Main points of investment:
1. Event
Recently, we have tracked the operation of Long John Pharmaceutical Industry and conducted research activities. The main contents are as follows.
two。 Our view.
(1) Private enterprises committed to injecting Erigeron breviscapus preparation in the field of cardio-cerebrovascular diseases
Kunming Long John Pharmaceutical Co., Ltd. is a pharmaceutical company mainly engaged in the development and production of natural plant medicine and chemical freeze-dried powder injection. It is mainly committed to 10 kinds of drugs, such as breviscapine for injection, sodium ferulate for injection, water-soluble vitamins for injection, among which the main products are breviscapine freeze-dried powder for injection. Kunming Qunxing Investment Co., Ltd. holds 87.75 million shares, accounting for 43.82% of the total share capital, which is the actual controller of the company; Hong Kong Lixing Industrial Co., Ltd. holds 47.25 million shares, accounting for 23.60% of the total share capital, and Yunnan Huixinsheng Investment Co., Ltd. holds 15.15 million shares, accounting for 7.57% of the total share capital and 50.25 million tradable shares, accounting for 25.09% of the total share capital.
The company's operating income in the first three quarters of 2015 was 136 million yuan, an increase of 5.03 percent over the same period last year, and the net profit attributed to shareholders of listed companies was 44.0163 million yuan, an increase of 1.75 percent over the same period last year.
(2) Beijing Science and Technology Co., Ltd., a subsidiary of Beijing Science and Technology, a local company with a certain reputation in the industry.
CRO's CRO industry means that large pharmaceutical companies outsource some non-core R & D links to improve efficiency while saving 30% to 50% of costs. As a result, professional pharmaceutical R & D outsourcing institutions came into being, and gradually formed a considerable market scale.
According to BusinessInsights data, the global pharmaceutical CRO industry market exceeded 40 billion US dollars in 2014, and China's pharmaceutical CRO market exceeded 30 billion yuan. From 2006 to 2013, China's pharmaceutical CRO industry maintained a compound growth rate of 33%.
In 2013, China's CRO market exceeded 22 billion yuan, accounting for 9.2% of the total global CRO. Domestic CRO enterprises are mainly distributed in Beijing, Shanghai, Nanjing, Guangzhou and so on. On August 18, the State Council issued the opinions on reforming the examination and approval system of drugs and Medical Devices, which put forward the requirement to speed up the digestion of the stock of drug registration documents. The domestic backlog of 21000 clinical approval applications for drugs will be digested within three years, and the number of new applications will reach 12000 in the next three years, and the number of clinical approvals approved each year will be twice that of the current one, and the market will be greatly expanded. We expect CRO to grow by more than 40 per cent after 2015.
Beijing Kechuang Pharmaceutical Technology Development Co., Ltd. was established on March 20, 2003. In 2008, in order to further enhance its R & D capability and reserve R & D talents, the company acquired Beijing Science and Technology. Beijing Kechuang, as a CRO company, that is, pharmaceutical R & D contract outsourcing service organization, not only provides support for Long John Pharmaceutical Industry, but also engages in certain pharmaceutical R & D business, accumulates R & D experience and obtains certain economic benefits at the same time. After more than a decade of growth, has a certain reputation in the CRO industry, from the original mainly to traditional Chinese medicine, gradually involved in the field of chemical medicine. Beijing Kechuang strives to help the company find suitable varieties, mainly in anti-cancer, cardio-cerebrovascular and diabetes, but does not rule out other varieties, such as gynaecological drugs and pediatric drugs. Its role is mainly as a research and development center and project reserve, the company has its clinical variety priority. In 2014, Beijing Science and Technology Co., Ltd. had an operating income of 22.0119 million yuan and an overall loss of 3.4335 million yuan.
(3) the second shareholder Lixing Industry has strong strength, which contributes to the growth of the company.
Yunnan is rich in biological resources and is the hometown of world civilization. The variety of traditional Chinese medicine in Yunnan accounts for more than half of China. Hong Kong Lixing Industry, the company's second largest shareholder, continues to inject money into the development of Yunnan biopharmaceutical industry.
In addition to injecting HK $13 million to set up Long John Pharmaceutical, Lixing is also a shareholder in Panlong Yunhai, Dali Pharmaceutical, Panax Notoginseng Technology and other enterprises.
