Matters:
The company announced its 2023 annual report, achieving revenue of 1,635 million yuan (+36.10%), net profit of 293 million yuan (+45.42%), net profit of 246 million yuan (+26.21%) after deduction, and EPS of 0.71 yuan/share. The company's performance was in line with expectations.
At the same time, it was announced that for the first quarter of 2024, it achieved revenue of 422 million yuan (+20.93%), net profit of 56 million yuan (+2.03%) to mother, and net profit of 56 million yuan (+4.95%) after deducting non-return to mother.
The 2023 profit distribution plan is: 2.0 yuan (tax included) for every 10 shares.
Ping An's point of view:
Epitaxial mergers and acquisitions have boosted apparent growth. In 2023, the company's revenue was 1,635 billion yuan (+36%), achieving rapid growth. Apart from its original core product, Kaifang Pharmaceutical, which was indirectly controlled by the company in 2023, and Hanfang Pharmaceutical, which was consolidated in the fourth quarter of 2023, all brought positive contributions to the company. Considering that the Chinese medicine industry will only start merging in November 2023, it is expected that the 2024 consolidation factor will still contribute greatly to the increase in apparent performance. Profitability improved in 2023, with gross profit margin of 73.31% (+1.57pp) and net profit margin of 18.04% (+2.06 pp). The company's investment income in 2023 was 55.16 million yuan, compared to 1.05 million yuan in the same period last year, which also contributed greatly to profits.
Throat Sword continues to grow rapidly, and the pipeline is fast and abundant. In 2023, we will rapidly enrich our pipeline through epitaxial mergers and acquisitions, and gradually get rid of our dependence on a single product. Among them, revenue from respiratory medication was 1.3 billion yuan (+20%), mainly from core products; revenue from hematologic drug use was 112 million yuan, mainly from astragalus gel to increase white capsules; revenue from gynecological medication was 77.38 million yuan (+74%), mainly gynecological remodulation pills; revenue from supplements, cardiovascular drugs, and orthopedic products was 46.33 million yuan, 41.33 million yuan, and 35.44 million yuan respectively.
The apparent growth in performance is high, and the results of the integration are expected to continue to be reflected, and the “recommended” rating is maintained. Considering the impact of combined factors, we raised the company's 2024-2025 net profit forecast to 354 million yuan and 458 million yuan (the original forecast was 315 million yuan and 381 million yuan), and the estimated net profit for 2026 is 583 million yuan. The current stock price corresponds to 2024 PE only 18 times, maintaining the “recommended” rating.
Risk warning. 1) Risk that the integration progress falls short of expectations: The company has had many collateral mergers and acquisitions in the past two years, and there is a possibility that the integration will fall short of expectations. 2) Risk of price reduction for core varieties: There is a risk of price reduction in collection of core varieties. 3) Risk that the dosage of key varieties falls short of expectations: There is a possibility that the dosage of key varieties such as Pharyngology Sword, Astragalus Gel Whitening Capsules, and Gynecological Reproduction Pills will fall short of expectations.