Core views
In 2023, the company's revenue, net profit to mother, and net profit after deducting non-return to mother increased by 24.59%, 130.58%, and 141.52%, respectively. Overall performance growth was in line with expectations, and ophthalmic lenses and medical and aesthetic hyaluronic acid all achieved high growth. Looking ahead to 2024, 24H1 is expected to achieve steady growth in the company's business due to factors such as the high base for the same period last year; 24H2 is expected to rapidly release optometry terminal products, and the company's “Sea Charm” hyaluronic acid continues to be released, which is expected to drive the company's overall business to achieve steady growth throughout the year. In the short term, under the catalytic release of new hyaluronic acid products, the company's medical and aesthetic business is expected to maintain high growth; in the medium to long term, the company is actively promoting ongoing research projects, focusing on expanding innovative ophthalmology and aesthetic products, and is expected to continue to consolidate its dominant position in the industry in the future.
occurrences
The company released its 2023 annual report
In 2023, the company achieved revenue of 2,654 billion yuan, up 24.59% year on year; net profit to mother was 416 million yuan, up 130.58% year on year; net profit without return to mother was 383 million yuan, up 141.52% year on year, and EPS was 2.44 yuan. The 2023 profit distribution plan is to distribute a cash dividend of RMB 10.00 (tax included) to all shareholders for every 10 shares. At the same time, it is proposed to transfer 4 shares to all shareholders for every 10 shares.
Brief review
The performance was in line with expectations. Ophthalmic lenses and medical and aesthetic hyaluronic acid both achieved high growth. According to the announcement, revenue for the full year of 2023 was 2,654 billion yuan, an increase of 24.59% over the previous year.
The overall revenue growth is in line with expectations. The main reason is that the company has carried out various production and operations, increased product marketing efforts, and the promotion of the medical and aesthetic hyaluronic acid business exceeded expectations. In particular, the star product Haimei has entered a period of rapid expansion and is driving the overall improvement of the hyaluronic acid product portfolio; the cumulative demand for cataract surgery has been released, and the company's intraocular crystal prices have stabilized, and sales have increased dramatically.
Looking at split products: In 2023, the company's ophthalmic product revenue was 928 million yuan (up 20.57% year on year), including 382 million yuan (up 37.00% year on year), and domestic cataract surgery volume recovered steadily. After two rounds of provincial alliance collection, the company's artificial lens product price system stabilized, and used multi-brand product line advantages, channel advantages, and cost advantages to consolidate and increase market share; optometric materials revenue of 209 million yuan (up 20.17% year on year), mainly due to the resumption of global production and operation activities, and Products such as high oxygen permeability materials produced by the company continued to develop in the US and other international markets; optometry terminal products continued to expand in the US and other international markets; mainly due to changes in the scope of merger after the company sold its subsidiary Hebei Xinshikang in July '22 (Xinshikang's revenue of 13.51 million yuan in the same period); ophthalmic adhesives reached 115 million yuan (year-on-year increase of 29.05%), and the rapid release of products created a new high revenue for this product line.
The company's annual revenue for medical beauty and wound care products was 1,057 billion yuan (up 41.27% year on year), of which hyaluronic acid revenue was 602 million yuan (up 95.54% year on year), of which the third-generation hyaluronic acid product “Haimi” contributed more than 230 million yuan in revenue, an increase of 129.32% year on year. “Sea Charm” is positioned in the high-end market, and has the characteristics of no granulation and high cohesiveness. At present, the product has entered the upward channel of rapid release, and the company is also strengthening the “Jiaolan” hyaluronic acid product “Xinlan Lip” Adapt The product market promotes symptoms and assists downstream medical and aesthetic institutions to develop unique injectable use solutions using this indication. The company's three hyaluronic acid product portfolios have been widely recognized by the market. The brand effect has improved, driving the overall volume of the company's hyaluronic acid product portfolio and further expanding the market penetration rate. “Haiwei” and “Guerlain” product revenue increased 94.14% and 57.70% year on year, respectively; human epidermal growth factor revenue was 171 million yuan (up 13.58% year on year). The product application department expanded from traditional burn medicine and dermatology to pediatrics, oncology, oral surgery, and general surgery. Multiple departments such as obstetrics and gynecology, endocrinology, and gastroenterology; revenue from radiofrequency and laser equipment was 284 million yuan (down 1.97% year on year), but “Endymed Pro” high-frequency skin treatment devices and related consumables achieved rapid growth.
The annual revenue of the company's orthopedic products was 476 million yuan (up 22.56% year on year). The company's medical chitin sugar (for intra-articular injection) and sodium vitrate injection products formed unique product efficacy and combined advantages, and continued to expand market share through a good pricing system. Among them, sales of medical chitin (for intra-articular injections) products continued to rise, up 26.05% year on year; revenue from anti-adhesion and hemostasis products was 146 million yuan (down 17.32% year on year), mainly influenced by domestic policy factors such as cost control and control of high-value consumables.
