Events: 1) Jiang Chinese Pharmaceutical Co., Ltd. issued a report on 2021 that the company achieved revenue of 2.874 billion yuan in 2021, an increase of 17.72% over the same period last year, a net profit of 506 million yuan, an increase of 6.74% over the same period last year, and a net profit of 424 million yuan, down 4.58% from the same period last year. Excluding the newly acquired subsidiary Hayes Pharmaceutical, Jiangzhong Pharmaceutical 2021 achieved revenue of 2.62 billion yuan, an increase of 7.32% over the same period last year, of which over-the-counter drugs achieved revenue of 2.032 billion yuan (+ 7.46%), prescription drugs achieved revenue of 348 million yuan (- 2.41%), and Great Health products and other realized revenue of 240 million yuan (+ 28.41%). 2021Q4 achieved revenue of 936 million yuan, an increase of 32.54% over the same period last year, and net profit of 54 million yuan, down 28.85% from the same period last year. 2) the company issued a pre-increase announcement for the first quarter of 2022. 2022Q1 expects to achieve a return net profit of 183 million yuan (+ 15%) and a non-return net profit of 172 million yuan (+ 20%).
Build a moat of gastrointestinal products, look for high-quality targets to broaden the category of products. The two major brands "Jiangzhong" and "Lihuo" focus on gastrointestinal products respectively. On the one hand, through the word-of-mouth of gold products, advertising investment and expert trust endorsement to strengthen the product awareness of "medicine and food homology, safety and no side effects", expand the product use scene, and be the practitioners of regular medicine at home. In terms of spleen and stomach, on the basis of more than 1 billion star Jiangzhong Jianwei digestion tablets, we will gradually cultivate potential products such as Jianer Xiaoshi oral liquid and Jianer Qingjie liquid to maintain the market share of gastrointestinal products. In terms of intestinal tract, Lihuo lactobacillus tablets were treated with "combined medication + course of treatment".
And other channels achieved annual sales of 5967 million boxes (+ 18.65%), sales exceeded 420 million yuan. Following the acquisition of Sanghai and Jisheng Pharmaceuticals, the company acquired Hayes Pharmaceuticals, "Bei Feida".
Bifidobacterium triple live bacteria enteric-coated capsule is a high-quality intestinal live bacteria product, tamping the moat of gastrointestinal products.
On the other hand, the company extends its gastrointestinal advantages to related areas such as tonifying and throat cough and asthma. Multi-dimensional element tablets through promotion experience to achieve annual sales of more than 190 million yuan (+ 143.53%), based on becoming the first brand of national supplement Victoria mine, but also the first over 100 million products of Sanghai Pharmaceutical. Pharynx cough and asthma enlarges the layout around the related varieties such as compound grass coral buccal tablets and compound fresh bamboo extract. In 2021, the over-the-counter drug sector achieved 2.158 billion yuan in revenue through the dual drive of "brand + channel", an increase of 14.11% over the same period last year. In the past two years, the gross profit margin has been maintained at 67.06%, and the decrease in output affected by the epidemic has led to an increase in unit cost. We believe that on the basis of ensuring the advantages of the gastrointestinal field, Jiangzhong continues to expand the product territory through mergers and acquisitions, coupled with brand empowerment and rich marketing experience, the future potential products are expected to be sold in online and offline channels.
Focusing on probiotics suitable for Chinese intestines and stomach, we will enter the blue sea of healthy commerce on a large scale. The company establishes the Chinese Gastrointestinal Research Institute and aims at the broad probiotic market for differentiated products. The company's annual R & D expenditure is 88 million yuan (+ 58.09%), of which the investment amount of Lihuo probiotic solid beverage is 13 million yuan (+ 181.54%), which can maximize the number of living bacteria and improve the efficiency of the product. In addition to the probiotic series, there are "postoperative rehabilitation nutrition" positioning of the primary series and "drinkable Cordyceps sinensis" ginseng grass to help the big health plate to achieve annual revenue of 245 million yuan (+ 31.24%). The gross profit margin rose to 47.22% from 47.13% in 2020, mainly due to the decrease in production costs caused by the increase in production. We believe that with the promotion of the concept of health care and the rejuvenation of consumers, with the enrichment of large categories of health products and the gradual expansion of sales volume, the gross profit margin has room for further improvement. the company's probiotic products subdivide intestinal functions for different ages, and under the blessing of the "Lihuo" brand, it is expected to become the next leading product.
Maintain high R & D expenses, mergers and acquisitions drive up the company's overall sales expenses. According to the performance evaluation target, the intensity of R & D investment in 2022 in 2024 is not less than 2.96%, 2.98% and 3%, respectively. We will increase R & D investment in 2021, and the R & D expenditure rate will be 3.06% (+ 0.78pct). The rate of sales expenses rose to 35.89% from 33.42% in 2020, mainly due to the acquisition of Hayes Pharmaceuticals, the increase in the scope of the merger and changes in the sales structure. The rate of administrative expenses fell to 5.74% from 5.99% in 2020. We believe that in the process of further integrating M & A companies and sharing resources, synergy will iron out the increase in sales expenses, coupled with the implementation of China Resources management system, the cost side is expected to be controlled.
Investment suggestion: China Resources management and assessment system can promote the company to continuously optimize at the strategic level, broaden channels and share resources. The moat of gastrointestinal products has been continuously strengthened to ensure the development of core business OTC.
The large health sector is expected to increase in volume driven by probiotics and other new products. It is estimated that the company's EPS in 2022-2024 will be 0.86,0.93,1.02 yuan, corresponding to PE 15.41,14.24,12.99 respectively, maintaining the "overweight" rating.
Risk tips: changes in industry regulation, intensified competition in the industry, fluctuations in raw material prices, lower-than-expected promotion of new products, and lower-than-expected profit improvement.