Event description: On October 24, 2023, the company released its report for the third quarter of 2023. 2023Q1-Q3 achieved operating income of 6.663 billion yuan, an increase of 30.23% over the previous year; realized net profit of 2.191 billion yuan, an increase of 92.93% over the previous year; and realized net profit after deduction of 1,670 billion yuan, an increase of 74.09% over the previous year. Looking at a single quarter, 2023Q3 achieved operating income of 1,683 billion yuan, an increase of 7.65% over the previous year; realized net profit of 697 million yuan, an increase of 100.40% over the previous year; and realized net profit of 415 million yuan after deducting non-return mother's net profit, an increase of 29.86% over the previous year.
Profitability continued to be optimized, and profit side doubled due to asset disposal income. Looking at the financial side, the company achieved a gross profit margin of 51.2% in a single quarter, a year-on-year increase of 5.2 pct, a year-on-year increase of 5.2 pct, a year-on-year sales expense ratio of 14.4%, a year-on-year decrease of 0.5 pct; a management expense ratio of 5.3%, a year-on-year decrease of 1.1 pct; and the R&D expense ratio was 7.3%, down 0.5 pct year on year. There is a clear trend of continuous optimization on the cost side. On the profit side, the company achieved a net profit margin of 41% in a single quarter in 23Q3, an increase of 19pct over the previous year. The core was affected by asset disposal income of 290 million yuan, and net profit of the mother was 697 million yuan, a 100% increase over the same period last year. After deducting the effects, it still maintained a high growth rate of nearly 30%. Currently, high-margin new product launches and revenue structure optimization continue to drive the company's profitability to increase.
The respiratory treatment sector is growing steadily, and the diabetes care sector is growing at an accelerated pace. By business, according to the company's latest investor research records, the three core products of the respiratory treatment sector, oxygen concentrators, ventilators, and nebulizers all maintained steady growth in the third quarter of 2023; the diabetes care sector was driven by the new launch of the new CGM CT3 series, and Q3 growth accelerated in a single quarter; and the disinfection and control business declined from the high base in the same period last year.
Clarification of strategy+high-end products+internationalization are expected to consolidate the company's development. Clarification of strategy+high-end product+internationalization will consolidate the company's development, and the newly released employee stock ownership plan highlights confidence in long-term development. On September 13, 2023, the company announced the 2023 employee stock ownership plan (draft), setting a performance growth target of up to 21% in the net profit CAGR for 2019-2025:23 equity incentive performance targets 23, 24, and 25, net profit of no less than 20, 20.3, 2.34 billion (15% increase over 24 years). Leaving aside the disruptions caused by the pandemic, the net profit CAGR will reach 21%. We believe that with the increase in the company's brand status after the epidemic, the improvement of the marketing system, and the improvement of the R&D system and R&D team building. The launch of CT3, a next-generation product, is expected to continue to contribute to growth points. Self-developed businesses such as AED and POCT are expected to boost growth in the next few years and continue to open up the company's revenue space.
Profit forecasting and valuation: Clarification of strategy+high-end product+internationalization are expected to consolidate the company's development. We expect the company's 2023-2025 revenue to be 86/94/10.9 billion, respectively, with a year-on-year growth rate of 21%/9%/16%; net profit of 25/22/2.5 billion, with a year-on-year growth rate of 55%/-12%/15%, corresponding to PE 13/15/13 times. Maintain a “buy” rating.
Risk warning: Product development progress falls short of expectations; new product promotion falls short of expectations; overseas business expansion falls short of expectations; the epidemic has repeatedly affected the release of consumer demand