Introduction to this report:
The company released its 2023 annual report. The performance slightly exceeded expectations, the ability to control fees continued to improve, and profits achieved high growth. The core products grew steadily and are expected to continue throughout the year due to strong market demand, and the BD project progressed steadily, which is expected to contribute to new volume.
Key points of investment:
Maintain an “Overweight” rating. The company released its 2023 annual report, achieving revenue of 9.655 billion yuan (+7.3%), net profit attributable to mother of 2,823 billion yuan (+30.0%), after deducting non-net profit of 2,692 billion yuan (+32.7%). The performance slightly exceeded expectations. Considering the continuous improvement in cost control capabilities, EPS was raised to 3.28/3.58 yuan (originally 2.91/3.31 yuan), and the 26-year EPS forecast was added by 3.93 yuan. Referring to the industry average valuation, the 2024 PE 15X was given, and the target price was raised to 49.20 yuan, maintaining the “gain” rating.
The ability to control fees continues to improve to guarantee a high rate of profit growth. Looking at a single quarter, 23Q4 net profit of 889 million yuan (+51.8%). The high growth is expected to be mainly due to continued improvement in cost control capabilities. The 23Q4 sales/R&D expenses ratio is 41.3%/4.2%, respectively, compared to -5.7pct/-5.5pct in 22Q4, respectively. 23 The annual sales expense ratio was 41.5% (-4.2pct), the R&D expense ratio was 4.81% (-1.3pct), the net margin increased to 29.3% (+5.1pct), and the cost control capacity continued to improve. We expect profits to continue to grow at a high rate as the share of out-of-hospital sales continues to increase and in-hospital expenses are controlled.
Core varieties are expected to continue to grow steadily, and the steady progress of the BD project is expected to contribute to new volume. View by section:
In '23, the heat-clearing and detoxifying category (mainly Pu Di Lan) and the pediatric category (mainly pediatric black pepper) earned 3.38 billion yuan (+17.7%) and 2,741 billion yuan (+13.0%) respectively. The high growth is expected mainly due to ① the concentrated outbreak of respiratory diseases in 23Q1 and the intertwining of various respiratory diseases in China since 23Q4. The core products are in strong market demand; ② Continue to strengthen channel expansion, develop an empty market, and contribute new volume. Considering that the respiratory incidence rate is still high in 24Q1 and that out-of-hospital channels are expected to continue to expand, we expect that core varieties will continue to grow steadily in 24 years. Among the core BD products currently in hand: ① ZX-7101 submitted an NDA in 24Q1 and is expected to be approved for marketing in 25 years; ② long-term growth hormone is expected to submit an NDA in 24 years; ③ introduced from Hengyi's two products, which are progressing steadily clinically. As BD projects gradually apply for NDA and go public, it is expected to contribute to additional performance in the future.
Catalysts: Core product sales exceed expectations, BD projects continue to advance, and new products are successfully commercialized Risk warning: policy risk, collection risk, risk of core product sales falling short of expectations