Report guide

The income in 21 years was 3.3 billion yuan, an increase of 34%, of which medical and beauty income was 400 million yuan, accounting for 12%. As a "cash cow", generic drugs continue to empower medical beauty and innovative drugs, with a net cash of 4.6 billion yuan in 21 years.

Main points of investment

Performance overview: income increased by 34%, while medical and beauty business accounted for 12%.

For the whole of 2021, the company realized income / net profit / return net profit of about 33.2 billion yuan, compared with + 34%, 54% and 12%, respectively. In 21 years, the company bought back 139 million shares at a cost of 250 million Hong Kong dollars (about RMB 200 million). At the end of the 21st year, it is proposed to pay a cash dividend of 1.3 RMB per share and a special cash dividend of 9.5 RMB per share.

Split by business, 1) Medical income is 390 million yuan, accounting for 12%, and the operating profit of the division is about 250 million yuan (corresponding to a profit margin of 62%). 2) innovative drug revenue is 290 million (+ 23% compared with the same period last year), accounting for 9%. 3) the revenue of generics is about 2.6 billion (year-on-year + 18%), accounting for 79%; the operating profit of the division is 1.31 billion yuan (corresponding to a profit margin of 50%), which has entered the inflection point of growth.

Profitability: continuously increase investment in R & D, promote performance transformation and upgrading, and accelerate value magnification

For the whole year 2021: 1) Gross profit margin: gross profit margin reached 74% (- 3pp), mainly due to the decline in selling prices caused by concentrated volume procurement; 2) expense rate: sales / management / R & D expense rates were 16.5%, 18.3% and 26.4% respectively, year-on-year + 1.7pp/-1.3 pp/-3pp. R & D expenses reached 870 million (year-on-year + 19%), continuously increasing investment in innovative R & D transformation; financial expenses reached 120 million yuan (8.22 million yuan in the same period of 20 years), mainly due to interest charges of more than 89 million generated by redemption of shares in subsidiaries; 3) net interest rate: the net interest rate was 7% (- 14 pp), the decline was mainly due to the large listing expenses and R & D investment of Xuanzhu biology, and the impairment of intangible assets. 4) after deducting interest-bearing liabilities, the net cash is about 4.64 billion yuan, and the generics business contributes a sound cash flow.

The highlight of the annual report: the product matrix continues to be rich, creating an integrated platform for medical, aesthetic, industry, marketing and research.

Medical beauty: exclusive agent → self-research + BD+ overseas mergers and acquisitions to create a platform enterprise with full product matrix.

Botox Letibao: since its listing in February, it has contributed 400 million yuan in income and 370000 + sales, covering 200 + cities and 2400 + institutions, of which 86% are Top500 institutions. Letibao 50U has also been approved to go on the market, further enriching product specifications.

Product reserve: layout life cycle requirements, covering filling shaping, optoelectronic equipment, body carving, skin care and so on.

1) self-developed pipeline: there are 10 + III products (Child Needle, Girl Needle, Collagen, Lipid) and nearly 20 II brand products (more than 21 years have been approved, such as medical skin conditioner / medical skin repair gel / skin coagulation, 22Q1 has been approved 10). In addition, Tian Research Space has set up an R & D center in Los Angeles, USA, which will help the R & D and industrialization of new technologies.

2) expand the product matrix through acquisition / cooperation / agency, etc.: wholly-owned acquisition of American Genesis in December 21, layout fat collection system LipiVage; and blue crystal microorganism to establish a joint venture company to jointly research and develop polymer PHA, layout the field of regenerative medicine; rely on Shenzhen Yimei platform to expand the field of optoelectronic equipment Exclusive agent Hugel hyaluronic acid (registration application is close to examination and approval), Korean gold microneedle products, Swiss 4 water light needle products, and other line carving products.

Pharmaceutical sector: generic drug "Cash Niu" + accelerate the promotion of Xuanzhu biological spin-off and listing + Hui Sheng Diabetes full product coverage.

1) Xuanzhu Bio: the most comprehensive company in the layout of breast cancer track in China, focusing on the self-research of tumor drugs and creating a dual technology platform for large and small molecules. The company currently holds a 62.4% stake and will accelerate the spin-off listing of Science and Technology Innovation Board in 22 years. The current financing amount is 1.57 billion yuan, with a post-investment valuation of 7 billion yuan.

2) Huisheng biology: to achieve full product coverage of diabetes and complications, round A financing is in progress.

3) API / CDMO: there are 100 + foreign customers and 50 + domestic customers, and will continue to expand large customers at home and abroad in 22 years.

4) generics: focus on monitoring the impact of catalog products on business is coming to an end, with the goal of contributing at least 20% cash flow growth in 22 years, becoming the company's sound "cash cow".

Profit forecast and valuation:

The company has a deep accumulation in the field of traditional medicine, newly cut into the Botox track growth with certainty, has entered the medicine + medical beauty two-wheel drive era. However, taking into account the impact of the epidemic, we downgrade our profit forecast. The company's revenue for 22-24 is expected to be 39.8,49.0 and 6.02 billion yuan respectively, an increase of 21%, 23% and 23% respectively over the same period last year. The net profit of returning home is 7.6,11.2 and 1.63 billion yuan respectively, an increase of 82%, 47% and 46% over the same period last year. The current price corresponds to 16 times, 11 times and 7 times PE, maintaining the "buy" rating.

Risk Tips:

Under the influence of the epidemic, the development of the medical and beauty industry is not as expected; the risk of medical malpractice in the Botox project; the risk of increased competition in the botulinum toxin market; drug research and development is not as expected; the risk of policy change in volume procurement