Yunnan Panlong Yunhai Pharmaceutical Group Co., Ltd. is an international pharmaceutical enterprise group integrating drug research, development, production and sales. In China, it has modern production bases, pharmaceutical research institutes, drug trading companies, real estate development companies, advertising companies and so on. Panlong Yunhai has set up more than 100 companies and offices at home and abroad, and set up a marketing network with Kunming, Beijing and Shanghai as the triangle and Kunming, Sichuan, Zhengzhou, Beijing and Harbin as the axis. In addition to Paidu Yangyan capsule, the company also has Lingdancao granule, Dragon Lantern capsule, Santongshu tablet, throat Shukou lozenges and so on. In 2014, its revenue reached 500 million yuan, with a profit of about 50 million yuan.
Dali Pharmaceutical is mainly engaged in the production and sales of Chinese and western medicine injections, and its core products are Xingnaojing injection, astragalus injection and Shenmai injection, among which Xingnaojing injection is a national second-class protected variety of traditional Chinese medicine, ranking in the top three in the country. it accounts for more than 90% of the company's total income. Shenmai injection replenishes qi and solid desorption, nourishes yin and invigorates fluid, invigorates pulse, and is used to treat shock, coronary heart disease, viral myocarditis and chronic cor pulmonale of deficiency of both qi and yin. It is the national catalogue of essential drugs and the price of proprietary Chinese medicines in medical insurance. Dali Pharmaceutical needs 4 tons of raw materials every year, which currently meets only 400 kg, and there is still a lot of room for its production capacity. In 2014, the operating income reached 339 million yuan and the net profit reached 100 million yuan.
Yunnan Sanqi Technology Co., Ltd. was established in 1998, the company mainly engaged in Panax notoginseng total saponins, tofu fruit, berberine hydrochloride and other APIs. Among them, Yunnan Panax Notoginseng Science and Technology Wenshan Branch is a production base of Panax notoginseng total saponins, Panax notoginseng polysaccharides and Panax notoginseng extract, with an annual output of 80 ~ 1.2 million tons, is currently the largest producer of Panax notoginseng extract in China. The raw materials of Panax notoginseng saponins for acupuncture cover 90% of the pharmaceutical enterprises in the national market, and the oral raw materials of Panax notoginseng saponins cover 70% of the pharmaceutical enterprises in the national market. The market advantage of Panax notoginseng science and technology is reflected in that the pharmaceutical group founded by its second largest shareholder has offices in provincial capitals and prefecture-level cities across the country, and its sales network covers 200000 pharmacies and 3000 large hospitals across the country.
(4) the concentration of Erigeron breviscapus preparation industry is high, and the advantageous enterprises have more market development space.
The Erigeron breviscapus preparation industry is highly concentrated, and the whole breviscapus preparation, including tablets, water needles and minute needles, currently accounts for only 2.93% of all cardio-cerebrovascular traditional Chinese medicine injections, and there is a huge space for development in the future.
At present, there are three main manufacturers producing Erigeron breviscapus preparation in China: Yunnan Biological Valley Pharmaceutical Co., Ltd., Hunan Hengsheng Pharmaceutical Co., Ltd. And Long John Pharmaceutical Co., Ltd. Together, the three companies have accounted for more than 98% of the breviscapus preparation market since 2013.
The market share of breviscapine for injection increased from 45.45% in 2007 to 60% in 2012, and the market growth rate of breviscapine for injection was significantly higher than that of breviscapine as a whole. At present, there are only two pharmaceutical companies in the market of breviscapine for injection, namely, our company and Hunan Hengsheng Pharmaceutical Co., Ltd., and both of them only produce one kind of breviscapus breviscapus for injection. It has a strong industry leading position in the whole breviscapine market.
3. Investment suggestion
The company is expected to make a profit of 73 million yuan, 82 million yuan and 90 million yuan in 2015, 2016 and 2017, corresponding to 0.37 yuan, 0.41 yuan and 0.45 yuan in EPS, respectively, and 124,112 and 102 times the PE in 2015-2017. We believe that the company is in an absolute leading position in the market of breviscapine for injection in the field of cardio-cerebrovascular vessels. While tamping the main business, we vigorously develop new varieties and adhere to the marketing strategy of "fine regional investment promotion agent + professional academic promotion". At the same time, the company's second largest shareholder Lixing Industrial is strong, which contributes to the growth of the company. Panlong Yunhai, Dali Pharmaceutical, Panax Notoginseng Science and Technology are quite interesting, and there is a huge space for long-term development. We give the company a "cautious recommendation" rating.
4. Risk hint
The output of Erigeron breviscapus planting industry in the upper reaches was lower than expected; the bidding situation in various provinces was lower than expected.
