Incidents:
On October 29, 2016, the company released its third-quarter results announcement, stating that revenue for the first three quarters was 687 million yuan, up 0.34% year on year; Guimu's net profit was 469.11 million yuan, up 232.77% year on year; net profit after deduction was 355.63 million yuan, up 249.6% year on year; basic earnings per share were 0.06 yuan, up 197.94% year on year.
The third quarter's single-quarter revenue was 239.8 million, a year-on-year decrease of 1.477%, net profit of 14.59 million yuan, an increase of 381.4% over the previous year, after deducting net profit of 17.857 million, an increase of 814.3% over the previous year.
Reviews:
The company's performance continued to pick up in the third quarter, and the performance of specialty drugs and proprietary Chinese medicines and tablets was impressive
The company achieved sales revenue of 246 million yuan for specialty specialty drugs in the first three quarters, an increase of 64.59% over the previous year. The main reason is that the company is increasing the marketing of specialty drugs, and the market share of key products is gradually expanding. Proprietary Chinese medicines and tablets achieved sales revenue of 78.714 million yuan, an increase of 44.81% over the previous year. The main source of this performance was due to the company's increase in sales of American ginseng tablets. The anti-infection sector achieved sales revenue of 246 million yuan, a year-on-year decline of 9.4%; the major infusion sector achieved sales revenue of 78.826 million yuan, a year-on-year decline of 37.63%. The company's two businesses were mainly due to “infusion restrictions” and “anti-resistance restrictions” at the policy level. Overall, the company's main business revenue has maintained a certain growth rate. The specialty specialty and proprietary Chinese medicines and tablets sectors have grown brilliantly, gross margins in various business segments have stabilized, and performance continues to pick up.
Continued release of new targets for specialty drugs Remicol, Canalin (nanocarbon), and Utilins, and the American ginseng business helped increase performance
Remicol was the company's first generic drug launched in 2014, and the original research product was AstraZeneca's Nexin. From September to October 2016, Lemeshu added 3 new bids, of which Heilongjiang was the new province that won the bid. Up to now, the product has won bids in 8 provinces this year (only 2 in 2015). Cannalin (nano-carbon suspension injection) and Uthelins are the company's exclusive products. Among them, Canarine added two new targets in September, Uthelins added four new bids, and Heilongjiang was added to the winning province of Heilongjiang. The above three products are all major products of the company, and are currently in production. On January 20, the company signed a cooperation agreement with Hengfa Ginseng Holdings Co., Ltd., the largest first-class American ginseng wholesaler in Hong Kong. Hengfa Ginseng provides the company with an estimated quantity of 300 to 400 tons of Canadian ginseng. The two parties are jointly developing the domestic market. According to the company's performance in the proprietary Chinese medicines and tablets sector in the third quarter, the agreement is gradually being implemented. In line with the current numerous documents issued at the government level promoting the health treatment function of traditional Chinese medicine, the company's ginseng business has become another guarantee of performance growth.
Profit forecasting and valuation: Considering the launch of the company's specialty pharmaceutical products, the rapid growth in performance and the expected implementation of overseas outreach, we estimate that the company's EPS in 16-18 was 0.09, 0.17, and 0.3 yuan respectively, corresponding to 98, 50, and 30 times PE. The target price is 12 yuan, maintaining the “Highly Recommended” rating.
Risk warning: Product volume and extension expansion fall short of expectations; changes in national policies.