Core Viewpoint - The domestic pharmaceutical sector is experiencing a significant downturn in 2024 due to external uncertainties, with traditional Chinese medicine (TCM) showing resilience and positive annualized returns amidst the challenges faced by other segments like hospitals and medical R&D outsourcing [1][3]. Industry Summary - The TCM sector has recorded a nearly 4-year positive return, demonstrating its defensive attributes and growth potential during adverse market conditions [1]. - Recent policies have been favorable for TCM, with multiple top-level design documents issued to promote its development, including the "14th Five-Year Plan for TCM Development" and guidelines for enhancing TCM quality [2]. - Analysts predict that the TCM sector may see a performance turning point by Q2 2025, with market activity potentially starting before this inflection point [3]. Company Summary - Kangchen Pharmaceutical (01681) is positioned to excel in the industry due to its differentiated product offerings and innovative pipeline, particularly in chronic disease management [4]. - In 2024, Kangchen achieved a revenue of 2.967 billion RMB, a year-on-year increase of 14.6%, with a gross profit of 2.242 billion RMB and a net profit of approximately 910 million RMB, reflecting a growth of 16.1% [5]. - The company has a return on equity (ROE) of 23.57%, significantly higher than the average for both Hong Kong and A-share pharmaceutical companies [6]. - Kangchen's revenue structure is diversifying, with its nephrology segment generating approximately 1.996 billion RMB, a 14.6% increase year-on-year, and its pediatric products reaching 361 million RMB, a growth of 23.1% [10][12]. - The company is actively expanding its product lines in nephrology and imaging, with significant growth in its bone injury medications, which saw a 64.9% increase in revenue [11]. Financial Performance - Kangchen's financial metrics indicate strong performance, with a gross margin of 75.6% and a net profit margin of 30.92% [6]. - The company has increased its dividend payout ratio to 51.1% for 2024, reflecting its commitment to returning value to shareholders [5]. - Despite the broader market challenges, Kangchen's stock price has surged by 110.59% in 2024, indicating strong market confidence in its business model and growth prospects [16].

Investment Rating - The investment rating for 康臣药业 (1681.HK) is not explicitly stated in the provided documents, but the report indicates a positive outlook based on financial performance and growth prospects [1]. Core Viewpoints - 康臣药业 reported a revenue of 2.967 billion yuan for 2024, representing a year-on-year increase of 14.56%, and a net profit of 910 million yuan, up 16.05% year-on-year [1][2]. - The company declared a final dividend of 0.3 HKD per share, with a projected dividend yield of approximately 11.04% for 2024 [1]. - The report highlights strong growth in the renal, pediatric, and orthopedic drug segments, with notable increases in revenue from key products [2]. Financial Performance Summary - **2024 Financials**: - Total revenue: 2.967 billion yuan (YoY +14.56%) - Net profit attributable to shareholders: 910 million yuan (YoY +16.05%) - Operating cash flow: 1.087 billion yuan (YoY +32.73%) - ROE (diluted): 22.22% - Dividend payout ratio: 78.17% - Debt-to-asset ratio: 24.94% - Cash and cash equivalents: 2.908 billion yuan [1][3]. - **Revenue Breakdown**: - Renal drugs revenue: 1.99 billion yuan (YoY +14.5%) - Pediatric drugs revenue: 360 million yuan (YoY +23.3%) - Orthopedic drugs revenue: 253 million yuan (YoY +64.89%) [2]. - **Future Projections**: - Expected revenues for 2025-2027: 3.354 billion yuan, 3.750 billion yuan, and 4.203 billion yuan, with respective growth rates of 13%, 12%, and 12% [2][3]. - Expected net profits for the same period: 1.041 billion yuan, 1.167 billion yuan, and 1.305 billion yuan, with growth rates of 14%, 12%, and 12% [3]. Key Financial Ratios - **Gross Margin**: Approximately 75.56% for 2024, projected to remain stable over the next few years [3]. - **P/E Ratios**: Expected to be 6.90, 7.07, 6.31, and 5.64 for 2024-2027 respectively [3][5]. - **P/B Ratios**: Expected to be 1.59 for 2024, decreasing to 1.26 by 2027 [5].

