Key points of investment
The performance is basically stable, and the ability to control fees is good. In 2023, the company achieved operating income of 12.43 billion yuan (-1.58%); realized net profit due to mother of 1,954 billion yuan (+2.32%); and realized deducted non-net profit of 1,881 billion yuan (+0.05%). Among them, Q4 achieved revenue of 2,775 billion yuan (-11.65%) in a single quarter and net profit of 352 million yuan (-12.55%). Q4's single quarter results declined, mainly due to COVID-19 vaccine revenue in Q4 2022, and a sharp drop in revenue in Q4 2023. The company calculated impairment of assets related to the COVID-19 vaccine for the full year of 2023, affecting net profit of 310 million yuan. In 2023, the company's gross sales margin was 64.08%, down 0.6 pct year on year; the net sales margin was 15.27%, down 0.22pct year on year; the company's sales expenses ratio, management expense ratio, financial expense ratio and R&D expense ratio were 28.95%, 5.26%, -2.18%, 10.74%, -1.83 pct, +0.06 pct, -0.06 pct, -0.56 pct. The company's overall cost control ability was good.
The chemical agents sector is under pressure for a short period of time, and the traditional Chinese medicine sector is growing rapidly. In 2023, the company's chemical formulation sector achieved revenue of 6.571 billion yuan (-6.13%). By sector, 1) The digestive tract sector achieved revenue of 2,903 billion yuan (-15.50%). We expect that the decline in revenue is mainly due to price cuts in the national negotiations on iprazole and the impact of industry policies, prescriptive drug sales will be pressured in the short term. 2) The gonadotropin sector achieved revenue of 2,767 billion yuan (+6.80%). With the continuous release of leuprorelin microspheres and the launch of triprorelin microspheres (1-month release) new indications for prostate cancer, the sex stimulating hormone sector is expected to continue to grow. 3) The spiritual sector achieved revenue of 602 million yuan (+10.54%). During the reporting period, the traditional Chinese medicine formulation sector achieved revenue of 1,745 billion yuan (+39.19%). Revenue increased rapidly, mainly due to influenza, etc., which spawned market demand, and sales of key products such as antiviral granules and ginseng fuzheng continued to increase. During the reporting period, the APIs and intermediates sector achieved revenue of 3.253 billion yuan (+3.70%), and antibiotic series products and high-end pet drugs achieved good growth. The diagnostic reagents and equipment segment generated revenue of 659 million yuan (-8.92%).
Focus on complex formulations with high barriers, and R&D results are gradually realized. The company actively lays out high-barrier research and development of complex formulations and specialty biological products, and is progressing rapidly in the research pipeline. Triptorelin microspheres (1M) prostate cancer has been marketed, and marketing applications for endometriosis have been accepted; octreotide microspheres and leuprorelin microspheres (3M) are undergoing BE clinical trials; injectable ariprazole microspheres (1M) have been reported for production and registration verification, and are expected to be approved for marketing in the first half of 2025. Tocizumab injection has been approved for 3 indications; the phase III clinical trial of simeglutide injection has been enrolled and is expected to be marketed in the second half of 2024, and weight loss will be approved for clinical use; in clinical promotion of recombinant IL-17A/F humanized monoclonal antibody psoriatic phase III, head-to-head testing with scuziumab is expected to achieve advantages such as rapid efficacy, good curative effect and long duration of efficacy; recombinant human follicle-stimulating hormone phase III clinical subjects enrolled in the group; Pusubizumab (PD-1) has been submitted for conditional listing Pre-BLA filing. In terms of BD, potassium-competitive acid blockers (P-CAB) in the digestive tract field and thrombin inhibitors in the cardiovascular field have been introduced, further enriching the layout of innovative drug products.
Investment advice: Taking into account the impact of product price reductions and industry policies, we lowered the company's profit forecast for 2024/2025 and added a profit forecast for 2026. The net profit attributable to the parent company in 2024-2026 is estimated to be 2.559 billion yuan, 2,377 billion yuan, and 2,657 billion yuan respectively. The corresponding EPS is 2.33 yuan, 2.57 yuan and 2.87 yuan, respectively. The corresponding PE price is 15.82/14.38/12.86 times, respectively. The company operates steadily and has a long-term layout of complex formulations and specialty biopharmaceuticals with high barriers. The products are gradually entering the harvest period, which is expected to bring new performance increases, is optimistic about the company's long-term development, and maintains a “buy” rating.
Risk warning: risk of drug price reduction; risk of R&D progress falling short of expectations; risk of market competition.