Event: The company achieved revenue of 920 million yuan (+6.15%) for the full year of '23, achieved net profit of 150 million yuan (+48.24%), and achieved net profit of 127 million yuan (+42.51%) after deducting non-return to mother. The company's revenue grew steadily, mainly due to the steady increase of Suling; the profit side showed impressive growth, mainly due to cost side improvements and drastic reduction in income tax expenses. The company achieved revenue of 199 million yuan (+20.67%) in 24Q1, achieving net profit of 41.6532 million yuan (+62.28%), and net profit of 396.5767 million yuan (+74.63%) after deducting non-return to mother. The significant profit side growth was mainly due to the increase in Suling's revenue and reduction in R&D expenses.

“Suling” has been released steadily, and the application for marketing of the dog formulation has been accepted. The lifting of “Suling” medical insurance restrictions in 2023 drove a steady increase in sales revenue. The annual sales volume increased 19.83% year on year, achieving sales revenue of 613 million yuan, an increase of 13.89% year on year, which is an important factor driving the steady growth of the company's performance. Furthermore, the application for registration of viper hemagglutinin for injections for dogs has been accepted. As health insurance restrictions continue to be lifted and the pet sector expands, it is expected that Suling's sales will continue to grow steadily and contribute to the increase in performance.

KC1036 has entered clinical phase III, and ongoing research projects are progressing smoothly. The company's multi-target innovative drug KC1036 is undergoing phase III clinical research for advanced esophageal squamous cell carcinoma and phase II clinical research for advanced thymic tumors. First-line maintenance treatment of locally advanced or metastatic esophageal squamous cell carcinoma with KC1036 and KC1036 for advanced Juventus sarcoma in adolescents aged 12 and above have all been approved. In addition, the phase III clinical trial of the proprietary Chinese medicine Jincao tablets has reached the main research end point, and it is expected that a marketing application will be submitted within this year; the application for registration of horned beetle hemothrombin for dog injections has been accepted. The company's ongoing research projects are progressing smoothly, and it is about to enter the harvest period to bring additional performance to the company.

Nasal sprays are growing rapidly, and “closely cover” performance promises. In 2023, “Close Interest Coverage” achieved operating revenue of 297 million yuan, of which injections achieved sales revenue of 156 million yuan (-19.72%), nasal sprays achieved sales revenue of 141 million yuan (+ 39.37%); realized net profit of 123 million yuan after deducting net profit from non-mother, and successfully completed the performance promise of no less than 120 million yuan in net profit for 2023. Furthermore, thanks to a shift in “secret interest” from air transportation to shipping, its gross margin increased by 3.89pct year over year. As nasal sprays continue to grow rapidly, it is expected that the volume of “Miccab” will continue to contribute to the increase in performance.

According to the 2023 annual report's lower revenue assumption, the company's earnings per share for 2024-2026 are projected to be 1.02/1.11/1.46 (the original 24-25 was 1.09/1.34), respectively. According to the valuation level of comparable companies, the company was given a valuation of 43 times in 2024, and the corresponding target price was 43.86 yuan, maintaining the purchase rating.

Risk warning

Market competition risks for the main products on sale, risk of innovative drug development progress falling short of expectations, risk of changing assumptions affecting calculation results, pharmaceutical industry policy risks, etc.