TRT(SH:600085) Huajing Securities·2024-04-08 16:00Investment Rating - The report maintains a "Buy" rating for Tong Ren Tang (600085 CH) with a target price of RMB 57.60, indicating a potential upside of 40% from the current price of RMB 41.27 [1][2][5]. Core Views - The company is expected to maintain steady growth over the next three years, with projected revenue and net profit CAGR of 11% and 19% respectively from 2023A to 2026E [1][4]. - The target price has been adjusted down by 19% due to lowered earnings forecasts for 2024 and 2025, reflecting a more conservative outlook [5][16]. Financial Performance Summary - In 2023, Tong Ren Tang achieved revenue of RMB 17.861 billion, a year-on-year increase of 16%, and a net profit of RMB 1.669 billion, up 17% [4][9]. - The company's gross margin decreased by 1.5 percentage points to 47.3%, while the net profit margin remained stable at 9.3% [4][9]. - The pharmaceutical manufacturing segment reported revenue of RMB 11.079 billion, growing 13% year-on-year, while the pharmaceutical commerce segment saw revenue of RMB 10.246 billion, a 21% increase [10][20]. Earnings Forecast Adjustments - Revenue forecasts for 2024 and 2025 have been reduced by 4%, with corresponding adjustments to gross profit and net profit estimates, reflecting a 9% decrease in EPS for both years [13][15]. - The updated earnings per share (EPS) estimates are RMB 1.54 for 2024E, RMB 1.81 for 2025E, and RMB 2.05 for 2026E [15][20]. Valuation Metrics - The target price corresponds to a 2024 P/E ratio of 37x, which is above the average P/E of comparable companies at 20x, justifying a premium valuation for the leading OTC traditional Chinese medicine company [5][16][18].