occurrences

On October 25, 2024, Weiguang Biotech released its report for the third quarter of 2024. In the first three quarters of 2024, the company achieved revenue of 0.854 billion, +16.14% year-on-year, and achieved net profit of 0.183 billion yuan, or +20.8% year-on-year.

reviews

The company's profit-side growth performance in the third quarter was impressive

Looking at a single quarter, 2024Q3, Weiguang Biotech achieved revenue of 0.331 billion, +19.02% year-on-year, and achieved net profit of 0.073 billion yuan, or +45.05% year-on-year. The profit side growth rate was impressive.

The fee-control system has achieved remarkable results, and the sales expense ratio has declined year-on-year. In the first three quarters of 2024, the company achieved a gross profit margin of 41.75%, -1.15 percentage points year-on-year. The cost ratio for the period was 11.35%, -0.91 percentage points year on year; of these, the sales expense ratio was 2.33%, -1.07 percentage points year on year; the management expense ratio was 7.36%, -0.38 percentage points year on year; the financial expenses ratio was 1.66%, +0.54 percentage points year on year; and the net operating cash flow was 0.101 billion yuan, or -53.22% year on year.

The product range is diverse and covers a wide range of products. The approval of the new product is expected to further increase the company's profit. The company's business covers 11 types of products with 23 specifications, including human blood albumin, intravenous human immunoglobulin, and human coagulation factor VII, covering a wide range of clinical needs. Among them, human albumin and isopropyl are the company's main revenue sources, accounting for more than 70% of the company's revenue. Furthermore, in June 2024, the company obtained PCC's “Drug Registration Certificate”, which will further enrich the company's product line and improve the comprehensive utilization rate of the company's raw plasma; at the same time, the company will increase market development and sales efforts, continue to promote market development in key hospitals and teaching hospitals, continuously optimize professional academic promotion and new product promotion strategies, enhance product reputation, and enhance customer stickiness.

Sinopharm's entry is expected to bring new life, and help the company take the company to the next level. Sinopharm Group will become the actual controller of Weiguang Biotech. On June 2, 2023, the Shenzhen Guangming District State-owned Assets Administration Bureau and China Biotechnology Co., Ltd. reached an agreement to jointly establish a joint venture to hold most of Weiguang Biotech's shares. Sinopharm Group is a central enterprise directly managed by the State Council's State-owned Assets Administration Commission. Its group size, efficiency and comprehensive strength are in a leading position in the global industry; Sinopharm Group has more than 1,600 member companies, including Tiantan Biotech, which is on the same track as Weiguang Biotech. Tiantan Biotech is a listed company ranked first in the blood products industry. After Sinopharm enters Weiguang, Weiguang Biotech is expected to receive more resources and support to further enhance its competitiveness and innovation capabilities in the biomedical field. With the intervention of state-owned assets, the company's capabilities in R&D, production and market expansion are expected to increase significantly.

Investment advice

We maintain our previous profit forecast. We expect the company's 2024-2026 revenue to be 1.149/1.308/1.478 billion yuan, respectively, up 9.6%/13.9%/13.0% year over year, and net profit to mother is 0.236/0.267/0.304 billion yuan, respectively, up 7.8%/13.2%/14.0% year on year, respectively. The corresponding valuation is 27X/24X/21X. We are optimistic about the company's long-term development and maintain a “buy” investment rating.

Risk warning

Risk of insufficient supply of raw plasma; risk of developing new products; potential safety risks of products; increased risk of market competition.