Incidents:
The 2023 annual report was released. The results were in line with expectations, with annual revenue of 12.430 billion yuan, a year-on-year decrease of 1.58%, achieving net profit of 1,954 billion yuan, an increase of 2.32% over the previous year, and net profit without return to mother of 1,881 billion yuan, an increase of 0.05% over the previous year. The company announced the 2023 profit distribution plan and plans to pay a cash dividend of 13.5 yuan (tax included) for every 10 shares.
The API and Chinese medicine business drives performance improvement
By business, in 2023, the company achieved revenue of 6.571 billion yuan (-6.13% YoY), APIs achieved revenue of 3.253 billion yuan (+3.70% YoY), and traditional Chinese medicine formulations achieved revenue of 1,745 billion yuan (+39.19% YoY). Traditional Chinese medicines and APIs are the main drivers of performance in this period. The market volume of ginseng and Qi is fueling the growth of antiviral granules in retail pharmacies and online terminals, while the API business is driven by high-end antibiotics and pet medicines. Revenue from chemical preparations declined, mainly due to a 16% drop in revenue from digestive tract products in the current period.
Optimistic about the company's own innovations and improvements brought about by product introduction
Results were hampered in the current period due to significant asset impairment. Livou Group is rich in products, successfully renewed medical insurance for ulcer bleeding, and added medical insurance indications for the prevention of ulcer bleeding; triprarelin microspheres and tocilizumab have been declared for production, IL-7A/F monoclonal antibodies have been declared for production, IL-7A/F monoclonal antibodies initiated phase III clinical trials for psoriasis in August 2023, and recombinant human folliculinin and simeglutide are also in phase III clinical phase; in terms of product introduction, P-CAB and thrombin inhibitors, innovative drugs in the cardiovascular field were introduced. Furthermore, Lizhu's international API registration certification is expected to contribute to revenue.
Profit Forecasts, Valuations, and Ratings
Based on the progress of the vaccine and API business, we have adjusted our forecast. The company's revenue for 2024-2026 is 131.63/139.47/14.875 billion, respectively, with year-on-year growth rates of 5.90%/5.95%/6.66%, respectively, and net profit to mother of 21.99/24.64/2.27.15 billion, with year-on-year growth rates of 12.55%/12.07%/10.16%, EPS 2.37/2.66/2.93 yuan/share, respectively, and a 3-year CAGR of 11.59%. The company lays out high-barrier drugs. Referring to comparable company valuations, we gave the company 19 times PE in 2024, with a target price of 45.12 yuan, maintaining an “gain” rating.
Risk warning: Iprazole sales fall short of expectations; API expansion falls short of expectations; microsphere product approval falls short of expectations; risk of increased competition in the self-avoidance and weight loss market