Revenue growth was steady, and profit to mother remained flat year over year after deducting non-recurring factors and exchange rate effects. In 2023, the company achieved revenue of HK$10.530 billion, up 10.1% year on year. After deducting the impact of exchange rate changes, all core businesses maintained steady growth, and the innovative business was in the early stages of expansion; profit to mother was HK$1,880 billion, down 9.6% year on year; if the impact on Telix's investment fair value change income (HK$160 million) and one-time administrative fines (HK$316 million) was deducted, the normalized return to mother profit was approximately HK$2,036 million, down about 4.7% year on year, further deducting the exchange rate The year-on-year increase was approximately 0.2% after the impact of the changes. The Board recommended a final dividend of HK26 cents per share for the year 2023, totaling approximately HK$905 million, increasing the dividend rate to 47.7%.
Respiratory products performed well, and the anti-tumor segment of nuclear drugs entered the rapid release stage. In 2023, the company's pharmaceutical technology business achieved revenue of HK$6.813 billion (+17.1%), of which the respiratory and critical care sector achieved revenue of HK$1,375 billion (+38.2%), and demand for core products such as Cheno increased significantly; the facial surgery sector generated revenue of HK$2,414 billion (+10.0%); and the cardiovascular emergency sector generated revenue of HK$2,447 billion (+15.9%).
In terms of innovative business, the nuclear drug anti-tumor diagnosis and cardiovascular precision interventional diagnosis and treatment technology business achieved revenue of HK$335 million (+26.7%). The core product, Yigantai Yttrium [90Y] microsphere injection, continues to increase in market attention and penetration rate. Formal surgery has been carried out in more than 40 hospitals in 17 provinces and cities, and has entered welfare insurance in 36 provinces and cities. The nuclear drug anti-tumor sector has revenue of about HK$217 million (+279.5%). The biotechnology sector achieved revenue of HK$3.381 billion (+12.4%), of which the amino acid sector (including taurine) achieved revenue of HK$2,758 billion (+16.1%), maintaining good growth.
The gross margin remained stable, and the three expense ratios increased slightly. In 2023, the gross sales margin was 62.0% (-0.3pp), the sales expense ratio was 24.3% (+0.3pp); the management expense ratio was 11.7% (+0.4pp), mainly due to the continued increase in R&D investment; the financial expense ratio was 1.9% (+0.6pp), mainly due to the increase in financial costs due to the US dollar interest rate hike; the net margin was 17.9% (-3.9pp). The net cash flow from operating activities was $2,425 million (+31.6%), and the ratio to net profit attributable to mother was 129%, and the cash flow remained healthy.
Investment advice: Considering changes in financing costs and R&D investment, the 2024-25 profit forecast was lowered, and the 2026 profit forecast was added. The net profit for 2024-26 is estimated to be 22.29/25.40/HK$2,888 billion (2024-25 was 24.45/2,835 million), up 18.6%/14.0%/13.4% year-on-year, corresponding EPS of 0.63/0.72/0.81, and the PE corresponding to the current stock price is 8.1/7.1/6.2X. Since 2015, Yuanda Pharmaceutical has accelerated innovation and transformation. It has built “gradientation+differentiation” pipelines in the three segments of antineoplastic (nuclear drugs, RDC, and gene therapy), precise cardiovascular intervention, and pharmaceutical technology. It expects sales volume of yttrium [90Y] microsphere injections and maintains a “buy” rating.
Risk warning: R&D and product registration fall short of expectations; health insurance fee control exceeds expectations; sales promotion falls short of expectations.