Core views:
The company published the first quarter report of 2023. In 23Q1, the company achieved revenue of 2,778 million yuan (-7%, the following are all year-on-year), net profit of 857 million yuan (-25%), and net profit of 854 million yuan (-24%) after deducting non-return to the mother.
Due to the turmoil of the epidemic and underlying factors, Kinsai Pharmaceutical's growth declined somewhat, and Baig Biotech achieved relatively rapid growth. By business type, Jinsai Pharmaceutical achieved revenue of 2,353 million yuan (-11%) and net profit of 895 million yuan (-26%) in 23Q1. The year-on-year decline on the revenue side was mainly due to the high base of 22Q1 due to centralized delivery before the epidemic in March last year. The growth of new cases gradually accelerated after the epidemic. The decline on the profit side was mainly due to the return to normal investment in sales expenses and increased investment in R&D expenses after the epidemic; Baig Biotech achieved revenue of 179 million yuan (+30%) and net profit of 18 million yuan (+6%); Huakang Pharmaceutical achieved revenue of 165 million yuan (-3%) Net profit was 190 million yuan (0%), Gaoxin Real Estate achieved revenue of 71 million yuan (-58%), and net profit of 0.1 million yuan (-95%).
Investment in R&D continues to increase, and various business layouts such as pediatrics, gynecology, dermatology and aesthetics help long-term development. In 23Q1, the company's overall gross margin fell 4.35 pp to 87.91% year on year, sales expenses ratio fell 1.53 pp to 30.28% year on year, management expenses ratio increased 0.92 pp to 6.73% year on year, R&D expenses ratio increased 4.17 pp to 12.06% year on year, and net profit margin fell 7.57 pp to 30.93% year on year. The company continues to increase R&D investment and pipeline layout. On the one hand, long-term growth hormone is about to begin phase III clinical trials in the US, and on the other hand, the company is actively implementing multiple business layouts to help long-term development. The variety reserve covers fields such as assisted reproduction, female health, wound healing (medical beauty), and youth growth and development.
Profit forecasts and investment recommendations. The company's EPS for 23-25 is estimated to be 11.97, 14.46, and 17.79 yuan/share, respectively. Considering that the revenue share of the company's long-acting growth hormone products continues to rise, and that self-production of PEG is conducive to long-term cost optimization, the superposition of 100 grams of shingles is expected to go on sale this year, giving the company 20 times PE in 23 years, corresponding to a reasonable value of 239.40 yuan/share, maintaining the “buy” rating.
Risk warning. Growth hormone market expansion risks; increased market competition; policy risks such as harvesting.