Core Insights - 康臣药业 reported a net profit attributable to equity shareholders of 910 million RMB for the year ending December 31, 2024, representing a year-on-year increase of 16.05% [1] - The company's total revenue reached 2.967 billion RMB, marking a 14.56% increase compared to the previous year [1] - The company plans to distribute a final dividend of 0.3 HKD per share [1] Revenue Breakdown - The renal product series achieved a sales growth of approximately 14.6%, with尿毒清颗粒 remaining the flagship product [2] - The pediatric and women's health product series saw a notable sales increase of about 23.1%, becoming the second-largest revenue contributor [2] - Sales of medical imaging contrast agents grew by approximately 9.0% year-on-year [2] - The orthopedic product series experienced a significant sales increase of 64.9% [2] - Sales in the dermatology product series declined by 9.5%, while the hepatobiliary product series saw a decrease of 40.0% [2] - Other pharmaceuticals experienced a decline in sales of 39.2% [2] Strategic Developments - In 2024, the company completed the consistency evaluation approval for four specifications of gadopentetate dimeglumine injection and received approval for iodinated contrast agent injection [2] - The company submitted a listing application for perfluoropropane lipid microspheres and completed production verification for gadobutrol injection, pending listing application [2] - The company published four SCI papers, enhancing the clinical application safety of its renal products [2]

