Main points of investment:
High growth continued in three quarterly reports
The company announced three quarterly results for 2016: revenue of 612 million yuan, net profit of 113 million yuan and net profit of 111 million yuan after deduction, up 28.49%, 132.10% and 142.47% respectively over the same period last year, which is in line with our expectations. At the same time, the company expects net profit of 14055-171.78 million yuan for 2016, an increase of 80%, 120% over the same period last year, continuing the high growth trend.
Traditional Chinese medicine preparation continues to improve
We expect the revenue growth of traditional Chinese medicine preparations to be about 20%: the overall price system of the main variety Wangshi Baochi pills (low-priced drugs, independent pricing) is moving up steadily, and revenue is expected to be relatively stable during the reporting period. Ji Desheng snake tablets have also made a considerable price increase, and revenue is expected to grow by more than 30%. Zhengchaihuyin granule, as a national base drug, still has a lot of room for expansion, and it is expected to achieve rapid growth under the promotion of bidding in the future. At the same time, the company implements marketing reform and increases the coverage of the blank market, which is expected to help traditional Chinese medicine preparations to achieve a second leap.
Sulfur-free slices are ready to go.
The company focuses on "authentic medicinal materials + sulfur-free slices" and invests in Longxi Baohetang and Baohetang (Bozhou) companies to enter the field of sulfur-free large-scale slices processing. Baohe Tang Bozhou Phase II project is being promoted and will significantly increase production capacity; Longxi Baohetang is stepping up factory certification and is expected to achieve revenue this year. In the future, authentic medicinal materials and sulfur-free slices are expected to become the profit growth point of the company's traditional Chinese medicine. At the same time, it is of great significance for the company to lay out the entire traditional Chinese medicine industry chain and consolidate the main business of traditional Chinese medicine.
To promote the thickening performance of the acquisition of Alpha Pharmaceutical, there are persistent extension expectations. We expect that Dongli Enterprise Management Q3 will decline from the previous month, but there is still a good chance that the performance commitment will be fulfilled throughout the year. The company announced that it intends to acquire 100% stake in Alpha Pharmaceutical. At present, the relevant extension audit and evaluation work is under way, and the merger is expected to be completed early next year. In this way, the company quickly enters the core industry chain of Atto vastatin calcium and rosuvastatin calcium API, improves the layout of the company's APIs and intermediates, and will significantly thicken the company's performance. The company adheres to the development strategy of "one main body and two wings". In the future, it will continue to have an extension in the fields of traditional Chinese medicine, specialty medicine, biological medicine and even big health. It is expected that the annual performance will continue to grow high, and the "buy" rating will be maintained.
From 2016 to 2018, the EPS of the company is expected to be 0.40,0.54,0.67 yuan respectively, and the corresponding PE is 58,42,34 times respectively. The company's high annual performance growth is relatively certain, and the risk of maintaining a "buy" rating suggests that the progress of mergers and acquisitions is lower than expected and marketing reform is lower than expected.