The company released the 2021 mid-term report, the performance slightly exceeded market expectations. In 2021, H1 realized revenue of 2.321 billion yuan (year-on-year + 19.18%), net profit of 329 million yuan (+ 35.71%), and non-return net profit of 323 million yuan (+ 35.56%). Q2 achieved revenue of 1.139 billion yuan (year-on-year + 6.85%) in a single quarter, net profit of 179 million yuan (+ 28.52%), and non-return net profit of 178 million yuan (+ 30.92%), slightly exceeding market expectations. H1 achieved a gross profit margin of 39.86% (year-on-year-2.01pct) and a net profit margin of 16.68% (year-on-year + 2.27pct). In terms of expense rate, the sales expense rate was reduced to 13.60%, the management expense rate was reduced by 0.48pct to 6.42%, the R & D expense rate was increased to 0.14pct to 1.23%, and the quality of operation continued to improve.
OTC business is growing steadily, and the Great Health business is expected to consolidate in the second half of the year. According to the category, the company's pharmaceutical revenue reached 1.984 billion yuan, an increase of 18.42% over the same period last year, and the gross profit margin decreased by 2.47pct to 39.0%; the income from health-related products reached 295 million yuan, an increase of 22.48% over the same period last year, and the gross profit margin increased by 0.04pct to 39.32%. The results of the China News have not yet consolidated the seven bids that the company announced on July 7 and are expected to do so within the year to further enhance the company's profitability.
An overview of the employee stock ownership plan protects the performance. From July 27 to August 10, the company buys back 20.38 million shares of the company through a special securities account for share repurchase, accounting for 1.46% of the total share capital of the company. The repurchase shares will be used in the employee stock ownership plan. The holders include 13 directors, supervisors and senior managers. The total subscription amount is not more than 138 million yuan, and the subscription price is 6.86 yuan per share. The employee stock ownership plan corresponds to the performance evaluation index for the next two years, and the net profit in 2021-2022 is no less than 10% and 20% respectively compared with the same period in 2020.
Profit forecast and investment advice: the expected results in 21-23 are 0.52, 0.64 and 0.80 yuan per share respectively, corresponding to PE valuation 17.44x/14.11x/11.39x. With reference to the valuation of comparable companies, we think it is appropriate to give its traditional business a reasonable valuation of 18 times PE in 2022 and a reasonable valuation of 50 times PE in cosmetics business, with a "buy" rating corresponding to a reasonable value of 15.8 yuan per share.
Risk hint. New product competition risk; collection and other policy risks; cosmetic business growth is not up to expectations.