Financial Performance - For the year ended December 31, 2024, the company's revenue was RMB 2,967,235,000, an increase of approximately 14.6% compared to RMB 2,590,115,000 for the year ended December 31, 2023[4] - The profit attributable to equity shareholders for the year ended December 31, 2024, was RMB 910,458,000, reflecting a growth of about 16.1% from RMB 784,534,000 in the previous year[4] - Basic and diluted earnings per share for the year ended December 31, 2024, were approximately RMB 1.11 and RMB 1.09, respectively, representing increases of about 12.1% and 11.2% compared to RMB 0.99 and RMB 0.98 in 2023[4] - Total comprehensive income for the year ended December 31, 2024, was RMB 917,551,000, compared to RMB 786,315,000 in 2023[6] - The gross profit for the year ended December 31, 2024, was RMB 2,242,102,000, compared to RMB 1,921,678,000 in 2023, indicating a significant increase[5] - The operating profit for the year ended December 31, 2024, was RMB 1,045,060,000, up from RMB 884,967,000 in the previous year[5] - The group reported a net profit before tax of RMB 1,020,106,000 in 2024, up from RMB 863,703,000 in 2023, marking a growth of 18.1%[20] - The group’s financing costs increased to RMB 24,888,000 in 2024 from RMB 21,264,000 in 2023, reflecting a rise of 17.3%[20] - The company reported a total tax expense of RMB 102,732,000 for 2024, compared to RMB 77,149,000 in 2023, reflecting a 33.1% increase[33] Revenue Breakdown - Revenue from nephrology drugs for the year ended December 31, 2024, was RMB 1,996,274,000, up from RMB 1,741,298,000 in 2023, showing strong growth in this segment[12] - Revenue from Customer A in 2024 reached RMB 817,775,000, an increase of 14.6% from RMB 714,038,000 in 2023[14] - Revenue from Customer B in 2024 was RMB 373,734,000, up 26% from RMB 296,666,000 in 2023[14] - The nephrology division generated sales revenue of approximately RMB 1.99 billion, with a year-on-year growth of about 14.5%[69] - The leading product, Uremic Clear Granules, maintained steady growth with sales revenue of approximately RMB 1.88 billion, reflecting a year-on-year increase of about 13.9%[69] - The imaging division's sales revenue reached approximately RMB 170 million, marking a year-on-year growth of 9.0%[69] - The women's and children's division achieved sales revenue of RMB 360 million, a significant year-on-year increase of approximately 23.3%[70] - The Yulin Pharmaceutical division reported sales revenue of approximately RMB 440 million, with a year-on-year growth of about 12.1%[70] Dividends - The company proposed a final dividend of HKD 0.3 per share for the year ended December 31, 2024[4] - The interim dividend declared and paid per ordinary share was HKD 0.3, an increase from HKD 0.15 in 2023, totaling RMB 229,827,000 for 2024 compared to RMB 109,068,000 in 2023[37] - The proposed final dividend per ordinary share remained at HKD 0.3, resulting in a total of RMB 235,302,000 for 2024, compared to RMB 221,122,000 in 2023[37] - The total dividends payable to equity shareholders for the year amounted to RMB 465,129,000, up from RMB 330,190,000 in 2023, reflecting a significant increase[37] Assets and Liabilities - The company's total assets as of December 31, 2024, were RMB 4,551,313,000, an increase from RMB 4,278,080,000 in 2023[7] - The net asset value increased to RMB 4,393,052,000 as of December 31, 2024, compared to RMB 3,918,712,000 in the previous year[8] - Reportable segment assets increased to RMB 5,851,628,000 in 2024, compared to RMB 5,488,737,000 in 2023, reflecting a growth of 6.6%[20] - Reportable segment liabilities decreased to RMB 1,385,354,000 in 2024 from RMB 1,482,510,000 in 2023, a reduction of 6.6%[20] - The total lease liabilities as of December 31, 2024, were RMB 13,829,000, up from RMB 8,116,000 in 2023[64] Employee and Operational Costs - Employee costs rose to RMB 593,172,000 in 2024, up 22.7% from RMB 483,508,000 in 2023[4] - The group's distribution costs in 2024 were RMB 981,576,000, an increase of approximately 15.2% from RMB 852,206,000 in 2023, primarily due to increased market investment for OTC brand building[83] - The company’s inventory costs rose to RMB 733,040,000 in 2024, an increase of 9.7% from RMB 668,437,000 in 2023[28] Research and Development - The company completed several significant R&D milestones, including the approval of Gadopentetate Dimeglumine Injection and the submission of a listing application for Octafluoropropane Lipid Microspheres[71] - The company has established collaborations for new drug research, including a partnership with WuXi AppTec for the innovative nephrology drug SK-08, which has received clinical trial approval[72] - The company aims to increase R&D investment and promote technological innovation to ensure product and service leadership[77] Cash Flow and Financing - The net cash generated from operating activities in 2024 was RMB 1,086,987,000, an increase of approximately 32.7% compared to RMB 818,973,000 in 2023[92] - As of December 31, 2024, the group's cash and bank balances were RMB 3,865,682,000, an increase of approximately 7.9% from RMB 3,583,204,000 in 2023[93] - The total financing cash flow changes for the year included a net decrease of RMB 285,533,000 in bank loans[62] Compliance and Governance - The management continuously monitors operational, financial, and compliance risks, adapting policies in response to national pharmaceutical industry developments[108] - There were no significant legal or regulatory violations related to the group's operations for the year ending December 31, 2024[110] Future Outlook - The average sales growth rate for the five-year financial forecast is projected at 8.3%, with a 2023 estimate of 11.2%[47] - The company is focusing on enhancing its brand presence through advertising on mainstream channels and social media, aiming for sustainable growth in its retail business[70] - The company is advancing its Xinjiang production base phase II project, expected to commence production in Q2 2025, enhancing overall production capacity[74]

虎臣 蔚 美集團有限公司 CONSUN PHARMACEUTICAL GROUP LIMITED (Incorporated in the Cayman Islands with limited liability) (於開曼群島註冊成立的有限公司) Stock Code 股份代號：1681 Kidney Medicines 腎科藥物 對比劑 Orthopedics Medicines 骨科藥物 Contrast Medium Gynaecology and Paediatric Medicines 婦兒藥物 Hepatobiliary Medicines 肝膽藥物 Gastroenterology Medicines 消化系統藥物 皮膚科藥物 中期報告 Interim Report 2024 Dermatologic Medicines | --- | --- | --- | --- | --- | |-------|-------------------------------------------------|---------------------------------------------- ...

