1H23's performance met our expectations
The company announced 1H23 results: revenue of HK$3,333 million, down 2.1% year on year; net profit to parent of HK$639 million, corresponding to profit of HK$0.22 per share, up 12.0% year on year, in line with our expectations.
Development trends
Intravenous infusion sales revenue for the first half of 2023 increased 12.8% year-on-year to HK$2,069 million. In the first half of 2023, the company's non-PVC soft bag infusion, stand-up bag infusion, PP plastic bottle infusion and glass bottle product revenue was +13.8%, +23.4%, +5.1%, and +1.2% year-on-year to 1.07 billion, 419 million, 424 million and HK$119 million, respectively. In terms of sales, the company achieved sales volume of 936 million bottles (bags) of intravenous infusion in the first half of 2023, +24.1% over the same period last year. We believe that the growth of the intravenous infusion sector is mainly due to the company continuing to replace small manufacturers in market share and increase in market concentration. We expect the company to continue to maintain its leading position in the infusion market in the future.
Revenue from the oral formulation sector increased 68.4% year over year to HK$244 million. According to the company's announcement, this increase is mainly due to the fact that the company has systematically prepared the market supply of selected products collected by the country, such as felodipine/felodipine II sustained-release tablets, cefaclor suspensions, cefudinil capsules, and prucapride succinate tablets in conjunction with national and local collection policies; and the group has actively adopted measures such as adjusting the market layout and strengthening professional promotion, strengthening commercial cooperation with top 100 pharmaceutical chains, speeding up the commercial cooperation with the top 100 pharmaceutical chains, etc. The market for a number of specialty oral preparations such as soft-release tablets and valsartan amlodipine tablets layout and professional promotion.
Other: In the first half of 2023, 1) The company's ampoules sector revenue fell 11.2% year on year to HK$453 million, API revenue fell 41.6% year on year to HK$454 million, and medical materials fell 0.5% year on year to HK$90 million. 2) The company achieved an export volume of about 51.8 million bottles (bags) of infusion, an increase of about 17% over the previous year, and export infusion sales of about HK$80,800 million, an increase of about 25% over the previous year. 3) The company's comprehensive gross margin was 58.3%, an increase of 1.3 percentage points over the previous year. 4) The company has successively obtained 34 production batches, including 8 APIs and 26 formulations. As of August 2023, a total of 13 products from the Group have been selected for national drug collection.
Profit forecasting and valuation
Taking into account the impact of RMB depreciation, we lowered our net profit for 2023 and 2024 by 7.4% and 5.3% to HK$1,336 million and HK$1,630 million. The current stock price corresponds to 9.3 times the 2023 price-earnings ratio and 7.6 times the 2024 price-earnings ratio. We maintained our outperforming industry rating, but due to the devaluation of the RMB, we lowered our target price by 11.6% to HK$5.7, corresponding to 12.7 times the 2023 price-earnings ratio and 10.4 times the 2024 price-earnings ratio, which has 36.7% upward margin compared to the current stock price.
risks
Sales of new products declined; collection results fell short of expectations.