2023 results are in line with our expectations
The company announced its 2023 results: revenue of 5,042 billion yuan, up 17.28% year on year; net profit to mother of 1,037 billion yuan, up 15.12% year on year; deducted non-net profit of 1,013 billion yuan, up 16.11% year on year. The results are in line with our expectations. The company plans to distribute a cash dividend of 3.2 yuan for every 10 shares.
Development trends
Product revenue is in line with expectations, and anesthetic products drive steady growth in performance. On a quarterly basis, the company's 1-4Q23 revenue growth rates were 18.8%/21.1%/12.2%/17.6%, respectively, and net profit to mother grew 20.5%/22.6%/15.8%/-4.9%, respectively. By product, the company achieved revenue of 2,702 billion yuan in 2023, an increase of 24.29% over the previous year. The main part is the rapid release of anesthetic products (remifentanil, sufentanil, aventanyl, oxycodone, etc.) approved by the company in recent years. We expect this series of products to maintain high growth in the future under the company's key promotion. Furthermore, the company's TRV130 was included in the medical insurance catalogue at the end of 2023; in addition, the company received exclusive commercialization of Teva Antitan in mainland China in February 2024 Equity further enriches the company's spiritual product line; neurological revenue fell 32.22% year on year, and we think the main product price reduction was affected. The company's gross margin in 2023 was 72.8% (YoY -3.4pct); the comprehensive cost ratio declined compared with 2022, including sales expenses ratio 34.5% (YoY -4.0pct), management expenses ratio 4.1% (YoY -0.4pct), and R&D expenses rate 10.9% (YoY +0.3pct).
R&D is progressing steadily, and the simulation R&D pipeline continues to be realized. In 2023, the company's R&D team reached 854 people, up 7.83% year on year, and invested 614 million yuan in R&D (of which 65 million yuan was capitalized), up 23.9% year on year. According to the company's announcement, in terms of generic drugs and consistency evaluation, the company's TRV130 and etomidate medium/long chain fat emulsion injections have been approved for marketing, and 10 generic drugs have been declared for production under review projects; buspirone hydrochloride tablets (5 mg), pentanethyl hydrochloride injections (1 ml: 1 mg, 2 ml: 2 mg), alprazolam tablets, and fentanyl citrate injections have passed the consistency evaluation, and 3 others are under review. In terms of innovative drugs, the company currently has 20 research projects. Among them, the NH600001 emulsion injection (etomide upgrade product) has completed phase II clinical trials, 3 products (NH102 tablets, NHL35700 tablets, and YH1910-Z02 injections) have completed clinical phase I, and 4 innovative products (NH112 tablets, NH130 tablets, Protollin nasal spray, and NH300231 enteric tablets) are in clinical phase I. Looking at the pipeline layout, generic drugs and consistency evaluations are gradually being implemented, and innovative research products are expanding to the layout of refined narcotics control drugs. We believe that the future will further enrich the company's pipeline layout.
Profit forecasting and valuation
We keep our profit forecast for 2024 and 2025 unchanged, and the current stock price corresponds to a price-earnings ratio of 17.7 times/14.9 times for 2024/2025. We maintain our outperforming industry rating and maintain a target price of 30.0 yuan (corresponding to 23.9/20.1 times the 2024/2025 price-earnings ratio), which has 35.2% room to rise from the current stock price.
risks
Drug collection price reduction risk; clinical progress falls short of expectations; product commercialization falls short of expectations.