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Daren Tang released its 2023 annual report. The company's revenue for the year 23 was 8.222 billion yuan, -0.33%; net profit to mother was 987 million yuan, +14.49% year over year; net profit after deduction of non-return to mother was 952 million yuan, +23.80% year over year; and net operating cash flow was 688 million yuan, +1.66% year over year.
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The company's profitability continues to improve, and gross margin continues to be optimized
In 2023, the company's gross sales margin was 44.01%, up 4.08 percentage points year on year; net sales margin was 11.78%, up 1.19 percentage points year on year; sales expenses ratio was 25.86%, up 1.99 percentage points year on year; management expenses ratio was 4.64%, up 0.06 percentage points year on year; R&D expense ratio was 2.25%, up 0.39 percentage points year on year; financial expense ratio was -0.19%, up 0.29 percentage points year on year.
2023Q4's revenue was $2,429 million, -9.57% year over year; net profit to mother was $129 million, -3.25% year over year; net profit without return to mother was 110 million yuan, -8.50% year over year.
The company's core products continued to be released, with sales of quick-acting heart saving pills exceeding 2 billion yuan. By industry, revenue from the industrial sector was 4.930 billion yuan, +10.34% year on year, and revenue from the commercial sector was 3.762 billion yuan, -11.19% year on year; by product, proprietary Chinese medicine sector was 5.836 billion yuan, +3.26% year on year, and the Western medicine sector was 1.697 billion yuan, or -4.84% year over year. The company's core products continued to be released. Sales of quick-acting heart saving pills exceeded 2 billion yuan for the first time, with sales of 57.76 million boxes in '23, +14.16%; sales of respiratory products continued to maintain high demand, with 7.02 million boxes of fresh throat drops sold in '23, +80.79% year over year, and 5.75 million boxes of lung cleansing and anti-inflammatory pills sold, +16.5% year over year. At the same time, the company's main products are throat cleansing pills, Angong beef yellow pills, Jingwanhong Ointment, and lung cleansing and anti-inflammatory pills, entering the 200 million yuan variety tier. Core products continued to be released, and respiratory products maintained high growth.
Daren Tang's subsidiary, Sino-US Tianjin Schke Pharmaceutical Co., Ltd. (holding 25% shares), had net profit of 980 million yuan in 2023, +39.01% over the same period last year.
The company continues to promote the “three core nine wing” and “1+5” new layout, and Daren Tang comprehensively promoted the “three core nine wing” and “1+5” strategic layout. On the product side, the company's market development work in 23 years revolved around the “three core and nine wings” strategy and continued to deeply cultivate the development of main products, with sales reaching 10 varieties with sales exceeding 100 million. The “1+5” strategic layout focuses on the “Da Ren Tang” main brand and carefully lays out industries related to traditional Chinese medicine. At the same time, the company further laid out the construction of an upstream Chinese herbal medicine base. In '23, the company built 4,000 acres of planting bases for chuanyu, honeysuckle, and schisandra chinensis.
According to the 14th Five-Year Development Plan, the company's core cardiovascular products, quick-acting heart saving pills, are striving to reach 2 billion yuan in revenue; the main products of the “China Heart Health Tour” campaign promoted Tongmai Health Pills and throat cleansing drops, which are the main products for the respiratory system, reaching a scale of 5-10 billion yuan; and gastrointestinal relief pills, tablets, and parqi capsules reached a scale of 3-5 billion yuan.
Investment advice: Maintaining a “buy” rating
Daren Tang has a history of 100 years. The company has a well-known product, “Quick-acting Heart Saving Pills”, with sales exceeding 2 billion yuan in 23 years. Considering the results disclosed in the company's annual report for '23, the revenue for '23 was greatly affected by the commercial sector, but the core business was still dynamic. The company's revenue forecast for 2024-2026 was 91.2/101.8/11.38 billion yuan respectively (94.5/10.55 billion yuan in 24-25 years ago), up 11%/12%/12% year on year, respectively; net profit to mother is estimated to be 11.5/1,39/1.70 billion yuan, respectively (forecast value 24-25 years ago was 11.8/1.44 billion yuan) ), with year-on-year increases of 17%/21%/23%, respectively, and the corresponding valuation is 21X/18X/14X. We maintain a “buy” investment rating.
Risk warning
Policy risks, cost escalation risks, R&D risks, etc.