CISEN(603367) 中泰证券·2024-06-18 03:00Investment Rating - The report assigns a "Buy" rating to Chenxin Pharmaceutical (603367 SH) [7] Core Views - Chenxin Pharmaceutical is a leading player in the large-volume infusion (LVI) sector with stable traditional business and a robust product portfolio including glass bottles, plastic bottles, and non-PVC soft bags [7] - The company is advancing its formulation business, with multiple products passing consistency evaluations and establishing a vertically integrated supply chain for APIs and formulations [8] - Innovation in drug development is accelerating, with several products in clinical stages, including a PA enzyme inhibitor for influenza and a CDK2/4/6 inhibitor for oncology, expected to drive future growth [8] - Revenue is projected to grow from 4 93 billion yuan in 2024 to 5 78 billion yuan in 2026, with net profit increasing from 583 million yuan to 721 million yuan over the same period [8] Industry Overview - The LVI market in China is transitioning from glass bottles to soft bags due to clinical convenience, transportation costs, and safety, with non-PVC soft bags offering higher unit prices and gross margins [4] - The LVI industry is consolidating, with smaller players exiting due to declining profitability, leading to a shift from monopolistic competition to an oligopolistic market structure [15] - Chenxin Pharmaceutical is among the top four LVI manufacturers in China, with its market share expected to grow further [15] Company Performance - In 2023, Chenxin Pharmaceutical reported revenue of 4 46 billion yuan, a 9 7% year-on-year increase, and net profit of 521 million yuan, up 48 9% year-on-year [37] - The company's gross margin and net margin improved to 58 8% and 11 8% respectively in 2023, with further gains in Q1 2024 to 62 2% and 14 1% [39] - Sales, management, and R&D expense ratios in 2023 were 29 9%, 6 5%, and 8 4% respectively, with R&D expenses expected to rise due to ongoing clinical trials [40] Product Portfolio - The LVI segment remains the core business, contributing nearly half of total revenue, with products including fluid balance infusions, nutritional infusions, and therapeutic drug infusions [50] - Non-PVC soft bags showed the highest gross margin at 69 6% in 2023, while plastic bottles saw the largest increase in gross margin, rising from 23 1% in 2021 to 52 2% in 2023 [50] - The formulation business is transitioning from generic to innovative drugs, with 90+ oral, injectable, ophthalmic, and topical formulations in various stages of development [54] Innovation Pipeline - Chenxin Pharmaceutical has five Class 1 new drugs in clinical development, including a PA enzyme inhibitor for influenza and a CDK2/4/6 inhibitor for oncology, both in Phase II trials [63] - The company's R&D investment exceeds 8% of revenue, supporting its transformation and sustainable development [63] Market Strategy - The company is expanding its international presence, with its esomeprazole magnesium enteric-coated capsules approved by the US FDA in 2020, marking its entry into the US market [62] - Future internationalization efforts will focus on high-tech oral formulations, targeting both domestic and international markets [62] Financial Projections - Revenue is expected to grow at a CAGR of 10 5% from 2024 to 2026, driven by the LVI and formulation businesses, with innovative drugs expected to contribute from 2026 onwards [78] - Gross margin is projected to remain stable at around 41% from 2024 to 2026, with sales and R&D expense ratios expected to stay at 30% and 8 5% respectively [81]