Event description
The company released its annual report in 2022, with an income of 1.088 billion yuan, an increase of 12.15% over the same period last year, a net profit of 116 million yuan, an increase of 15.40% over the same period last year, a deduction of 106 million yuan, an increase of 12.71% over the same period last year, and an EPS of 0.5 yuan.
Event comment
The profit growth rate has slowed down for the whole year due to the epidemic and the rising cost of medicinal materials, and the brand plan will be extended to the whole country this year. In the fourth quarter of 2022, the income was 218 million yuan, down 2.73% from the same period last year; the net profit from returning to the mother was 11 million yuan, down 3.92% from the same period last year; and the net profit from non-return was 4.1561 million yuan, down 45.75% from the same period last year. The company launched a brand program in early 2022, focusing on pilot projects in nine major cities in four provinces, which led to an increase in the output of OTC sales per store and increased the share of OTC channel sales from about 30 per cent to 34 per cent. At present, the company's prescription drug products cover more than 12800 county (district)-level hospitals, including more than 1700 third-class hospitals, and have established long-term and stable business relations with more than 1500 domestic medical commercial units; OTC products cover more than 100000 pharmaceutical chain companies and more than 100000 stores, and have established long-term and stable business relations with the headquarters of nearly 100000 domestic pharmaceutical chain companies. The 23-year brand plan will be gradually extended to the national region to further increase the proportion of OTC channel sales. In the future, the share of OTC sales is planned to increase to about 50 per cent while maintaining overall sales growth.
The growth of the leading varieties is stable, and the small varieties provide new growth points. In 2022, the company's income from gynecological products was 769 million yuan, an increase of 11.95% over the same period last year, and the gross profit margin was 76.78%. The income of urinary system products was 222 million yuan, an increase of 9.95% over the same period last year, and the gross profit margin was 84.71%. The income from heat-clearing and detoxification was 80.1644 million yuan, an increase of 17.09% over the same period last year, with a gross profit margin of 64.59%. In addition, the company's existing small-scale products, Tiaojing Huoxue capsule, Xinlikang capsule, Longzhang oral liquid, Danggui Yixue oral liquid, Xiaoyu Jiangzhi capsule are all exclusive varieties, which are expected to become a new performance growth point of the company after cultivation.
New drugs + formula granules + classic prescriptions to follow up to store kinetic energy for the future. Three new traditional Chinese medicine products, Longcen Penqiang Shu granule, Kuerjiejieyin gel and Shuyutong granule, have completed the third phase of clinical trials and have entered the stage of filing data and will be reported for production one after another. The company also has 445 provincial standard varieties of traditional Chinese medicine formula granules, 179 national standards have been completed, and the research and development of 8 classic famous products have also achieved initial results. The pattern of "two, three, four" has been formed in R & D: the R & D layout is located in Shanghai and Guiyang, and three major R & D bases of Shanghai Haitian Pharmaceutical, Shanghai Shuofang Pharmaceutical and Guiyang Xintian Pharmaceutical have been established respectively. four major R & D modules are systematically constructed, such as traditional Chinese medicine innovation medicine R & D center, traditional Chinese medicine formula granule R & D center, ancient classic prescription R & D center and post-market clinical medicine research center.
Investment suggestion
The company expands OTC channels in sales, controls fees and increases efficiency, increases brand investment, and starts the sales and promotion of second-tier varieties, and has formed a product pattern of "innovation of traditional Chinese medicine + granules of traditional Chinese medicine formula and research and development of classic prescriptions + investment in small molecular drugs to create new drugs". It is estimated that the EPS of the company in 2023-2025 will be 0.63 / 0.75 / 0.90 respectively. Based on the closing price of 13.27 yuan on March 30, the PE will be 21.7 / 18.1 / 15.2 times respectively and will be given a "Buy-B" rating.
Risk hint
Industry policy risks: medical insurance control fees, collection and price reduction of traditional Chinese medicine, etc.; the risk that the progress of product research and development and listing is slower than expected; drug quality risk; price increase of traditional Chinese medicine, etc.