The epidemic affected the growth rate in the short term. Profitability increased steadily. Maintaining the “buy” rating on April 28, 2022, the company released its 2022 first-quarter report: 2022Q1 achieved operating income of 249 million yuan, an increase of 16.10% over the previous year; achieved net profit of 30.87.93 million yuan, an increase of 21.73% over the previous year; net profit after deducting non-return to the mother was 29.7275 million yuan, an increase of 19.55% over the previous year; net cash flow from operating activities was 3.6957 million yuan, a decrease of 77.96% over the previous year. The growth rate of the company's revenue and profit is in line with our expectations. We keep our profit forecast unchanged. We expect the company's net profit to be 1.33, 170, and 211 million yuan respectively in 2022-2024, and the corresponding EPS is 0.80, 1.02, and 1.27 yuan/share, respectively. The current stock price corresponding to PE is 16.2, 12.7, and 10.2 times, respectively, maintaining the “buy” rating.
The equity incentive plan sets a three-year revenue doubling target and strengthens the determination to develop, and the equity incentive plan steadily promotes the equity incentive plan to provide driving support and initiative guarantees for the three-year revenue doubling. In 2021, the company implemented an equity incentive plan and granted a total of 3.17 million restricted incentive shares to 60 key management and technical employees, providing strong driving support and initiative guarantees for a three-year revenue doubling: on the marketing side, continuously optimizing the personnel structure of the market team, insisting on “driving the OTC channel market with clinical efficacy”, continuously improving the product coverage of pharmacy chain pharmacies; in terms of product development, it responded positively to the country's policy support for the traditional Chinese medicine industry and continuously increased talent and capital investment in product development. The construction project was successfully completed and put into operation to promote R&D and production capacity to a new level. The “Chinese Medicine Formulation Granule Construction” project and “Gel and Compound Production Line Construction” are still progressing in an orderly manner. It is expected to be put into operation in 2023, which is expected to further help the company increase production capacity and expand its product line.
Research pipelines are sufficient, OTC channels are being vigorously expanded, and future growth space is opened. The company actively develops new indications for existing varieties, re-evaluates marketed varieties and selects drugs with the best clinical efficacy to conduct comparative tests to continuously enhance product competitiveness. In terms of R&D reserves, the company has 3 new traditional Chinese medicine products and has completed phase III clinical trials; there are 445 traditional Chinese medicine formula granule varieties that have entered clinical research, 60 national standard filings, and 34 are in the application process; and research and development of classic prescription products has also begun to bear fruit, which is expected to become a new revenue and profit growth point for the company.
Risk warning: drug development failure, channel promotion falling short of expectations, etc.
