Event: The company released its 2024 semi-annual report. 2024H1 achieved revenue of 1.43 billion yuan (+41.2%); realized net profit of 0.3 billion yuan (+49.8%); net profit of non-return to mother 0.29 billion yuan (+50.8%).
The performance in the second quarter of 2024 grew steadily, and the growth rate of the Chinese herbal medicine series products was impressive. The company's Wuling capsules and Lingze tablets continued to grow. As the number of registered varieties of traditional Chinese medicine tablets increased, sales revenue increased significantly over the previous year; sales revenue of traditional Chinese medicine tablets grew rapidly due to strong Internet sales in hospitals. By category, the revenue of the Wuling series increased 29.15% year on year. Among them, sales revenue of Wuling capsules increased 28.86% year on year, and sales revenue of Lingze tablets increased by 30.84% year on year; revenue from the Bering tablet series decreased by -16.59% year on year; with the increase in national standard and provincial standard filings for formula granules, the operating income of traditional Chinese medicine formula granules increased 256.73% year on year; revenue from the Chinese medicine tablet series increased 57.11% over the same period last year.
The cost rate of procurement promotion has declined further, and profitability continues to increase. 2024H1's gross margin was 62.6% (-6.7pp); the company's net margin was 21% (+1pp). On the cost side, the company's 2024H1 sales rate is 34.2% (-7.4pp); the management rate is 3.7% (-0.7pp); the financial rate is -0.4% (+0.3pp); and the R&D rate is 2.74% (-1.3pp).
The development trend of core products is improving, and profit growth is worth looking forward to. 1) Wuling series: The company will make full use of the dual favorable conditions for products to enter the national essential drug catalogue and provincial volume collection, increase coverage of hospitals and departments, and strengthen promotion to doctors, pharmacies and consumers. 2) Bailing Series: Tianjin, Guangxi and other provinces in the Beijing-Tianjin-Hebei “3+N” alliance in which Bailing Film participated have begun collecting. As of June 2024, Bailing Capsule has completed networking work in 28 provinces, autonomous regions and municipalities. Bering tablets and Bailing capsules have begun collaborative development, and the future growth of Bering series products is worth looking forward to. 3) Chinese medicine tablets and granules: In the second quarter of 2024, there was a significant increase in Internet sales of Chinese medicine tablets. The company will actively take advantage of the opportunities brought by increased demand for health and wellness to increase sales of Chinese medicine tablets; as of June 2024, the company has completed 382 national standard provincial standard filings for traditional Chinese medicine formula granules. The company will continue to cultivate the Zhejiang market while continuing to advance its layout in the national market, and the granule business is expected to expand further.
Profit forecasting and investment advice. Net profit due to mother in 2024-2026 is estimated to be 0.52 billion yuan, 0.63 billion yuan, and 0.77 billion yuan, respectively, corresponding year-on-year growth rates of 37%/21%/21%, respectively, maintaining the “buy” rating.
Risk warning: risk of sales falling short of expectations; risk of collection; risk of falling short of expectations in research; industry policy risk.