Incident Overview
The company released its 2023 mid-year report: 23H1 achieved operating income of 553 million yuan, a year-on-year increase of 8.59%, a year-on-year net profit of 96 million yuan, a year-on-year decrease of 17.85%, and achieved non-net profit of 94 million yuan, a year-on-year decrease of 16.68%.
Analytical judgment:
The profit side is affected by factors such as equity incentives, etc., and the didrogesterone preparation 23H2 gradually contributed to increased performance
The company 23H1 achieved revenue of 553 million yuan, an increase of 8.59% over the previous year. Its growth was mainly affected by the growth of overseas markets for anti-tumor, respiratory and cardiovascular products.
The company's net profit was 96 million yuan, down 17.85% year on year, mainly due to (1) 23H1 gross margin of 49.79%, down 1.67 pct year on year. We judge that is, due to changes in business structure, that is, women's health products with high gross margin are in the de-inventory cycle, and the low gross margin anti-tumor drug type Abiraterone is in the release cycle; (2) the impact of rising costs, that is, 23H1 management expenses rate and sales expenses rate were 24.93% and 4.68% respectively, up 3.16 pct and 0.83 pct, respectively. At its core, it is affected by equity incentive expenses and increased sales staff. In June 2023, the company's didrogestrel preparation was approved by the State Drug Administration. It is the first didrogesterone generic drug to be marketed in China. Currently, the company has formed a formulation sales team of nearly 20 people to be responsible for its national sales work. Looking to the future, products such as didrogestone, abiraterone, flumetasone, fluticasone, and epleridone continue to grow, with the addition of new products (buvacetam, beperidoic acid, enzalutamide, noxinacin sodium, enzalutamide, dotiravir sodium, simeglutide, etc.) and preparations such as didrogesterone, and we judge that they will continue to grow rapidly over the next 3 to 5 years.
Deploy new businesses such as peptides and oligonucleotides to empower medium- to long-term business growth
In 2021, the company achieved new business layouts such as polypeptides and oligonucleotides through acquisitions and self-construction models. Among them, the peptide business entity Zhuopide Pharmaceutical 23H1 achieved revenue of 1,078,900 yuan, and the oligonucleotide business entity Orient Biotech 23H1 achieved revenue of 2,078,500 yuan. At present, the construction of the company's smeglutide API fermentation workshop has been completed, and the synthesis workshop plant is under construction. It is expected that after the construction is completed, it will be able to produce 300 kg of API per year.
The company has developed R&D, production and global registration capabilities for oligonucleotide APIs from milligrams to hundred grams, and is developing multiple oligonucleotide API products to contribute incremental performance to the company's future performance.
Performance forecasts and investment recommendations
The company continues to explore the specialty API field and anticipates the continued release of stock varieties (didrogesterone, abiraterone, fluticasone, eplerone, etc.) and potential major products (buvacetam, enzalutamide, budesonide, nosinasone sodium, dotilavir sodium, and simetaglutide, etc.) will continue to be commercialized one after another, and the small nucleic acid polypeptide business with a strategic layout based on the integration of superimposed formulations will add impetus to medium- to long-term performance growth. We judge that the company will continue to show rapid growth in the next few years..
Taking into account fluctuations in product performance, adjust the previous profit forecast, that is, we predict that the operating income for 2023-2025 will be adjusted from 1,329/16.72/2,082 billion yuan to 1,241/15.46/1,913 billion yuan, and the corresponding EPS will be adjusted from 0.73/0.95/1.28 yuan to 0.63/0.82/1.10 yuan, corresponding to the closing price of 21.8 yuan/share on September 04, 2023. PE is 35/27/20 times, maintaining the “increase in holdings” rating.
Risk warning
The progress of the product line under development fell short of expectations; sales of didrogestrel preparations fell short of expectations; exchange rate fluctuations and geopolitics made the company's business uncertain; and there is a risk of uncertainty about the future development of the strategically arranged small nucleic acid and peptide business.