Main points of investment:
The leading enterprises of traditional Chinese medicine formula granules have sustained and rapid growth in performance.
Chinese traditional Chinese medicine has been deeply cultivated in the traditional Chinese medicine industry for more than 60 years, and its production capacity and the number of varieties on record are the industry leader, and it is the leading enterprise of traditional Chinese medicine formula granules in China. The company adopts a two-wheel drive strategy of strengthening innovation and R & D internally and constantly merging and expanding externally. The business has maintained rapid growth over the years. The CAGR of revenue and return net profit from 2017 to 2021 is 22.50% and 13.36%, respectively. In the future, it is expected to continue to grow rapidly with the expansion of the formula granule market.
The market of formula granules is about to expand, and the leading enterprises have significant advantages.
According to the Ministry of Industry, the market capacity of prepared pieces of traditional Chinese medicine in 2021 is 205.7 billion yuan, and the CAGR from 2012 to 2021 is 8.46%. With the advantages of quality control, efficacy, price and convenience, traditional Chinese medicine formula granules continue to replace the market share of prepared slices. According to the data of Huajing Industrial Research Institute, from 2017 to 2021, the market size of traditional Chinese medicine formula granules increased from 0% to 213.0586 billion yuan, accounting for 52 billion yuan in Shengyin to tablet 2 market, and the ratio C increased from 0% to 12.27% of AG5.R0. The end of the pilot policy in 2021 is expected to continue to catalyze the expansion of the industry market. Leading enterprises are expected to enjoy the dividend brought by the rapid growth of the industry by virtue of their advantages in technology, cost, channel and so on.
Take the formula particles as the core and lay out the whole industry chain of traditional Chinese medicine.
The company's business covers the whole industry chain of traditional Chinese medicine, prospectively arranges the planting base of traditional Chinese medicine, ensures the stability of the supply of raw materials, and lays the foundation for the business of downstream prepared slices, formula granules and proprietary Chinese medicine; at the same time, further consolidate the market leading position of traditional Chinese medicine formula granules through the advantages of quality, production capacity and technology. The company vigorously develops the service of the National Medical Center and the business of large-scale health consumption, actively interacts with traditional Chinese medicine products such as formula granules, creates a closed-loop development model of the large health industry of traditional Chinese medicine, and injects new growth points for the company's future performance improvement.
Earnings forecast, valuation and rating
We estimate that the company's income from 2022 to 2024 will be 171.84 yuan 243.85 / 30.496 billion yuan, the corresponding growth rate will be-9.81%, 41.90% and 25.06%, respectively, and the net profit of homing mother will be 22.74 yuan / 2.853 billion yuan, respectively. the corresponding growth rate will be-32.10%, 73.28% and 25.44%, respectively, and the 3-year CAGR will be 13.86%. The corresponding PE was as much as in 10-6-5. We believe that after the arrival of the GB standard, the company's formula granule business and relative valuation method can calculate the rapid growth of the incoming value of the market. With a total of 18.375 billion yuan, we estimate that the reasonable market value of the company in 2022 is 18.949 billion yuan, corresponding to the target price of 3.76 yuan (HK $4.26), 14 times of PE, covering for the first time and giving a "buy" rating.
Risk hint
Tighter regulatory policy; risk of profit decline; risk of raw material supply and price fluctuation; risk of shortage of product supply; risk of intensified competition in industry; industry development is not as expected