Lionco(603669) 华通证券国际·2024-12-16 01:45Investment Rating - The report assigns a "Buy (Initiation)" rating to Lingkang Pharmaceutical (603669 SH) [1] Core Views - The company's performance has bottomed out and is expected to see new growth driven by multiple business segments [1] - Two of the company's products, Injection of Latamoxef Sodium and Esmolol Hydrochloride Injection, are eligible for the 10th national centralized drug procurement round, with significant sales growth potential if included [1] - The company's exclusive product, Injection of Huperzine A, has substantial room for expansion in market coverage and is expected to become a new growth driver [1] - Strategic cooperation with Laboratoire Bailly-Creat is expected to open up new growth opportunities in overseas markets, particularly in Africa and Belt and Road countries [1] Business Overview - Lingkang Pharmaceutical is an innovative enterprise group engaged in pharmaceutical R&D, production, sales, and medical services, with a nationwide network covering over 6,500 hospitals [21] - The company has a diversified product portfolio, with 114 products and 221 drug production approvals, including 55 products listed in the national medical insurance catalog and 13 in the national essential drug list [22] - The company is accelerating the consistency evaluation of key products, with 27 specifications already passing or deemed to have passed the evaluation, further enriching its product structure [23] Financial Performance - The company's revenue and net profit reached a high in 2019 but declined significantly in 2020 due to the pandemic and national centralized procurement policies [33] - In 2023, the company achieved revenue of 197 million yuan and a net loss of 151 million yuan, but performance rebounded in 2024 with a 53 34% YoY increase in revenue for the first three quarters [33] - The company's gross margin has declined from 85% to 43% due to factors such as price reductions from centralized procurement and rising raw material costs, but further declines are expected to be limited [36] R&D and Innovation - The company is transitioning from generic drugs to innovative drugs, with 8 ongoing R&D projects, including 2 Class 2 2 chemical drugs and 2 Class 3 chemical drugs [42] - R&D investment accounted for 14 80% of revenue in 2023, higher than the industry average, reflecting the company's commitment to innovation [41] Centralized Procurement Opportunities - The 10th national centralized drug procurement round involves 62 products with a total market size exceeding 50 billion yuan, with Lingkang's Injection of Latamoxef Sodium and Esmolol Hydrochloride Injection eligible to participate [49] - Injection of Latamoxef Sodium has a market size of approximately 3 billion yuan annually, with a competitive landscape of 5 out of 3 companies [1] - Esmolol Hydrochloride Injection has a market size of approximately 1 1 billion yuan, with 18 companies eligible to participate, but only 13 companies holding both production and marketing licenses [1] Exclusive Product - Injection of Huperzine A - Injection of Huperzine A is the company's exclusive intellectual property product, with proven efficacy in treating benign memory impairment, Alzheimer's disease, and myasthenia gravis [58] - The product is currently sold in only a few provinces, covering less than one-fifth of the national market, with significant potential for expansion [64] Overseas Expansion - The company has entered into a strategic cooperation with Laboratoire Bailly-Creat, a French pharmaceutical company with a sales network covering Africa, Vietnam, and Cambodia [77] - The first phase of cooperation involves the export of Omeprazole Injection, with a market size of approximately 20 million USD in African countries in 2023 [82] Financial Forecast - Revenue is expected to grow from 319 million yuan in 2024 to 882 million yuan in 2026, with a CAGR of 61 87% from 2024 to 2026 [96] - Net profit is expected to turn positive in 2025, reaching 177 44 million yuan, and further increase to 252 50 million yuan in 2026 [97] Valuation - Based on DCF valuation, the intrinsic value of the company's stock is estimated at 12 45 yuan per share [98]