Investment Rating - The investment rating for the company is "Buy" with a target price of 5.9 HKD, while the current price is 5.66 HKD [4]. Core Insights - The company has demonstrated stable growth with a revenue increase of 13.3% and a net profit increase of 14.9% in H1 2024, driven primarily by the pediatric and imaging segments [1][2]. - The company has a strong commitment to shareholder returns, having distributed over 2.4 billion HKD in dividends, with a consistent payout ratio exceeding 30% [2][5]. Financial Performance Summary - In H1 2024, the company achieved revenues of 1.27 billion HKD and a net profit of 400 million HKD, with a gross margin of 74.7% and a net margin of 31.5% [1]. - The revenue breakdown by segment for H1 2024 is as follows: - Nephrology: 880 million HKD (+11.1%) - Pediatrics: 150 million HKD (+28.7%) - Imaging: 80 million HKD (+21.1%) [1]. - The company expects revenues of 2.85 billion HKD, 3.16 billion HKD, and 3.54 billion HKD for 2024, 2025, and 2026, respectively, with corresponding growth rates of 10.0%, 10.9%, and 11.8% [2][3]. Profitability Metrics - The projected net profit for 2024, 2025, and 2026 is 889 million HKD, 1.01 billion HKD, and 1.14 billion HKD, with growth rates of 13.4%, 13.6%, and 12.9% [3][8]. - The company maintains a gross margin of approximately 73.4% to 73.5% and a net margin projected to improve from 31.3% in 2024 to 32.4% in 2026 [3][8]. Shareholder Returns - The interim dividend declared for H1 2024 is 0.3 HKD per share, doubling from 0.15 HKD per share in H1 2023, alongside a special dividend of 0.3 HKD per share to celebrate the company's 10th anniversary [2][5].

Investment Rating - The report assigns a "Buy" rating to the company with a target price of HKD 8.67, representing a potential upside of 47% from the current price of HKD 5.90 [1][7][14]. Core Insights - The company has demonstrated continuous rapid growth, with a mid-year revenue of RMB 1.269 billion in 2024, reflecting a year-on-year increase of 13.3%, and a net profit of RMB 398 million, up 14.9% year-on-year. Since its listing in 2013, the company has achieved a compound annual growth rate (CAGR) of 16.3% in revenue and 17.8% in net profit, showcasing its strong product and management capabilities [5][9]. - The company focuses on the nephrology and imaging sectors, with a rich pipeline of products including 6 innovative drugs and 6 generic drugs. It has 8 products under development in nephrology, with significant market opportunities [6][13][14]. - The company has a robust financial structure, with cash and cash equivalents reaching RMB 3.581 billion and a reduction in accounts receivable by 8.7% year-on-year, indicating improved operational efficiency [9]. Summary by Sections Financial Performance - For the first half of 2024, the company reported revenue of RMB 1.269 billion, a 13.3% increase year-on-year, and a net profit of RMB 398 million, up 14.9% year-on-year. The company has distributed over HKD 2.4 billion in dividends to shareholders, with a mid-year dividend of HKD 0.30 per share, compared to HKD 0.15 in the same period last year [5][9]. - The company has improved its cash flow management, with accounts receivable turnover days decreasing to 34.7 days, down from 36.3 days in 2023 [9]. Product Competitiveness - The core products in nephrology, including "Uremia Clear" and "Yishen Huashi Granules," generated sales of RMB 883 million, a growth of 11.1% year-on-year, with "Yishen Huashi Granules" sales increasing by 34.7% [6][11]. - The company has expanded its market reach, covering 42,000 medical institutions and 280,000 pharmacies, and has seen a 28.7% increase in revenue from its pediatric and women's health products [6][11]. Market and Industry Context - The Chinese government is strongly supporting the development of traditional Chinese medicine, enhancing the strategic position of the industry. Policies such as the "14th Five-Year Plan for the Development of Traditional Chinese Medicine" are expected to drive growth and standardization in the sector [12].

