Incidents:
The company released its 2024 quarterly report. With 2024Q1, the company achieved operating income of 2,086 billion yuan, a year-on-year decrease of 3.19%; net profit to mother of 387 million yuan, a year-on-year decrease of 3.36%; and net profit after deducting non-return to mother of 376 million yuan, a year-on-year decrease of 4.84%.
Comment:
1. The main business is steady, and growth is in line with expectations. 2024Q1's revenue fell 3.19% year on year, mainly due to the year-on-year decline in commercial revenue, the pharmaceutical industry's revenue of 1.43 billion yuan, up 4.38% year on year, commercial sector revenue of 780 million yuan, down 16.19% year on year; net profit to mother fell 3.36% year on year, mainly due to the year-on-year decline in the company's investment income and 3.04% year on year. Overall, the company's main business is steady and has achieved some growth against the backdrop of a high base in 2023Q1.
2. The volume and price of quick-acting heart saving pills have risen sharply, and gross margins have continued to rise. In 2023, the revenue for a single product of quick-acting relief pills exceeded 2 billion yuan, up more than 30% year on year; annual sales volume was 57.76 million boxes, up 14.16% year on year.
Regardless of specifications, the factory price of quick-acting heart relief pills in 2023 is 34.63 yuan/box, up 4.39 yuan from 30.24 yuan/box in 2022, an increase of 14.52%. The volume and price have risen sharply. It is expected that the factory unit price will continue to rise slightly in 2024. Thanks to the continuous progress of channel management and price increase work for quick-acting relief pills, the company's gross margin reached 51.54% in 2024Q1, an increase of 7.53pct over 2023 and 2.76pct over 2023Q1, and a marked increase in profitability.
3. Focus on the “three core and nine wings” strategy and continue to promote terminal coverage. The company's products have a strong coverage rate. In 2023, quick-acting heart saving pills and Jingwanhong Ointment have covered 500,000 pharmacies and 100,000 medical terminals; the coverage rate of second-tier varieties such as anti-throat drops, lung cleansing and anti-inflammatory pills, throat clearing and throat relief granules, gastrointestinal relief pills, etc. has increased significantly; Niuhuang Qingxin Pills, Yasugong Niuhuang Pills, and Qinggong Shoutao Pills have achieved effective penetration. Thanks to this, throat cleansing pills, Yasumiya beef yellow pills, Jingwanhong Ointment, and lung cleansing and anti-inflammatory pills entered the 200 million category in 2023, with remarkable results in deepening the cultivation of main products.
Profit forecast: We expect the company's 2024-2026 revenue to be 92.85, 101.63 billion yuan, and 11.131 billion yuan, respectively, with year-on-year growth rates of 12.93%, 9.46%, and 9.52% respectively, and net profit to mother of 12.45, 15.06 billion yuan, and 1.702 billion yuan, respectively. The year-on-year growth rates are 26.19%, 20.92%, and 13.08%, respectively, corresponding to the current stock price PE, which is 21, 17, and 15 times, respectively, maintaining the “recommended” rating.
Risk warning: risk of price reduction in product collection, risk of changes in industry policy, risk of raw material price fluctuations, risk of new product development falling short of expectations, risk of market development and brand building falling short of expectations, risk of falling short of expectations in core product sales, product quality risk, etc.