The company's core products were rapidly deployed, and performance entered a rapid growth channel
The company is a national high-tech modern pharmaceutical enterprise integrating scientific research, production and sales. The main varieties include Wuling capsules, Lingze tablets, Linglian granules, Bering tablets, Chinese medicine tablets, traditional Chinese medicine formula granules, and polycarbo non-calcium tablets. The company's core products, such as the Wuling series, have maintained a rapid volume trend in recent years. The company has maintained steady growth on the revenue side in recent years, and the profit side has shown a rapid growth trend. In 2023 and 2024, Q1 achieved revenue of 1,942 million yuan and 673 million yuan, respectively, up 7.61% and 35.75% year-on-year respectively. In 2023 and 2024, Q1 achieved net profit of 383 million yuan and 142 million yuan respectively, up 40.27% and 46.14% year-on-year respectively.
Wuling capsules embrace collection to drive continued growth in the hospital, and OTC volume can be expected in the future
The number of people suffering from mental disorders is huge. According to WHO statistics, in 2019, 1 out of 8 people, or 970 million people worldwide, had mental disorders. Among them, the number of patients with depression and anxiety reached 280 and 301 million, respectively, and the incidence rates reached 3.61% and 3.88%, respectively. Furthermore, the number of people with sleep disorders is also very large. According to Chinese business industry research, it is estimated that the number of insomniacs in adults in China will reach 290 million in 2022. Wuling capsules are supported by clear GABA mechanisms of action, gene chip research and meta-analysis results for indications such as depression, anxiety, and insomnia, and have been included in 64 clinical guidelines, expert consensus, and monographs. Wuling capsules have huge room for growth. In addition, the company is currently undergoing secondary AD development and clinical trials for various indications, including Parkinson's disease. As the scope of indications continues to expand, the penetration rate of Wuling capsules is expected to continue to increase. In Q1 2024, the sales volume and sales amount of Wuling capsules increased by 43.86% and 37.25%, respectively. As regions such as Jiangsu, Fujian, and the Beijing-Tianjin-Hebei 3+N Alliance begin to carry out collection work one after another in 2024, it is expected that Wuling capsules will continue to be released in hospitals through a price-for-volume strategy. With the academic image leading in the in-hospital market and the continuous strengthening of OTC channel construction, the out-of-hospital market is expected to usher in rapid development in the future. According to the investor relations record table, Wuling capsules currently account for about 10% of OTC sales. It is expected that with the volume of outside the hospital market, the sales share is expected to increase to more than 20%.
The Bering series is expected to create a second growth curve, and the Chinese herbal medicine tablet and formula granule business can be expected to grow in the future
In 2023, Bering achieved sales of 202 million yuan, a decrease of 21% over the previous year. Currently, bailing films account for more than 70% of sales in the provinces that have won the bid, and the impact of subsequent collection on Bering films is expected to weaken marginally. In addition, in the new 2024 medical insurance catalogue, the medical insurance indications for Bering tablets have been relaxed, and can be widely used in patients with chronic bronchitis and chronic renal insufficiency, which is expected to bring incremental patients to the company. In Q1 2024, the sales volume of Bering tablets increased 7.11% year over year, and growth has begun to resume. In December 2023, the company's Bailing capsules were approved for the market. It is the first prescription drug of the same name approved in China. Bering capsules and Bering tablets have strong synergy in sales, and the company is expected to make the Bering series into a 1 billion yuan variety in the future.
Profit forecasting
The company's Wuling series is expected to maintain rapid growth, and the Bering series is expected to create a second growth curve. We expect the company to achieve operating income of 24.10/29.79/37.68 billion yuan in 2024/2025/2026, up 24.07%/23.62%/26.47% year on year, net profit to mother of 5.22/6.71/887 billion yuan, up 36.38%/28.44%/27.70% year on year, corresponding to the closing price of 15.54 yuan/share on June 3, 2024, EPS 0.66/0.84/1.08, PE 23.63/ 18.40/14.41 times, first coverage, giving an “gain” rating.
Risk warning
In-house sales of the core product Wuling capsule have slowed, market competition has intensified due to an increase in the number of competing drugs, OTC channel expansion falls short of expectations, sales of Chinese medicine tablets and formula granules have fallen short of expectations, development of new indications for Wuling capsules has fallen short of expectations, and promotion of new Bailing capsules has fallen short of expectations