Incidents:
In 2023, the company achieved operating income of 16.646 billion yuan, -2.90% year on year; net profit to mother of 1,443 billion yuan, -3.99% year on year; net profit after deducting non-return to mother of 1,374 billion yuan, -3.18% year on year.
The company's 2024Q1 revenue was 4.340 billion yuan, -4.81% year on year; net profit to mother was 440 million yuan, -4.96% year on year; net profit after deducting non-return to mother was 428 million yuan, -4.26% year on year.
Analytical reviews
2023:23Q4 revenue declined slightly, operating cash flow stabilized
23Q4: Looking at a single quarter, the company's 2023Q4 revenue was 3,995 million yuan, -3.28% year over year; net profit to mother was 359 million yuan, -4.54% year over year; net profit after deducting non-return to mother was 325 million yuan, +7.28% year over year.
23 Annual financial data: The company's overall gross margin in 2023 was 62.16%, -1.37 percentage points year on year; the period expense ratio was 39.78%, -3.00 percentage points year on year; of which sales expenses ratio was 26.64%, -2.24 percentage points year on year; management expenses ratio (including R&D expenses) 15.57%, -0.38 percentage points year on year; financial expenses ratio -2.43%, -0.38 percentage points year on year; net operating cash flow was 3.9 billion yuan, -1.23% year on year.
Sales in the respiratory sector are impressive. Meropenem is under short-term pressure due to collection (1) Livou Group (excluding rizumab): directly and indirectly holds 45.34% of the shares in the Livingju Group. During the reporting period, Lizhu Group (excluding Livizumab) achieved operating income of 12.521 billion yuan, an increase of about 0.78% over the previous year; contributed about 1,130 billion yuan to the company in net profit attributable to shareholders of listed companies. Gastrointestinal products achieved revenue of 2,903 billion yuan, a year-on-year decrease of 15.50%; sex-promoting hormone products achieved revenue of 2,767 billion yuan, an increase of 6.80%; and spiritual products achieved revenue of 602 million yuan, an increase of 10.54% over the previous year.
(2) Rezumab: The company holds 56.19% of the shares in Rezumab, and the impact on the company's current net profit attributable to shareholders of listed companies is approximately -609 million yuan. Livizumab continues to focus on autoimmune diseases, vaccines, tumors, and assisted reproduction. As R&D projects gradually enter the production and commercialization stage, the quality system improvement and product commercialization process of lizumab continues to accelerate.
(3) Health Yuan (excluding Livzon Group and Livizumab): Achieved operating income of 4.556 billion yuan, down about 5.72% from the same period last year; realized net profit attributable to shareholders of listed companies of 924 million yuan, a year-on-year decrease of about 0.55%. The respiratory sector achieved sales revenue of 1,741 billion yuan, an increase of about 48.35% over the previous year, and the anti-infective sector achieved sales revenue of 224 million yuan, a year-on-year decrease of about 75.64%, mainly affected by the collection of meropenem. The APIs and intermediates segment achieved sales revenue of RMB 2,079 billion, a year-on-year decrease of about 11.89%. The health food and OTC sector achieved revenue of 453 million yuan, an increase of about 46.31% over the previous year.
TG-1000 reached the main clinical end point of phase III, and BD made phased progress to further implement the “innovative drug+high barrier complex formulation” two-wheel drive strategy. The company invested 1,632 billion yuan in R&D, accounting for 9.80% of total revenue. The company introduced a variety of innovative drugs to consolidate existing competitive advantages and enrich the product pipeline. The main product developments are as follows:
Respiratory diseases: TG-1000 has entered clinical phase III and completed the enrollment of subjects in January 2024, showing rapid development progress. DBM-1152A, N91115, and QX008N are in clinical phase I or phase Ib, while BA2101 has entered clinical phase II.
Pain: The FZ008-145 program received clinical approval in January 2024, and clinical trials are about to begin.
Digestive system diseases: The JP-1366 program received clinical approval in February 2024 and is about to enter clinical trials.
Cardiovascular disease: The HHT120 program is in clinical phase I, and its safety and initial efficacy are being evaluated.
Mental illness: The LS21031 program is also in Phase I clinical treatment for depression.
The company has made phased progress in BD. Various innovative pharmaceutical products such as respiratory system, digestive system, nervous system, cardiovascular, and analgesia have been successfully introduced to accelerate the transformation of the company into an innovative pharmaceutical company. The company reached product licensing cooperation with Quanxin Biotech and Boan Biotech respectively, and obtained the relevant rights of two products, anti-TSLP monoclonal antibody and anti-IL-4rA monoclonal antibody, to develop them to treat respiratory diseases such as asthma and chronic obstructive pulmonary disease (COPD). In March, the company and Bayer signed an exclusive license agreement for the development, commercialization and production of a small molecule inhibitor in China. This is also the first time that Health Yuan has introduced an innovative respiratory drug pipeline from a leading global multinational company.
24Q1: The company's gross margin increased, with seasonal fluctuations in revenue from some products. 24Q1 The company's overall gross margin was 63.39%, +0.98 percentage points year on year; the period expense ratio was 38.27%, -1.11 percentage points year on year; of which the sales expenses ratio was 25.29%, -1.48 percentage points year on year; management expenses ratio (including R&D expenses) was 14.67%, +1.72 percentage points year on year; net operating cash flow was 972 million yuan, year on year + 291.91%
Chemical agents achieved revenue of 2.141 billion yuan, a year-on-year decrease of 4.86%. Among them, sexotropin products achieved revenue of 807 million yuan, a year-on-year increase of 39.89%; digestive tract products achieved revenue of 589 million yuan, a year-on-year decrease of 25.68%; respiratory products achieved revenue of 417 million yuan, a year-on-year decrease of 18.17%; and anti-infective products achieved revenue of 115 million yuan, a year-on-year decrease of 42.20%. APIs and intermediates achieved revenue of 1,399 billion yuan, a year-on-year decrease of 3.70%. Traditional Chinese medicine formulations achieved revenue of 406 million yuan, a year-on-year decrease of 28.38%. Diagnostic reagents and equipment achieved revenue of $236 million, an increase of 60.26% over the previous year.
Health products achieved revenue of 78 million yuan, an increase of 96.50% over the previous year. Biological products achieved revenue of 44 million yuan, a year-on-year decrease of 29.86%.
Investment advice: Focus on rapid development and grasp the company's low valuation. We expect the company's revenue from 2024 to 2026 to be 172.6/190.6/21.2 billion yuan, up 3.7%/10.5%/11.2% year on year, and net profit to mother of 15.5/17.8/2.04 billion yuan, respectively, up 7.3%/14.6%/15.0% year on year, respectively, and the corresponding valuation is 16X/14X/12X. Maintain an “overweight” investment rating.
Risk warning
Policy risks exceeded expectations; market price risks exceeded expectations; R&D progress fell short of expectations.