Recently, we accompanied our institutional customers to investigate Shenzhen uniform Pharmaceutical Industry and communicated with the secretary of the company. the following is the summary of the investigation.
Relying on five major platforms, to build 10 billion pharmaceutical industry-the company aims to develop five major platforms: preparations, API, proprietary Chinese medicine, Grand Health and biomedicine, and plans to achieve an industrial output value of 10 billion by 2015, of which 30-4 billion for preparations, 30-4 billion for APIs, 200-300 million for proprietary Chinese medicines and 8-1 billion for Grand Health. Other platforms have been established except biomedicine. Cephalosporin products account for the largest proportion of industrial business (about 88% in 2010), and it is also the key business of the company. In order to enhance its competitive advantage in cephalosporin products, the company acquired Suzhou Wanqing Pharmaceutical Company to realize the docking of APIs and preparations. At present, 80% of the raw materials of the main varieties of cephalosporins are self-sufficient, raising the gross profit margin of cephalosporin products and further reducing the dependence on purchased raw materials. At present, the company's cephalosporin products are in short supply, and the company's production capacity is inclined to cephalosporin. The biggest risk facing cephalosporin products in the future is policy, and the government has planned to control the abuse of antibiotics, which will affect antibiotic consumption to some extent and be disadvantageous to companies. However, the specific effect remains to be seen, which mainly depends on the cooperation and implementation of hospitals and doctors.
Position the two regional distribution leaders and improve the network layout through acquisitions-the company currently has the top two drug distribution market shares in Guangdong and Guangxi, and has consolidated and expanded its distribution share through continuous acquisitions of local distribution companies in recent years. The company has a clear strategy and is located in the regional distribution leader of Guangdong and Guangdong. it has basically completed the network layout in the first-tier cities of Guangzhou and Guangdong, and will implement the network sinking in the future, focusing on the distribution network in the second-tier cities. Because the governments of the two regions do not allow the establishment of new pharmaceutical distribution enterprises, the company will complete the network layout through acquisitions. In 2011, the M & A budget is 200 million yuan, the M & A consideration will not exceed 10 times earnings, and the acquisition target requires clean assets and a local distribution network. Due to the influence of the government drug price reduction policy, the gross profit margin of the distribution industry is on a downward trend in the future, and the company will reduce the negative impact of the policy by adjusting the variety structure.
The demand for funds is strong, but the bottleneck remains-due to the company's ambitious goals in developing industrial and commercial business, the demand for funds is very strong, but it is unable to achieve capital market financing for some institutional reasons, only by increasing bank borrowing. this makes the company's debt ratio rising, much higher than the level of the industry. Capital has become a bottleneck restricting the future development of the company.
The current valuation is on the low side-we expect the company's 2011 revenue and net profit attributable to the parent company to be RMB 15.77 billion and 355 million respectively, up 20.73% and 36.13% respectively from a year earlier. In 2011, EPS will reach 1.23 yuan, and the current share price is HK $22.37, compared with 15.24 times 2011 earnings. As the average price-to-earnings ratio of Hong Kong pharmaceutical companies in 2011 is about 18 times earnings, we believe that stocks are currently undervalued, taking into account the expected earnings growth.