In 2023, the company's net profit to mother and net profit not to mother were 416 million yuan and 383 million yuan respectively, up 130.58% and 141.52% year-on-year respectively. The overall profit growth was in line with expectations, mainly due to gross profit growth due to increased operating income. In addition, the influencing factors were: 1) Aaren, an American subsidiary in '22, showed signs of impairment due to business restructuring, and the company calculated asset impairment losses of about 46 million yuan; 2) The company's production and operation in Shanghai stagnated between March and May '22, resulting in a loss of about 46 million yuan from work stoppage. 37 million yuan.
Looking ahead to the whole year, the company's performance is expected to maintain steady growth
Looking ahead to 2024, 24H1 is expected to achieve steady growth in the company's business due to factors such as the high base of the same period last year. The company's artificial crystal collection is expected to be implemented in 24Q2. The company's artificial crystal products are expected to further increase market share through collection, and the company's fourth-generation medical and aesthetic hyaluronic acid is expected to be approved in 24H1; 24H2 As ophthalmology usheres in the summer season, the company's optical vision terminal products (OK mirrors, defocus lenses, etc.) are expected to be released rapidly, and the company's “Sea Charm” hyaluronic acid will continue to be released throughout the year. Steady growth.
There is a rich pipeline of products under development. Companies focusing on expanding innovative ophthalmology and aesthetic products continue to increase investment in R&D, and focus on expanding innovative ophthalmology and aesthetic product lines. In the field of ophthalmology, in June 2023, the company's innovative hydrophobic non-spherical intraocular lens products were approved for marketing in China; in January 2024, the innovative intraocular filling biogel product completed clinical trials and entered the registration phase; in February 2024, hydrophobic modeled astigmatism correction aspherical artificial lens products completed clinical trials and entered the registration stage; hydrophilic aspherical multifocal intraocular lenses, hydrophobic spherical trifocal intraocular lenses, and aqueous posterior atrial eye lenses Clinical trials of key R&D projects such as lenses have been successfully carried out. In the medical and aesthetic field, fourth-generation organic crosslinked hyaluronic acid products are now in the late stages of registration. In the future, the company will continue to effectively use its own funds to actively develop advanced technology and products in the fields of ophthalmology, medical aesthetics, orthopedics, and surgical treatment to increase product reserves.
Expenses are well controlled, and financial indicators are basically normal
In 2023, the company's comprehensive gross margin was 70.50%, up 1.52 percentage points from the previous year, mainly driven by the increase in revenue and share of hyaluronic acid products; the sales expense ratio was 30.69%, down 1.21 percentage points from the previous year. As the pharmaceutical terminal market gradually returned to normal, the company actively broadened marketing channels, recruited more sales and marketing personnel, and increased the marketing efforts of products, especially hyaluronic acid products. The related market expenses and labor costs all increased; the R&D expense ratio was 8.29%, down 0.26 percentage points from the previous year, mainly due to The company continues to increase investment in R&D, and expenses such as R&D material collection and testing costs have increased; the management fee ratio was 15.74%, down 3.14 percentage points from the previous year. It is expected that due to work stoppage losses in the same period in '22 and share payment costs will decrease year over year. The financial expense ratio was -2.34%, an increase of 1.14 percentage points over the previous year, which is expected to be mainly due to exchange factors. Net cash flow from operating activities increased 174.40% year over year, mainly due to a sharp increase in operating cash inflows due to a sharp increase in operating income; net cash outflow from financing activities was about 255 million yuan (net cash outflow of about 288 million yuan in '22). The slight decrease was mainly funded by the company's new bank loans and restricted stock incentive plans. In terms of operating capacity, the number of receivables turnover days was 49 days, a year-on-year decrease of 23 days. The company's other financial indicators are generally normal.
Profit forecasting and valuation
In the short term, under the catalytic release of new hyaluronic acid products, the company's medical and aesthetic business is expected to maintain high growth. The results of the national collection of artificial crystals are expected to be implemented in 24Q2, and the company's artificial crystal business is expected to use collection to further increase its market share; in the medium to long term, the company is actively promoting ongoing research projects, focusing on expanding innovative ophthalmology and aesthetic products, and is expected to continue to consolidate its dominant position in the industry in the future. We forecast that in 2024-2026, the company's revenue will be 32.01 billion yuan, 37.86 billion yuan, and 4.435 billion yuan, respectively, up 20.62%, 18.26% and 17.15% year on year; net profit to mother will be 5.17, 6.34, and 766 million yuan, respectively, up 24.27%, 22.56% and 20.90% year on year. Based on the closing price on April 23 (92.81 yuan/share), the 2024-2026 PE was 30, 25, and 20 times, respectively, maintaining a “buy” rating.
Risk warning
Risk of changes in industry policies: Artificial crystals have already been collected at the national level, and Hebei Province has also included OK Mirror in the scope of collection. In the future, it is not ruled out that the price reduction of some of the company's products exceeds market expectations, affecting the profitability of related businesses; if bidding demand in some regions is delayed due to policy factors such as strengthened compliance in the medical industry, there is a risk that the company's performance will fall short of the reported forecast value.
New product promotion progress falls short of expectations: During the R&D registration process, many of the company's major products will be launched and sold one after another according to the plan. There is some uncertainty about the new product marketing itself. If the promotion progress falls short of expectations, it will affect the sustainability of the company's business growth.
Increased market competition: There are more and more manufacturers with ophthalmic, medical and aesthetic product layouts, and the industry faces the risk of increased competition in the future.