Incident: The company recently released its 2023 performance report, 1) 2023: operating income of 299 million yuan (YoY -26.55%), net profit of 123 million yuan (YoY -34.32%), net profit after deducting non-return to mother of 118 million yuan (-33.61%), net profit to mother was 41.03%, net profit after deducting non-net interest rate of 39.46%; 2) 2023Q4: operating income of 55 million yuan (YoY +4.03%), net profit to mother after deducting non-profit 0.22 million yuan (+5.97% YoY), net interest rate attributable to mother was 41.24%, after deducting a non-net interest rate of 39.99%; 3) Equity incentive payments rebounded to $0.13 billion.
Due to the expiration of sales commission contracts and customer restructuring, performance is under pressure in the short term.
Product sales: In 2023, Jiankai product sales totaled 281.32 million yuan (-13.44% year over year). 1) Domestic: Product sales revenue declined slightly, to 134.89 million yuan (-2.79% YoY), mainly due to customer Jinsai's self-built production capacity; 2) Overseas: Product sales revenue of 146.43 million yuan (-21.38% YoY).
(i) The overseas medical device side grew steadily, with a year-on-year increase of 18.52% in 2023; (ii) due to the cyclical nature of procurement of upstream raw materials, affected by the order rhythm of major overseas pharmaceutical customers, compounded by factors compounded by a sharp decline in revenue from LNP-related products, overseas pharmaceutical revenue declined significantly in 2023, down 72.56% year on year.
Technical services: Interpol's sales commission for Pegbin interferon products expires in April 2023, and Tebao's newly launched products are still in the early stages of release, and commission revenue is low. The company's technical service revenue in 2023 was only 17.02 million yuan (-79.22% year over year).
Domestic and foreign customers have entered the harvest period of drugs under development, and the next two years are expected to usher in incremental revenue & revenue structure optimization.
Overseas markets: Pharmaceutical-side customer's 1 billion dollar blockbuster products have been approved for marketing to treat myasthenia gravis, and 2 more products are nearing the declaration stage.
Domestic market: Tebao's G-CSF project has been approved, Anke Biotech's growth hormone drugs are being declared, and Tebao Biotech's growth hormone drugs, Shengsi Biotech's ultra-long-lasting recombinant 8-factor products, and Kain Technology interferon are in phase 3 clinical trials. Tebao's G-CSF and growth hormone drugs will bring an increase in technical service revenue to Jiankai, which is expected to drive an increase in overall gross margin.
The company continues to develop downstream innovative application scenarios, and testing the strength of the innovation platform is imminent. In 2023, Jiankai invested 58 million yuan in R&D (-25.34% year-on-year), and the R&D expenditure rate was 19.34% (+0.32pct). In the research project, the summary report of the phase 2 clinical trial of polyethylene glycol irinotecan for small cell lung cancer has been completed, and the phase 3 clinical trial is being prepared; phase 2 clinical trials of glioma indications are ongoing. Polyethylene glycol crosslinked sodium hyaluronate (JK-2122H) increases degradation time and reduces toxic side effects; clinical studies have now been completed and data compilation is in the data compilation stage. The sodium hyaluronate complex solution (JK-1136H) has completed clinical enrollment of all subjects. The above three projects are expected to be launched successively in 2024 and 2025 to generate revenue.
Profit forecast and valuation: According to the 2023 performance report, we lowered our profit forecast. The company's net profit for 2023-2025 is expected to be 1.23, 1.84, and 242 million yuan, respectively, up -34.0%, 49.5%, and 31.1% year-on-year, respectively. The PE corresponding to the current stock price is 39X, 26X, and 20X, respectively, maintaining a “buy” rating.
Risk warning: risk of core technology iteration; risk of product price reduction; risk of product development falling short of expectations.