Company news
The company published its 2014 annual report, and we are commenting on it.
Comment on the matter
Non-net profit after deducting a year-on-year increase of 43.34%
In 2014, the company achieved operating income of 2,257 million yuan, an increase of 4.91% over the previous year, and achieved net profit of 281 million yuan after deduction to shareholders of listed companies, an increase of 43.34% over the previous year, achieving a basic earnings of 0.82 yuan per share, and a proposed 10 distribution of 2.5 yuan.
The company's consolidated gross profit margin was 22.80%, an increase of 2.42 percentage points over the previous year. Among them, the gross profit margin of the cement business was 28.54%, an increase of 2.46 percentage points over the previous year. The gross margins of the pharmaceutical business and pharmaceutical industries were 6.18% and 54.40% respectively. Commercial gross margin declined slightly, and industrial gross margin increased 2.05 percentage points.
From a regional perspective, Yunnan's revenue increased 28.98% year over year, mainly due to Yunnan Jianfeng Cement.
In 2014, Yunnan Jianfeng achieved operating income of 397.884 million yuan, operating profit of 477.097 million yuan, and net profit of 3.611,500 yuan.
The changing competitive landscape favors the growth of paroxetine
The company's pharmaceutical sector has established a “4+2" new product development model, namely: 4 main categories: anti-infective, anti-tumor, anti-cardiovascular and geriatric drugs; 2 auxiliary categories: eye drops and antidepressants. Among the existing varieties, injectable cephalomexime hydrochloride accounts for the highest sales share, while paroxetine hydrochloride tablets account for the second share of sales. Currently, there are 4 approved manufacturers of paroxetine in China, namely GlaxoSmithKline, Huahai, Beijing Wansheng and Company. According to data from Mine.com, in 2011, GlaxoSmithKline ranked first in the market share of antidepressants with a 21.68% share. The market shares of Huahai and Jianfeng were 3.92% and 1.05% respectively. Influenced by the Glaxin incident, the market pattern changed, and the company's paroxetine hydrochloride sales grew rapidly in 2014. Amlodipine aspartic acid tablets were included in the list of low-cost drugs in Gansu and Guangdong provinces, and were added to the basic drug supplement lists in Zhejiang and Hubei provinces and the non-essential drug catalogues in Jilin and Hainan provinces. With the launch of a new round of tenders, amlodipine aspartic acid tablets are expected to grow rapidly.
Cement business provides stable cash flow
The company's cement business is mainly concentrated in Hubei, Yunnan, Zhejiang and Guangxi. The margin between supply and demand in the cement industry is expected to improve further in 2015. We think the company's situation will be more optimistic than the industry average. The main reason is that the entire cement industry has excess capacity, but due to the transportation radius, prices mainly depend on the regional supply and demand structure and low peak season. Daye Cement has major brand advantages and technical advantages in the Hubei region. In 2014, Daye Jianfeng had a net profit of 11.399 million yuan, an operating income of 625.457,800 yuan, and a net profit margin of 17.97%. At present, Yunnan Jianfeng has covered counties and cities such as Pu'er, Jinghong, and Lincang in Yunnan, and has entered markets in neighboring countries such as Laos, Vietnam, and Myanmar, with a sales radius of more than 400 kilometers. In 2014, Yunnan Jianfeng had a net profit of 3.611,500 yuan, an operating income of 397.884 million yuan, and a net profit margin of 9.05%. After delivery, there will be a scale effect, and costs are likely to be reduced.
Investment advice
Maintain a “prudent increase in holdings” rating within the next six months
The company achieved earnings of 0.82 yuan per share in 14 years and is expected to earn 0.92 yuan per share in 15 years. Based on the closing price of 18.14 yuan on April 21, the static and dynamic price-earnings ratios were 22.05 and 19.63 times respectively. The average price-earnings ratios of listed companies in the cement industry in 14 and 15 years were 17.05 times and 15.61 times, respectively; the average price-earnings ratios of companies listed in the chemical industry in 14 and 15 years were 51.47 and 39.18 times, respectively; and the average price-earnings ratios of listed pharmaceutical companies in 14 and 15 years were 51.24 and 41.37 times, respectively. Without considering investment income, based on the average price-earnings ratio of the industry over 15 years, we think that the company's market value is conservatively calculated at 6.5 billion yuan, and the market value of the investment income corresponding to the average price-earnings ratio of the corresponding industry is calculated conservatively at about 3.5 billion yuan. Even if we only refer to listed companies with the same revenue scale and profit level in the pharmaceutical sector, their market value is around 4 billion yuan. The company's current market capitalization is 6.242 billion yuan. We think the company's value is underestimated and the “prudent increase in holdings” rating is maintained.