Incidents: The company released its 2022 annual report, with revenue of 2,131 billion yuan in 2022, an increase of 6.57%; net profit of the mother was 758.457 million yuan, a decrease of 123.43% over the previous year; after deducting non-net profit - 97.9352 million yuan, a decrease of 131.81% over the previous year.
The cost of raw materials and goodwill affect performance, and I am optimistic that this year's difficult situation will reverse. The company's revenue continued to grow in 2022, and the profit side fluctuated mainly because: 1) upstream was subject to rising raw material prices and downstream was constrained by collection pricing, and gross margin fell 13.36 pp year-on-year; 2) the company's loss of goodwill to Poseidon Pharmaceuticals was 115 million yuan in impairment losses. On a quarterly basis, 22Q4 revenue was 754 million yuan (+9.42%, compared with the same below), net profit of the mother was 95.39 million yuan (-191.49%), and net profit after deducting non-net profit was 102 million yuan (-222.42%). Looking ahead to 2023 as a whole, on the one hand, iodine prices are expected to enter a downward channel as the supply side of major upstream suppliers gradually recovers, and gross margin can be expected to improve quarter by quarter; on the other hand, The liberalization of the epidemic has led to a continuous recovery in hospital terminal diagnosis and treatment demand and the company's pharmaceutical production and delivery. At the same time, new amounts of formulation collected (iodopanol) and cooperation with major API customers have driven growth.
Subsidiary company: Shanghai Staili's revenue grew rapidly, and profit margins declined due to disruptive factors. 1) Parent company: Revenue of 1,295 million yuan (+0.29%), net profit of 72.84 million yuan (-76.07%), gross profit margin of 15.98% (-16.58pp).
2) Shanghai Sitaili: Revenue of 349 million yuan (+59.11%), net profit - 55.98 million yuan. 3) Poseidon Pharmaceuticals: revenue of 612 million yuan (+7.42%), net profit of 66.79 million yuan (-34.43%). 4) Jiangxi Sitaili: Revenue of 722 million yuan (+12.70%), net profit of 16.12 million yuan (-76.97%).
Segmentation: Contrast agent APIs have declined, and the volume of formulations has begun to be released. API: Contrast agent API revenue was 1,404 billion yuan (-7.86%), which declined due to factors such as the epidemic. Formulations: Revenue in 2022 was $349 million (+59.11%), and production of formulations began. Furthermore, iodopanol injections won the bid for the seventh batch of collection, and implementation began in Sichuan, Beijing, Tianjin, Shaanxi, Guangxi, Jilin, Shanxi and other provinces and cities in November 2022.
Expense ratio: Gross margin fluctuates due to cost, etc., the cost ratio increases, and R&D investment continues to grow. Gross profit margin: 2022/22Q4 gross margin was 24.04% (-13.36pp) and 20.64% (-11.54pp). Fluctuations in gross margin were mainly affected by factors such as rising raw material costs and price reductions in formulation collection. Expense rate: 2022/22Q4 The sales expense rate was 3.32% (+2.34 pp), 1.89% (+0.61 pp), the management fee rate was 6.83% (+0.29 pp), 5.19% (+0.16 pp), and the financial expense ratio was 5.34% (+1.75pp) and 1.96% (-0.16pp). The increase in the sales expense ratio was mainly due to the addition of the sales team and marketing by Shanghai Stelly, while the increase in the financial expenses ratio was mainly due to increased exchange losses due to exchange rate fluctuations. R&D expenses: In 2022 and 22Q4, the company's R&D expenses were 133 million yuan (+6.45%) and 37.14 million yuan (-13.67%) respectively, accounting for 6.22% (-0.01 pp) and 4.92% (-1.32 pp) of revenue. R&D investment continued to grow, and the proportion remained stable.
Profit forecast and investment suggestions: According to the annual report, considering goodwill impairment, post-epidemic recovery, and upstream raw material price reduction trends, we adjusted the profit forecast. The company expects 2023-2025 revenue of 26.27, 31.93, and 3,913 billion yuan (2,488 million yuan before the 23-24 adjustment, 3.161 billion yuan), up 23.3%, 21.5% and 22.6% year-on-year; Guimo's net profit was 296, 4.16, 582 million yuan (203 million yuan before the 23-24 adjustment), an increase of 490.2% over the previous year. 40.5% and 40.1%. The current stock price corresponds to 21/15/11 times PE in 23-25. Considering that the company is in the contrast agent industry with rapidly developing demand and a good competitive pattern, the release of its own production capacity is combined with the continued rapid growth in formulations and CDMO harvests to maintain the “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.