According to the company's recent annual report, in 2016, the company achieved operating income of 881 million yuan, an increase of 12.96% over the previous year; Guimu's net profit was 165 million yuan, an increase of 111.36% over the previous year, and EPS of 0.39 yuan. At the same time, the company announced a profit distribution plan to distribute 1.50 yuan (tax included) for every 10 additional shares transferred to 10 shares.
Key points of investment:
The variety of traditional Chinese medicine preparations has strong advantages, and the Chinese medicine tablet project is progressing smoothly. The company's key varieties of proprietary Chinese medicine formulations, Wang's Baochi Pills, Dachai Hu Granules, and Ji Desheng Snake tablets, are exclusive to the country. The company has strengthened incremental efficiency of such varieties through marketing reforms, with remarkable results. There is plenty of room for expansion in the market for Zhengchaihu drink pellets and golden buckwheat flakes. In 2016, Chinese medicine pharmaceuticals contributed 260 million yuan to revenue, an increase of 29.47% over the previous year. It is expected to maintain rapid growth of 20%-30% in the next 1-2 years. Longxi Baohetang is not Bozhou Baohetang's sulfur-free Chinese medicine tablet project progressing smoothly, and it is expected that it will be put into use relatively soon. In the future, the layout of the entire Chinese medicine industry chain will help the company further improve its competitiveness.
Dongli's corporate management was merged, and production and sales of APIs and intermediates increased dramatically. In 2016, Dongli Enterprise Management completed its performance profit promise and reported performance of 63.822,900 yuan. This year, the company actively expanded foreign markets for APIs and intermediates. Under the strategic guidance of seeking profit in the high-end market and sharing costs in the low-end market, the growth rate of pomidone was steady, the market share of propylthiouracil increased, and tonavir sales made breakthrough progress due to the lack of oxygen pentacyclic electrolyte and tonavir sales. The company recently set up a new API production line in Rudong. It is expected that the profitability of the company's API business will further increase in the future.
There is plenty of market space for the variety being developed, which is expected to help the company achieve explosive growth. The company is developing a new Class 1.1 drug, betatinib, a second-generation targeted antitumor drug, has now been approved for clinical use. The biopharmaceutical field has deployed VEGFR-2 whole-human monoclonal antibody, PDL-1 whole-human monoclonal antibody, and injectable recombinant albumin/interferon fusion protein. The market space for the variety being developed is huge, and once the research is successful, it will provide great impetus for the company's growth.
Investment advice: We forecast that the company's EPS in 17-19 would be 0.52/0.66/0.78 respectively, and the corresponding PE would be 43.98/34.74/29.35 respectively. It was covered for the first time and gave a recommended rating. Giving 45 times PE in 2017, the company's target price is 23.40 yuan.
Risk warning: The progress of the sulfur-free tablet project has fallen short of expectations, and research and development of the varieties under development is not progressing smoothly