Investment Rating - Target price: HKD 15.75, representing a 64.5% upside from the current price of HKD 9.57 [1] - Maintains a "Buy" rating [7][22] Core Views - The company is undervalued with a static PE of 7.5x and a dividend yield of 6.1% [7] - Revenue for 2024-2026 is projected to be RMB 4.413 billion, RMB 4.722 billion, and RMB 5.147 billion, respectively, with net profits of RMB 1.012 billion, RMB 1.096 billion, and RMB 1.184 billion [7] - The company's gross margin slightly increased from 75.2% to 75.3% in 2024, reflecting effective cost control [6] - Sales and distribution costs decreased by 20.3% YoY, further improving net profit margins [6] Business Performance - Revenue for the first three quarters of 2024 decreased by 16.9% YoY to RMB 2.887 billion, primarily due to the normalization of post-pandemic demand and the impact of centralized procurement on traditional Chinese medicine products [6] - Revenue breakdown by product: injection products decreased by 26.7% to RMB 1.028 billion, soft capsule products decreased by 19.3% to RMB 391 million, granule products decreased by 2.2% to RMB 457 million, and traditional Chinese medicine formula granules decreased by 12.0% to RMB 824 million [6] - The company is expanding its market presence beyond Hebei and Yunnan provinces, with 90.4% of formula granule sales still concentrated in these two regions [13] Product Pipeline and Innovation - The company is actively developing exclusive innovative traditional Chinese medicine products, with oral drugs now accounting for 64% of its portfolio [7] - Key products in the pipeline include Saitong Capsule and JC Capsule, both of which have completed Phase III clinical trials [9][21] - Saitong Capsule, targeting vascular dementia, is expected to apply for production approval in the first half of 2025, with a potential market size of over 10 million patients in China by 2025 [26] - The company's R&D expenses account for 2.1% of total sales revenue, focusing on chronic disease treatments such as cardiovascular, pediatric, orthopedic, gynecological, and geriatric diseases [9] Market Expansion and Strategy - The company plans to strengthen its market expansion in provinces participating in the inter-provincial alliance, including Beijing, Tianjin, Anhui, and Shandong, while also targeting grassroots markets [29] - The production capacity of traditional Chinese medicine formula granules currently stands at RMB 5 billion annually, with plans for further expansion based on market demand [29] Financial Analysis - The company's gross margin has remained stable at around 75% over the past few years, with a slight increase to 75.3% in 2024 [6][15] - Net profit margins improved to 22.93% in 2024, up from 21.47% in 2023 [15] - The company's ROE is projected to increase from 15.38% in 2024 to 15.83% in 2026, reflecting improved profitability and efficiency [15]
神威药业：受环境影响业绩承压，塞络通已完成三期临床