With a clear "OTC+ Great Health" two-wheel drive development strategy, the big health business with pharmaceutical makeup as the core is expected to develop rapidly. The company is one of the top 100 pharmaceutical enterprises in China, with rich product clusters and a number of well-known Chinese trademarks, including Renhe Creek, Youkadan, Fu Yanjie, Shining and so on. The company began to lay out the large health business in 2017, and has formed a large health industry cluster based on medicine and makeup, including health products, small medical devices, maternal and infant products, and so on. The company announced the acquisition of seven major health-related companies on the evening of July 6. after this acquisition, the large health business with makeup as the core will form a strong synergy with the company's original business and channels, and is expected to develop rapidly.
The segment of functional skin care industry is difficult to reach saturation in the medium and long term, and the rapid development of domestic e-commerce channels helps domestic brands break the situation. Functional skin care products have higher requirements for safety and effectiveness, the pre-R & D investment is higher than conventional skin care products, and the barriers to entry of new brands are higher. Due to the differences in skin characteristics between the East and the West, most of the international brands focus on anti-aging products, and the price is higher, giving domestic brands more room for development. In recent years, the proportion of cosmetics e-commerce sales is increasing year by year, and the exposure rate of domestic brands is increasing rapidly, which is expected to break the situation quickly with the help of differential competition and online channels.
Renhe attack: the brand accumulation is profound, the cosmetics business develops rapidly in a short period of time, and the high-speed growth is sustainable. The company's cosmetics business has its own brand advantages, seize the low and medium prices with functional skin care brand gaps and medicine makeup tuyere at the beginning of development, superimposed superior channel capacity, the company's cosmetics business developed rapidly in a short period of time. The company has a rich reserve of special products, and in addition to Tmall, the development of other flow platforms is still in the early stage, we believe that the company's cosmetics business is in a golden period of development, rapid growth is sustainable.
Profit forecast and investment advice: the expected results in 21-23 are 0.52 yuan per share, 0.64 yuan per share and 0.80 yuan per share, corresponding to PE valuation 16.58x/13.41x/10.83x. With reference to the comparable company's valuation, we think it is appropriate to give its traditional business and other large health businesses in this acquisition a reasonable valuation of 18 times PE in 2022, and give its cosmetics business a reasonable valuation of 50 times PE in 2022, with a "buy" rating corresponding to a reasonable value of 15.8 yuan per share.
Risk tips. New product competition risk; collection and other policy risks; cosmetic business growth is not up to expectations.