Company profile
As the leading industry of Panax notoginseng, the company relies on the brand advantages of Kunyao Xuesaitong and Kunming traditional Chinese medicine to drive the development of category clusters and the continuous improvement of performance. From 2017 to 2021, the company's revenue and return net profit grew at an average annual compound rate of 9% and 11%. In the first three quarters of 2022, the revenue was 6.2 billion yuan (+ 3%), and the net profit was 370 million yuan (- 14%). On January 19, 2023, the company completed the reorganization of the board of directors and was formally incorporated into China Resources Sanjiu.
Investment logic:
China Resources Sanjiu Holdings 28%, the product structure continues to be optimized. On May 9, 2022, China Resources Sanjiu acquired 28% of the shares of the company and became the actual controller of the company, which is expected to help the company strengthen the construction of sales channels, open the national sales market, and improve the company's profitability. In 2021, the company achieved revenue of 8.25 billion yuan (+ 7%) and net profit of 508 million yuan (+ 11%), of which oral agent performed well, with revenue of 2.89 billion yuan (+ 14%) and dismal revenue of 850 million yuan (- 32%). The year-on-year decline in net profit in the first three quarters of 2022 was mainly due to the blockage of hospital channels for injection due to the impact of the epidemic in the first three quarters.
The gold single product drives the category cluster, and the brand advantage of Kunming traditional Chinese medicine is highlighted. In 2021, Xuesaitong soft capsule sales reached 566 million tablets (+ 40%) and sales revenue reached 593 million yuan (+ 28%). Xuesaitong soft capsule accounted for 31% (+ 10pct) in the whole cardio-cerebrovascular treatment plate and became the pillar product in the field of cardio-cerebrovascular therapy. Kunming traditional Chinese Medicine continues to promote the construction of big brands and big C, create OTC fast digestion marketing model, and further expand the influence of the brand. In 2021, the income of Shenling Jianpiwei granule, Shugan granule and Xiangsha Pingwei granule was 266 million yuan (+ 50%), 183 million yuan (+ 28%) and 134 million yuan (+ 40%) respectively.
Break through the emerging track and start the big health business quickly. In the first three quarters of 2022, Kunming Pharmaceutical achieved revenue of 129 million yuan (+ 175%). The company continues to create star products, Kunyao Health gradually break through the skin care and oral care track. In 2022, the sales of H1, Panax notoginseng freeze-dried gift boxes and gynecological gel exceeded 7 million, and the sales of Panax notoginseng toothpaste exceeded 6 million.
Earnings forecasts, valuations and ratings
It is predicted that the company will achieve revenue of 85.6,95.6 and 10.77 billion yuan respectively from 2022 to 2024, an increase of 3.8%, 11.7% and 12.6% over the same period last year. From 2022 to 2024, the company realized net profits of 5.3,6.3 and 750 million yuan respectively, an increase of 3.4%, 20.8% and 18.3% over the same period last year. Using the price-to-earnings ratio method for valuation, it will be given 22 times PE in 2023, with a target price of 18.50 yuan, covering the company's "overweight" rating for the first time.
Risk hint
Policy risk; product collection risk, product promotion is not expected, medical insurance drug price limit risk, brand value change risk, raw material price fluctuation risk, shareholder reduction risk.