Incidents:
The company released its 2024 semi-annual report. In 2024H1, the company achieved operating income of 2.15 billion yuan, an increase of 11.02% year on year, net profit to mother of 0.402 billion yuan, an increase of 27.28% year on year, and net profit after deducting non-return to mother was 0.334 billion yuan, an increase of 15.19% year on year.
Comment:
Q2 Revenue growth was steady, profit exceeded expectations, and deducted non-net profit in line with expectations. Looking at a single quarter, 2024Q2 revenue was 1.089 billion yuan, up 11.59% year on year, and net profit to mother was 0.231 billion yuan, up 40.18% year on year. Net profit after deducting non-return to mother was 0.177 billion yuan, up 15.98% year on year. We determine that the main reasons for the rapid increase in profit were: 1) continuous increase in sales outside of finished pharmacies; 2) government subsidies.
Sales reforms have achieved remarkable results, and sales of finished pharmacies have grown rapidly. By sector, revenue from finished drugs in the first half of the year was 1.301 billion yuan, up 17.13% year on year; revenue from raw materials was 0.501 billion yuan, up 5.66% year on year; and revenue from medical devices was 0.312 billion yuan, up 0.46% year on year. Sales of finished pharmaceuticals outside the hospital grew rapidly. In the first half of the year, the domestic trade market revenue of finished pharmaceuticals increased by more than 80% over the same period last year.
Increased gross margin and improved profitability. The company's 2024H1 gross profit margin was 51.57% (+1.06pct), and the net margin was 18.88% (+2.44pct). We judge that the increase in the company's profitability was mainly affected by the reduction in sales expenses; the 2024H1 sales expense ratio was 17.85% (-2.72pct); the R&D expense ratio was 9.16% (+0.32pct); the management expense ratio was 5.94% (+1.47pct), and the financial expense ratio was -1.71% (+0.02pct).
Continue to improve the R&D platform and open a new era of simulation integration. The company's first innovative drug, Dacinib capsules, was officially delivered commercially on March 25, 2024. As of 2024H1, it has developed more than 200 hospitals. The company continues to lay out innovative drug research and development pipelines in the neuropsychiatric and cardiovascular fields. Currently, clinical trials of JX11502MA capsules and rehabilitation enteric capsules II are ongoing; phase I of JX2105 capsules have obtained clinical approval, and clinical phase I is progressing smoothly. As the company's innovative varieties gradually materialize, it is expected that it will continue to contribute more and more to the company's performance.
Profit forecasts and investment advice
We forecast the company's revenue for 2024/2025/2026 to be 4.46/4.912/5.353 billion yuan, a year-on-year increase of 11.54%/10.12%/8.99%. Net profit to mother was 0.698/0.788/0.92 billion yuan, up 12.71%/12.89%/16.83% year over year. Corresponding current PE is 13/12/10X. Considering the impact of the company's in-hospital collection, there is plenty of room for improvement in the out-of-hospital market, innovative drugs continue to contribute more, and maintain the “buy” rating.
Risk warning
Risk of changes in industry policies; drug development and marketing falling short of expectations; environmental risks; product sales falling short of expectations.