Incident: The company released its 2023 annual report, achieving operating income of 8.674 billion yuan (+0.42%), net profit of 1,071 billion yuan (+505.34%), net profit after deducting non-return net profit of 1,181 billion yuan (+60.11%), and rapid growth in non-net profit, mainly due to increased profits due to revenue growth and a decrease in accrued asset impairment losses compared to the same period last year. On a quarterly basis, Q4 achieved operating income of 2.102 billion yuan (-16.04%), net profit to mother of 38.6426 million yuan (-51.62%), and net profit of non-return to mother of 127 million yuan (+367.59%).
Comment:
In 2023, the Chinese medicine sector achieved revenue of 5.971 billion yuan (+6.62%), and sales of the main compound salvia pill increased 9.89% year over year. In accordance with international innovation standards and modern medical standards, the company has used compound salvia tablets to drive a series of leading brand products such as serum nourishing brain pellets (pills), astragalus medicine pills, injectable yiqi complex, and salvia polyphenolic acid for injections, and has built a modern traditional Chinese medicine system focusing on cardiovascular and cerebrovascular use. At the same time, the company has continued to lay out a multi-level product portfolio, continuously strengthening large-scale secondary development and innovative traditional Chinese medicine research and development. In the past three years, three new traditional Chinese medicine products for diabetic retinopathy indications have been approved for the market in the past three years.
By the end of 2023, the company had deployed 25 products in the field of modern traditional Chinese medicine, and 19 products in the R&D pipeline are in phase II and phase III research, 7 of which are undergoing phase III research; in terms of secondary development of the core varieties, Jiuweihua zengyi qi drop pills increase diabetic nephropathy indications, and astringent brain pills increase AD indications; in terms of international research and development, T89 is in phase II clinical trials for treating chronic stable angina pectoris and preventing acute plateau syndrome (AMS) International clinical trials are underway.
In 2023, chemical pharmaceuticals achieved revenue of 1,203 billion yuan (-5.30%), chemical raw materials of 57.13 million yuan (-19.67%), and biopharmaceuticals of 190 million yuan (-23.47%). In the field of chemical medicine, the company is leading in multiple fields by imitating and constructing PXT3003, which treats fibular muscular atrophy, and has completed phase III clinical trials; the Class 1 innovative drug PARP inhibitor has promoted phase II clinical trials; JS1-1-01, a class 1 innovative drug, has completed phase I; and Tasley Diyi Pharmaceutical has passed or treated 17 varieties as consistent evaluations. In the biopharmaceutical sector, the company focuses on the two major fields of protein/antibody and CGT, focusing on the research and development of 12 innovative projects; in addition, in '23, Puyouke moved from the negotiation catalogue of the National Health Insurance Catalogue to the regular Class B catalogue. We expect sales to remain stable in Puyuk's myocardial infarction indications, and all phase IIIc verification tests for stroke indications have been completed.
Profit forecast: We expect the company's net profit to be 1,169 billion yuan, 1,260 billion yuan, and 1,340 billion yuan respectively in 2024-2026, up 9.2%, 7.7%, and 7.1% year-on-year respectively. The company is deeply involved in modern traditional Chinese medicine innovation, has rich R&D reserves, and has resumed rapid growth in performance. Referring to comparable companies, we gave the company 20-25X PE in 2024, with a corresponding reasonable value range of 15.65-19.56 yuan, maintaining a “superior to the market” rating.
Risk warning: risk of R&D progress falling short of expectations, risk of price reduction in collection, risk of new product registration falling short of expectations, risk of asset impairment.