2024 Q3 Earnings Report

In the first three quarters of 2024, the company achieved operating income of 30.912 billion yuan, up 0.69% year on year, excluding COVID-related products, operating income increased by about 5.74% year on year; realized net profit attributable to shareholders of listed companies was 2.011 billion yuan, a year-on-year decrease of 11.93%; among them, net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was 1.836 billion yuan, an increase of 24.58% year on year.

Lean operation, cost reduction and efficiency continued to advance. Operating cash flow was optimized in the first three quarters of 2024. The net cash flow generated by the company's operating activities was 2.987 billion yuan, an increase of 21.33% over the previous year, and operating cash flow continued to be optimized. In the first three quarters of 2024, the company's sales expense ratio was 21.33%, down 2.21 percentage points from the previous year; the management expense ratio was 10.17%, down 0.15 percentage points from the previous year. Excluding the impact of new mergers and acquisitions, management expenses were reduced by about 0.3 billion yuan; lean operation, cost reduction and efficiency continued to advance. In terms of innovative R&D, the company continues to focus on superior pipelines, optimize R&D project management and resource allocation, and ensure priority promotion of key projects.

In the first three quarters of 2024, the company invested a total of 3.915 billion yuan in R&D; of these, R&D expenses were 2.648 billion yuan, and the R&D expenditure rate was 8.57%, a year-on-year decrease of 1.71 percentage points.

The strategy focuses on the field of innovative pharmaceutical devices. In terms of core assets and R&D platforms, the company's two products (trastuzumab; botulinum toxin) were approved for marketing in the third quarter of 2024, 1 product pipeline (SBK010) was accepted, 1 product line reached the main research end point (HLX11) in phase 3 clinical trials (), 1 product pipeline entered phase 2 clinical (HLX53), and 6 product lines were clinically approved (sululimab, FH-2001 capsules, 23-valent pneumococcal polysaccharide vaccine, human diploid cell rabies vaccine), XS-04 and HLX17).

On September 13, 2024, Fosun Pharmaceutical Industry, a holding subsidiary of the company, and Kite Pharma Fosun Kate jointly signed an “Equity Transfer Agreement”, agreeing that Fosun Pharmaceutical will increase its shares in Fosun Kate by 50%. After the equity transfer is settled, Fosun Pharmaceutical Industries will hold 100% of Fosun Kate's shares, Fosun Kate will be included in the scope of the company's consolidated statement subsidiaries, and Fosun Kate will retain the exclusive development, production and commercialization rights of Yikaida and FKC-889 in China, Hong Kong and Macau. The company's move completed the strategic expansion of core assets and R&D platforms, and became a strategic initiative for the company to focus on innovative pharmaceutical devices.

Investment advice:

We expect the company's 2024-2026 EPS to be 1.09 yuan, 1.37 yuan, and 1.68 yuan, respectively, with corresponding dynamic price-earnings ratios of 24.48 times, 19.42 times, and 15.87 times, respectively. The company is one of the leading innovative drugs in China. Its products cover a wide range of fields, and innovation and transformation continue to be promoted. With the launch of the company's innovative pharmaceutical products, the revenue structure is expected to improve further. Maintain a buy rating.

Risk warning: risk of drug development falling short of expectations, risk of policy risk, risk of product sales falling short of expectations