YILING PHARMACEUTICAL(002603) 华创证券·2024-11-04 09:15Investment Rating - The report maintains a "Recommend" rating for Yiling Pharmaceutical with a target price of 22.8 RMB, compared to the current price of 16.90 RMB [1] Core Views - Yiling Pharmaceutical experienced a significant decline in revenue and profits in 1-3Q24, with revenue at 6.36 billion RMB (-26% YoY) and net profit at 550 million RMB (-68% YoY) [1] - The company's respiratory product line is expected to recover in 2025 after inventory adjustments, with Lianhua Qingwen projected to see a significant rebound in shipments by mid-2025 [2] - The cardiovascular and cerebrovascular product line remains relatively stable, with expected gross margin recovery in 2025 as raw material costs decline [2] - Yiling Pharmaceutical continues to advance its innovative traditional Chinese medicine pipeline, with several new drugs either approved or in the approval process [2] Financial Performance - 3Q24 revenue was 1.76 billion RMB (-1.3% YoY), with net profit of 20 million RMB (-84% YoY) [1] - The company's gross margin declined significantly due to changes in product mix and raw material costs [1] - Forecasted net profit for 2024-2026 is 900 million RMB, 1.08 billion RMB, and 1.30 billion RMB, with year-on-year growth rates of -33%, +20%, and +20% respectively [2] Valuation - The report uses a sum-of-the-parts valuation method, estimating a fair value of 38.2 billion RMB [2] - For existing products, a PE multiple of 20x is applied to 2025 estimated profits of 1.08 billion RMB, resulting in a valuation of 21.7 billion RMB [2] - For innovative traditional Chinese medicines, a 3x peak sales multiple is used, contributing 16.5 billion RMB to the valuation [2] Product Analysis - Respiratory products: Lianhua Qingwen is expected to see a shipment recovery in mid-2025, while Lianhua Qingke is expected to grow through marketing strategy adjustments [2] - Cardiovascular and cerebrovascular products: Sales are expected to stabilize in 2025 with improved marketing compliance and academic promotion [2] - Innovative drugs: Several new drugs, including Jieyu Chufan and Yishen Yangxin Anshen, are expected to contribute to growth [2] Financial Projections - Revenue is projected to decline by 12.8% in 2024 but grow by 12% in both 2025 and 2026 [3] - Gross margin is expected to recover from 53.4% in 2024 to 55.4% in 2026 [6] - ROE is forecasted to improve from 7.6% in 2024 to 9.6% in 2026 [6] Market Performance - The stock has underperformed the CSI 300 index over the past 12 months [5] - The 12-month high/low price range is 25.97/14.43 RMB [4]