The 2022 results are in line with our expectations
The company announced 2022 results: revenue of HK$6.434 billion, +20.1% year on year; net profit of HK$1,123 million, corresponding to profit of HK$0.38 per share, +42.9% year-on-year, in line with our expectations.
Development trends
In 2022, intravenous infusion sales increased 16.2% year over year to 1.58 billion bags/bottle. In 2022, sales revenue of non-PVC soft bags, vertical soft bags, polypropylene plastic bottles, and glass bottles was +3.7%, +10.2%, +9.9%, and +2.7% year-on-year. In 2022, the average sales prices of non-PVC soft bag infusion, vertical pouch infusion, PP plastic bottle infusion, and glass bottle infusion products increased by +0.0%, -13.9%, -8.2%, and -13.1% to HK$3.74, 1.79, 1.30, and 2.65, respectively. Among them, sales of peritoneal dialysate reached 3.79 million bags, an increase of 77% over the previous year. We believe that the increase in sales in the intravenous infusion sector is mainly due to the company continuing to replace the market share of small manufacturers and the increase in market concentration. We expect the company to continue to maintain its leading position in the infusion market in the future.
Sales of solid preparations and APIs increased 61.6% and 155% year-on-year. 2022 1) Revenue from small ampoules was HK$980 million, down 10.5% year on year, sales volume was about 160 million units, up 49% year on year; 2) Solid formulation revenue was HK$346 million. According to company announcements, the company currently has 15 varieties that have passed or are treated as having passed the consistency evaluation; 3) API revenue was HK$1.36 billion, of which caffeine was sold 5,000 tons, up 81% year on year, and metronidazole sold 266 tons year on year, up about 76% year on year; nifedipine sales volume was 62 tons, up about 150% year on year; 4) Medical materials pair Sales revenue from outside the group was HK$172 million, down 2.9% from the previous year. The company announced that in July 2022, the Bosheng Medical Materials multi-layer co-extruded biofilm project with an annual output of 20 million square meters was officially completed and put into operation. We expect that the company's strategic advantages in integrating APIs and pharmaceuticals are expected to gradually become apparent, and the solid formulation and API pipelines are expected to continue to expand.
Others: 1) In 2022, the company's gross margin was 55.4%, down 3.7ppt from the previous year; 2) In 2022, the company's sales expense ratio was 25.8%, down 6.1ppt from the previous year; the management expense ratio was 4.4%, down 0.6ppt from the previous year; the R&D expenses rate was 4.0%, down 0.6ppt from the previous year; 3) The company made positive progress in the NP-01 I clinical trial study of the company's first innovative drug class 1 drug; 4) The company's pharmaceutical exports in 2022 were about HK$149 million, an increase of 78% over the previous year. Infusion exports were exported The sales volume was about 100 million bottles, an increase of 88% over the previous year, with significant increases in the Asian and African markets, which are the main export regions.
Profit forecasting and valuation
Taking into account the continuous optimization of the company's products and fee structure, we increased net profit of 2023 and 2024 by 6.7% and 6.9% to HK$1.44 billion and HK$1.72 billion, respectively. The current stock price corresponds to a price-earnings ratio of 8.6 times/7.2 times 2024 in 2023/2024. We maintain an outperforming industry rating and a target price of HK$5.30, corresponding to 10.8 times the 2023 price-earnings ratio and 9.1 times the 2024 price-earnings ratio. There is 27.4% room for improvement compared to the current stock price.
risks
Sales of new products declined; collection results fell short of expectations.