Revenue was under slight pressure, profit grew steadily, and continued to diversify, maintaining the “buy” rating. In 2023, the company achieved operating income of RMB 12.430 billion (-1.58% year over year, all figures below); net profit to mother of RMB 1,954 billion (+2.32%); net profit after deducting non-return to mother of RMB 1,881 billion (+0.05%). In terms of profitability, the company's gross profit margin in 2023 was 64.08% (-0.60pct), and the net profit margin was 15.27% (-0.21pct).
On the cost side, in 2023, the company's sales expenses ratio was 28.95% (-1.83pct), management expenses rate 5.26% (+0.06pct), R&D expenses rate 10.74% (-0.56pct), and financial expenses ratio -2.18% (-0.06pct). We are optimistic about the company's market advantages in various treatment fields, and considering the impact of future expenses, lowered the 2024-2025 and added net profit forecasts for 2026. The estimated net profit forecast was 21.88, 24.66 billion yuan, and 2,769 billion yuan (originally estimated 2024-2025 was 23.05 billion yuan and 2,672 billion yuan), EPS was 2.36, 2.66, and 2.99 yuan/share, respectively. The current stock price corresponding to PE is 15.9, 14.1, and 12.6 times, respectively, maintaining the “buy” rating.
Among chemical preparations, the revenue performance in the psychoactive sector and the sex stimulating hormone sector was impressive. Revenue from the traditional Chinese medicine business significantly increased the product revenue side. In 2023, the company's chemical products achieved revenue of 6.571 billion yuan (-6.13%), accounting for 52.86% of total revenue. Among them, digestive tract revenue was RMB 2,903 million (-15.5%), revenue from probiotics was RMB 2,767 billion (+6.80%), and mental revenue was RMB 602 million (+ 10.54%); APIs and intermediates achieved revenue of RMB 3.253 billion (+3.70%), accounting for 26.17% of total revenue; and traditional Chinese medicine products achieved revenue of RMB 1,745 billion (+39.19%), accounting for 14.04% of total revenue. On the product profitability side, the gross profit margin for chemical preparations was 79.09% (+0.35pct); the gross profit margin for APIs and intermediates 35.49% (+0.14pct); and traditional Chinese medicine 68.62% (+1.37pct).
Innovative drugs and high-barrier formulations are being promoted, and the diversified layout promotes the approval and marketing of the company's key products, which is expected to drive an increase in performance in 2024, including tocizumab, tripraline microspheres, voriconazole, new indications for iprazole sodium (prevention of stress ulcer bleeding in critically ill patients), and bunanserin tablets. In addition, the company's microsphere complex formulation and biological product pipeline is being implemented at an accelerated pace, including goserelin (phase I clinical) in the field of sex stimulants, aripiprazole microspheres (declared for production) and octreotide microspheres (entered BE clinical) in the psychiatric field, simeglutide (phase III clinical trial for type II diabetes has been completed, and clinical trials have been approved for weight loss), and IL-17A/F monoclonal antibodies (phase III clinical trials).
Risk warning: risk of changes in industry policy, risk of new drug development, risk of raw material supply and price fluctuations, etc.