Event
On August 19, 2022, the company issued two announcements: (1) CSPC Pharmaceutical Xinrowei, a wholly owned subsidiary of CSPC Pharmaceutical, announced its 2022 semi-annual results, with revenue of about 1.039 billion yuan, an increase of 46.93 percent over the same period last year, and net profit of about 302 million yuan, an increase of 84.97 percent over the same period last year. (2) Moxifloxacin Hydrochloride Sodium Chloride injection (250ml: moxifloxacin 0.4g and Sodium Chloride 2.0g) developed by subsidiary company Ouyi has been approved to go on the market in China.
Comment
The volume and price of caffeine products rose, and the subsidiary New Norway made a net profit of 300 million yuan in the first half of 2022. (1) New Norway, a wholly owned subsidiary of the company, has an operating income of about 592 million yuan in the second quarter of 2022, a month-on-month increase of about 32%, an increase of about 69% over the same period last year, an increase of 46.93% over the same period last year, and a net profit of about 302 million yuan, an increase of 84.97% over the same period last year, mainly due to a significant increase in sales prices and sales volume of caffeine products over the same period last year. (2) Sunway's main business is the research and development, production and sale of functional food, including caffeine and vitamin health food, with 2022H1 gross profit margins of 40.76% and 80.83%, respectively. (3) caffeine products are national second-class psychotropic drugs with regulatory attributes and technical barriers in the production process.
Caffeine, as a food additive, is widely used in functional drinks. New Norway is a global supplier to PepsiCo Inc, Coca-Cola Company and Red Bull. (4) New Norway is currently preparing to set up a South American subsidiary to improve the layout of overseas companies. The company implements a series of xanthine technology upgrading projects in the green factory, completes the technological upgrading of various production processes of caffeine, and promotes the layout of high potential small varieties with room for growth, such as theophylline and aminophylline. (5) Xinnowei's health food products are mainly Shiyao Weikang vitamin C lozenges. The company has established cooperative relations with more than 200 domestic chain drugstores, covering nearly 30 provincial administrative regions. New Novi has obtained more than 20 health food approvals in the first half of 2022, and the new products continue to be put on the market following the listing of Guoweikang brand B vitamin tablets.
Add broad-spectrum antimicrobials to enrich the anti-infective product line. (1) Moxifloxacin has broad-spectrum antibacterial activity against Gram-positive bacteria, Gram-negative bacteria, anaerobes, acid-fast bacteria and atypical microorganisms. (2) moxifloxacin hydrochloride was originally developed as Bayer and was listed in the United States in 1999. According to the data of PDB sample hospital, the sales of moxifloxacin in China was 374 million yuan in 2021, of which Bayer's sales were 172 million yuan.
Profit forecast and investment suggestion
We maintain the profit forecast and expect the company to achieve 321 billion yuan in revenue in 2022-23-24 and 370 million yuan in net profit in 61-69-80. The company's current share price is trading at 13-13-11 times the PE for 2022-23-24, maintaining a "buy" rating.
Risk hint
The risk that new drug research and development and new product sales fall short of expectations and collection policies affect profitability.