Incident: The company released its report for the first quarter of 2023. It achieved revenue of 2.78 billion yuan in 2023, a decrease of 6.6% over the previous year, and the net profit of the mother was 860 million yuan, a decrease of 24.7% over the previous year.
The short-term performance was under pressure due to the high base of the same period last year, and it is optimistic that the new patient enrollment in 23Q2 will reach an inflection point.
In 23Q1, the subsidiary Jinsai Pharmaceutical achieved revenue of 2,353 million yuan, down 11% from the previous year, and achieved net profit of 895 million yuan, down 26% from the previous year. Considering that 22Q2 began to have a low base of new patients, we expect the growth rate of new patients starting 23Q2 to reach an inflection point; Baig Biotech 23Q1 achieved revenue of 179 million yuan, an increase of 30% over the previous year, and achieved net profit of 18 million yuan, an increase of 6% over the previous year; the subsidiary Huakang Pharmaceutical achieved revenue of 165 million yuan, achieving net profit of 190 million yuan; the subsidiary Hi-Tech Real Estate achieved production revenue of 190 million yuan 71 million yuan, achieving net profit of 0.1 million yuan. In 2023Q1, the company's gross margin and net interest rate were 87.9% and 30.9% respectively. The gross margin and net interest rate both declined year-on-year. The decline in net interest rate was mainly due to a 4.18% increase in R&D expenses. The company's R&D expense ratio and management expense ratio both increased to 12.1% and 6.7% respectively, while the sales expense ratio and financial expense ratio decreased to 30.3% and -1.3%, respectively.
R&D investment continues to increase, and the “major pediatric department+major gynecology” pipeline is worth looking forward to. In terms of the layout of pediatrics and gynecology, after several years of continuous layout, the company's pediatric product segment business has now expanded into the fields of endocrinology, respiration, digestion, blood, allergies, ophthalmology, dentistry, etc. The adult sector business has basically formed an industrial layout covering the fields of reproduction, gynecology, skin, nerves, endocrine diseases, etc. For growth hormone products, the company continues to expand product indications and application scenarios, developing indications such as infants younger than gestational age, Turner syndrome, idiopathic short stature, etc., as well as the development of macrogol recombinant human growth hormone; for female groups, it has developed injectable triptorelin acetate microspheres and recombinant human follicle-stimulating hormone-CTP fusion protein injections.
Profit forecasts and investment recommendations. Considering that the current penetration rate of growth hormone is still low and the growth momentum for the company's future diversified business development, we expect the company's net profit to be 50.1/648/8.88 billion yuan in 2023-2025, and the corresponding PE will be 14/11/8 times respectively, maintaining the “buy” rating.
Risk warning: risk of increased market competition; risk of product sales falling short of expectations; related policy risks.