Brief performance review
On April 17, 2023, the company released its report for the first quarter of 2023. The company achieved operating income of 2,778 million yuan (-7%); achieved net profit attributable to shareholders of listed companies of 857 million yuan (-25%); of these, the core subsidiary Jinsai Pharmaceutical achieved revenue of 2,353 million yuan (-11%), and achieved net profit of 895 million yuan (-26%).
Management analysis
One-off influencing factors were eliminated, and the pace of performance growth resumed. According to the company's investor relations documents, in March 22, the subsidiary Kinsai Pharmaceutical urgently shipped more than 600 million yuan to the country to guarantee market supply in response to special circumstances. At the same time, due to the fact that some sales expenses and R&D expenses could not be paid normally at the time, it formed a high base of relevant performance data for the first quarter of last year, compounded by factors where sales and R&D expenses returned to normal in the first quarter of this year, which led to a year-on-year decline in performance for the first quarter of '23. At present, the impact of relevant factors on performance has been fully implemented. Since the beginning of the year, the company's business activities have gradually returned to a normal state. The new patient enrollment continued to maintain a high growth rate in April, and the pace of performance growth has gradually resumed.
The layout of growth hormone indications continues to be improved, and self-production of PEG has reduced costs and increased efficiency. The company's recombinant human growth hormone injection was approved for the treatment of growth disorders in pre-adolescent children caused by chronic kidney disease (CKD) in January '23. The number of approved indications for growth hormone products has increased to 12, and the leading position in the industry continues to be consolidated. Furthermore, with the approval of matters relating to personal use of PEG, the company will further accelerate the promotion of long-acting dosage forms. According to the company's estimates, assuming a complete switch to in-house production, it is estimated that costs of around 100 million yuan will be saved in 2025.
Research and development work is progressing steadily, and the product pipeline is expected to continue to be enriched. The company's R&D expenses have been growing steadily in recent years, and the variety reserve covers various fields such as tumors, gout, weight loss, medical aesthetics, adult endocrinology, and anesthesia. The company's long-acting growth hormone will soon be declared for phase 3 clinical trial in the US. It is expected to be completed in 25 years and marketed in 27. Kintuximab is expected to become the world's first second-line gastric cancer treatment after two years, and kinalizumab is expected to become the drug of choice for gout arthritis in the future. In terms of weight loss, products such as gastric emptying are expected to be marketed this year. In the field of medicine and aesthetics, the company will focus on developing new drugs in the field of skin health, and will supplement products such as hyaluronic acid, collagen, contouring, muscle building, and fat loss, which have unique competitive barriers. In terms of adult endocrinology, pipelines will be built around the direction of gaining muscle and losing fat, etc., to interact with adult growth hormone deficiency, anti-aging, etc.
Profit Forecasts, Valuations, and Ratings
The company's leading position in growth hormone is stable, and the long-term growth logic remains unchanged. We maintain profit expectations. We expect the company to achieve net profit of 47.8 (+15%), 55.1 (+15%), and 6.22 billion yuan (+13%) respectively in 2023-2025. EPS is 11.81, 13.60, and 15.38 yuan respectively, corresponding to the current P/E of 14, 12 and 11 times, respectively. Maintain a “buy” rating.
Risk warning
Risk of medical insurance price reduction and fee control; increased risk of growth hormone competition; vaccine sales fell short of expectations; research and development progress fell short of expectations, etc.