period expense ratio was 47.50%, -7.46 percentage points year on year; of which sales expenses ratio was 41.50%, -4.22 percentage points year on year; management expenses ratio (including R&D expenses) 8.67%, -1.53 percentage points year on year; financial expenses ratio -2.67%, -1.71 percentage points year on year; net operating cash flow was 3.464 billion yuan, +32.17% year on year.

The core product is stable, and pediatric breathing is outstanding

By product, some revenue from the heat-clearing and detoxifying category (Pudilan anti-inflammatory oral liquid) was 3.38 billion yuan, a year-on-year growth rate of +17.68%; gross margin was 78.03%, a year-on-year decrease of 1.41 percentage points.

Revenue from the digestive segment (rabeprazole sodium enteric capsules, gastric digestion oral solution) was 1,687 billion yuan, a year-on-year growth rate of -4.60%; gross margin was 89.93%, a year-on-year decrease of 0.90 percentage points.

The revenue of the pediatric segment (children's tempura granules) was 2,741 billion yuan, with a year-on-year growth rate of +13.01%; gross margin was 87.30%, a decrease of 1.85 percentage points over the previous year.

Revenue from the respiratory segment (Sanao tablets, Huanglong cough tablets) was 640 million yuan, a year-on-year growth rate of +9.74%; gross margin was 85.29%, a year-on-year decrease of 0.88 percentage points. Part of the revenue from the cardiovascular category (Chuanxiao Qingnao granules) was 84 million yuan, a year-on-year growth rate of -12.75%; gross margin was 39.62%, a year-on-year decrease of 2.19 percentage points.

Epitaxial BD continues to advance, and employee stock ownership plans are implemented

The company has 4 drug consistency evaluation research projects and entered 6 pre-BE or BE projects. At the same time, the company closely focuses on medium- to long-term development strategies and the actual needs of the market, and uses BD to achieve the company's epitaxial growth. During the year, the company successfully reached four important business cooperation projects, including:

ZX7101A, a polymerase acid protein inhibitor designed to treat or prevent influenza;

An innovative TCM targeted dialysis treatment device;

2 medical device products for the fields of gynaecology and ophthalmology, respectively.

A 2024 employee stock ownership plan is proposed. The total number of participating employees was no more than 70, and the scale of the employee share ownership plan was no more than 14.3055 million yuan. The assessment index for the current employee stock ownership plan is an individual performance evaluation index. The assessment period is 2024-2026.

24Q1: The company's overall gross margin declined slightly, and the cost ratio fell sharply during the period 24Q1 Financial data: 24Q1 The company's overall gross margin was 81.12%, -0.91 percentage points year on year; the period expense ratio was 45.86%, -6.10 percentage points year on year; of which the sales expense ratio was 41.19%, -4.41 percentage points year on year; management expense ratio (including R&D expenses) 8.57%, +0.60 percentage points year on year; financial expenses ratio -3.90%, -2.28 percentage points year on year; net operating cash flow was 13.39 percentage points 100 million yuan, +2.86% YoY.

Investment advice

We expect the company's revenue for 2024-2026 to be 101.9/11.06 billion yuan, up 5.6%/8.6%/9.0% year-on-year respectively, and net profit to mother of 30.2/34.0/3.83 billion yuan, respectively, up 7.0%/12.6%/12.6% year-on-year, respectively, and the corresponding valuation is 13X/11X/10X. Maintain a “buy” investment rating.

Risk warning

Product sales fall short of expected risks, BD projects fall short of expected risks, product concentration risks.