Investment Rating - The report maintains a "Buy" rating for the company [2][6]. Core Insights - The company reported a revenue of 1.269 billion yuan for H1 2024, representing a growth of 13.30%, and a net profit attributable to shareholders of 400 million yuan, up by 14.91% [3]. - The gross margin remained stable at 74.69%, while the net profit margin increased to 31.51%, reflecting solid profitability [3]. - The company has implemented significant measures to optimize its operations, including enhancing clinical research capabilities and reforming its OTC marketing structure, which contributed to its revenue growth [4]. Financial Performance - For H1 2024, the company achieved a revenue of 1.269 billion yuan, with a year-on-year growth of 13.30% [3]. - The net profit attributable to shareholders was 400 million yuan, marking a 14.91% increase [3]. - The company’s cash flow from operating activities was 350 million yuan, up by 37.9%, indicating strong cash generation [3]. Segment Performance - The company's main segment, 康臣, generated 1.108 billion yuan in revenue, growing by 14%, while the 玉林 segment reported 160 million yuan, up by 10% [3]. - In terms of product performance, the renal segment saw revenue of 883 million yuan, an increase of 11.14%, while the pediatric segment grew by 28.68% to 146 million yuan [3]. Future Outlook - The company expects to continue its growth trajectory in the second half of 2024, supported by its strategic initiatives and operational improvements [4]. - Revenue projections for 2024-2026 are estimated at 2.901 billion yuan, 3.272 billion yuan, and 3.694 billion yuan, respectively, with corresponding net profits of 893 million yuan, 1.022 billion yuan, and 1.171 billion yuan [5].

Investment Rating - The investment rating for 康臣药业 (1681.HK) is not explicitly stated in the report, but the commentary suggests a positive outlook with expectations of strong growth and dividend yield [1]. Core Views - The report highlights that 康臣药业 achieved a revenue of 1.269 billion yuan in H1 2024, representing a year-on-year increase of 13.3%, and a net profit of 400 million yuan, up 14.91% year-on-year [1]. - The company declared an interim dividend of 0.3 HKD per share, with a projected dividend yield exceeding 10% for 2024 [1]. - The report emphasizes the robust growth of the kidney series products and notable performance in the women's and children's series, with the kidney series generating 883 million yuan in revenue, a year-on-year increase of 11.2% [1]. Summary by Sections Financial Performance - In H1 2024, 康臣药业's operating income was 1.269 billion yuan, with a net profit of 400 million yuan and operating cash flow of 350 million yuan, reflecting a year-on-year increase of 37.8% [1]. - The net profit margin improved slightly, reaching 31.61%, primarily due to a decrease in the expense ratio by approximately 1.05 percentage points [1]. - The company’s gross margin slightly decreased to 74.69%, with the kidney series maintaining a gross margin of 76.99% [1]. Revenue Breakdown - The revenue from the kidney series was 883 million yuan, while the women's and children's series generated 146 million yuan, marking a year-on-year increase of 28.7% [1]. - The medical imaging contrast agent revenue was approximately 78 million yuan, up 21% year-on-year, maintaining a leading position in the domestic market [1]. - The report also notes a significant increase in the sales of bone injury products, which reached 99 million yuan, a year-on-year increase of 129.7% [1]. Future Projections - The report forecasts 康臣药业's revenue for 2024-2026 to be 2.92 billion yuan, 3.287 billion yuan, and 3.684 billion yuan, with year-on-year growth rates of approximately 13%, 13%, and 12% respectively [2]. - The projected net profit for the same period is expected to be 901 million yuan, 1.03 billion yuan, and 1.18 billion yuan, with growth rates of 15%, 14%, and 15% respectively [2]. - The report indicates that the price-to-earnings ratio (P/E) for 2024-2026 will be 5.2x, 4.55x, and 3.97x, suggesting a favorable valuation [2].

Summary of the Conference Call Company and Industry - The conference call pertains to Kongcheng Pharmaceutical, focusing on its 2024 mid-year performance report Core Points and Arguments - The call began with a welcome message and a statement regarding the confidentiality of the content, indicating that it is intended solely for Xinyi Securities clients [1] Other Important but Possibly Overlooked Content - The audio and text records of the meeting are copyrighted by Xinyi Securities, and any reproduction without permission is considered an infringement [1]