Events: The company released its 2023 three-quarter report. The first three quarters achieved operating income of 1,631 billion yuan, an increase of 18.43% over the previous year; net profit of 39.32 million yuan, an increase of 101.17% over the previous year; and net profit of 27.22 million yuan, an increase of 520.59% over the previous year.
The cost of raw materials affects performance, so wait for an inflection point in iodine prices. The company's revenue side maintained relatively rapid growth in the first three quarters. Fluctuations on the profit side are expected mainly due to the decline in profitability due to upstream raw material prices remaining high. On a quarterly basis, 2023Q3 had revenue of 547 million yuan (+25.87%, same below), net profit of 4.04 million yuan (-109.07%), net profit of RMB 4.04 million (-109.07%), and net profit of 730,000 yuan (-101.55%) after deducting non-net profit of 730,000 yuan (-101.55%). Looking ahead to the whole year, the price of the raw material iodine is expected to enter a downward channel as the supply side gradually recovers, and gross margin is expected to improve; hospital terminal demand for diagnosis and treatment and the company's formulation production and delivery will continue to recover, while pharmaceutical collection (ioparol) will bring new increases. The company's performance is expected to continue to grow.
Expense ratio: gross margin decreased slightly, cost ratio decreased, R&D investment continued to increase. Gross profit margin: The gross margin for the first three quarters was 24.
32% (-1.59pp), 23Q3 gross profit margin 25.81% (+7.19pp). Expense rate: Sales expense ratio for the first three quarters 3.
94% (-0.17pp), management fee rate 5.60% (-2.12pp), financial expense rate 5.21% (-1.98pp), total cost rate of the three categories is 14.75% (-4.27pp). 23Q3 sales expense ratio 4.07% (-0.78pp), management expense ratio 5.
63% (-2.63pp), the financial expense rate is 6.87% (-2.67pp), and the total of the three cost rates is 16.57% (-6.08pp).
R&D investment: R&D expenses in the first three quarters were 104 million yuan (+8.46%), accounting for 6.35% of revenue (-0.58pp); 23Q3 R&D expenses were 38.38 million yuan (+13.88%), accounting for 7.02% of revenue (-0.74pp). R&D investment continues to grow, and its share remains stable.
Profit forecast and investment recommendations: According to the three-quarter report, considering the short-term impact of high iodine prices for raw materials, we adjusted the profit forecast. The company's 2023-2025 revenue is expected to be 22.39, 25.27, and 2,910 billion yuan (24.39, 29.96 billion yuan before adjustment), up 5.1%, 12.9% and 15.1% year on year; net profit is 0.81, 1.60, 300 million yuan (1.51, 3.04, 425 million yuan before adjustment), up 206.2%, 98.7%, and 87.5 billion yuan over the previous year %. The current stock price corresponding to 23-25 PE is 67/34/18 times. Considering that the company is in the contrast agent industry with rapidly developing demand and a good competitive pattern, although the price of iodine, the main raw material, is currently at an all-time high, it is expected that with supply-side recovery, it will enter a downward channel to drive a recovery in profitability. Combined with the release of its own production capacity and continued rapid growth in pharmaceutical and CDMO harvests, it maintains a “buy” rating.
Risk warning events: environmental risk; quality risk; risk of order loss due to competition with customers; risk of rising raw material prices; risk of product approval progress falling short of expectations; risk of disclosure of information being delayed or not updated in a timely manner.