Introduction to this report:
The results of the company's mergers and acquisitions integration have been remarkable, and the product structure has been optimized. It is expected that efforts will continue to be made to extend mergers and acquisitions in the future and maintain the rating for increasing holdings.
Key points of investment:
The performance was in line with expectations, maintaining the company's holdings growth rating. The company released its 2017 quarterly report. During the reporting period, the company achieved operating income of 450 million yuan, an increase of 112.54% over the previous year, and the net profit of Guimo was 90584 million yuan, an increase of 194.86% over the previous year (close to the upper limit of the first-quarter performance forecast), after deducting net profit of 886.345 million yuan, an increase of 220.76% over the previous year, in line with expectations. Maintain the company's 2017-2019 EPS forecast of 0.77, 0.88, and 0.99 yuan. Currently, similar companies are valued at about 33X. Considering the company's potential for continuous mergers and acquisitions and integration in the future, you can enjoy a valuation premium. The company's target price was raised to 32 yuan (originally 28.5 yuan), corresponding to PE of about 42X in 2017, maintaining the company's increase rating.
Outreach mergers and acquisitions have had remarkable results, driving rapid growth in performance. The company completed the acquisition and merger of Zhichu Pharmaceutical in June 2016, achieving a strategic layout in the field of biofermentation, and entered the field of lipid-regulating drugs and diabetes drugs. In addition to the previous acquisition of Ningbo Tianheng, it entered the field of oncology specialty drugs. According to the performance promise at the time of the merger and acquisition, the total promised net profit of the two targets in 2017 was 120 million yuan and 60 million yuan respectively, for a total of 180 million yuan. Judging from the current data for the first quarter, the operating income and profit situation of the M&A target is good, and it is expected that the performance promise target will probably be achieved.
Focus on internal optimization and continue to promote transformation and development. The company has achieved leaps and bounds in revenue and profit through continuous outbound acquisitions. It is expected that the company will continue to actively implement outbound mergers and acquisitions strategies in the future and continue to inject momentum into performance growth. At present, the company has actively transformed from an original antibiotic company to an enterprise where antibiotics and specialty drugs are developed collaboratively. Furthermore, most of the company's nearly 100 stocks in various treatment fields such as anti-tumor, cardiovascular, and anti-infective treatments have received clinical approval or are applying for production approval, laying a solid foundation for the company's medium- to long-term development.
Risk warning: Risk of declining performance of M&A targets