The company announced its 2016 results: revenue during the reporting period reached 1.497 billion yuan, an increase of 7.3% over the same period last year; the net profit attributed to the parent company was 283 million yuan, an increase of 0.3% EPS 0.34 yuan per share. Profit distribution plan: ten dividends of 0 yuan, with capital accumulation fund for every 10 shares into 3 shares. 2017 first quarter results forecast, expected to achieve a profit of 83.1141 million yuan-91.4255 million yuan, an increase of 0-10% over the same period last year
Support rating points
The company maintains a consistent and steady operation. In terms of revenue, assets, research and development, and mergers and acquisitions, the newly released 2016 report has maintained the company's usual sound operating style: revenue in 2016 was 1.497 billion yuan, up 7.3% from the same period last year; net profit from the home was 283 million yuan, up 0.3% from the same period last year; deducting 289 million yuan from non-net profit, an increase of 8.42% over the same period last year, the actual performance was slightly better than the performance forecast (down in the same direction, 0-8%). The total assets were 2.5 billion yuan, up 4%, and the net assets were 2.2 billion yuan, up 9.7%. Steady progress in research and development, the use of industry-university-research model to promote the upgrading of Tanreqing dosage form and secondary development, cardio-cerebrovascular, mental diseases, antineoplastic drugs and other research. In terms of investment and mergers and acquisitions, the company has completed the second capital increase of Yizhong Biology and Shanghai GE Baide, with an equity ratio of 20% and 25% respectively.
The core product Tanreqing is growing steadily. Tanreqing injection, the core product, is expected to grow by more than 8% in 2016, mainly due to the company's increased efforts in hospital development. Tanreqing was adjusted to "limited use by critically ill patients in secondary and above medical institutions" in the new medical insurance catalogue in 2017. Some investors are worried about future growth and pressure. In fact, the main sales channel of Tanreqing is in hospitals above secondary level. It is aimed at critically ill patients with fever and other in-patient observation, and because the average daily cost of Tanreqing is high (30 yuan / day), the proportion of drugs used in the original outpatient clinic is less. There is little impact after the adjustment of the health insurance catalogue. At present, the policy restricts the use of antibiotics, and doctors choose alternatives to antibiotics, such as Tanreqing, which is conducive to the sale of Tanreqing. In January 2017, Tanreqing injection was again listed in the diagnosis and treatment Program for Human infection with H7N9 Avian Influenza (1st edition in 2017) by the National Health and Family Planning Commission after 2014, which fully affirmed the contribution of Tanreqing injection in the prevention and treatment of epidemic diseases. Tanreqing injection, the main product, is expected to maintain steady growth in the future.
We believe that the follow-up focus of the company is: 1) to speed up the secondary development of the main product Tanreqing to form a series of products to ensure steady growth. 2) steadily promote the diversification of product lines and enhance profitability. 3) improve the marketing ability and increase the sales volume. 4) the development of epitaxial space is broad.
Main risks faced by rating
The risk of price reduction through bidding; the progress of epitaxial mergers and acquisitions is lower than expected; the uncertainty of new drug research and development is high; product market development is lower than expected investment suggestions
Valuation
Taking into account the company's sound business style, the main product Tanreqing series to maintain steady growth, new varieties have been approved to market, general medicine variety sales gradually volume, regardless of extension mergers and acquisitions and dilution, we expect to achieve a net profit of 304 million yuan / 341 million yuan / 392 million yuan from 2017 to 2019, corresponding to EPS0.37/0.41/0.47. Combined with the valuation level of the company in the same industry and the company's strategy of active extension development, the company is given a price-to-earnings ratio of 35 times for 17 years, corresponding to the target price of 12.95 yuan, which is 24.40% higher than the current stock price.