The recovery of Lei Yi's agency right affects short-term performance: the company's revenue in the first half of the year was 418 million yuan, down 14.38% from the same period last year, and the net profit was 131 million, down 14.77% from the same period last year. During the period, the gross profit margin and various expense rates remained stable, and a dividend of 0.03 yuan was proposed in the medium term. The decline in performance is mainly due to the change of agency authority for the recovery of the core product Lei Yi.
The channel inventory affects the handover sales, and it is expected to improve in the second half of the year: Lei Yide withdrew the agency from July 1, and there was inventory disposal in the middle, the company handed over in time, and the company bought back the products in the channel in order to prevent market chaos. Lei Yi's validity is 36 months and will not affect subsequent sales. At present, there are 70 agents in China, and there is still part of the inventory in the channel. Through the company's efforts to adjust, the situation is expected to improve in the second half of the year.
The cancellation of the large package model is conducive to the long-term development of the product: due to the change in the structure of the general agency group and the implementation of the two-vote system in the country, the company decided to cancel the general agency agreement in advance. The company's own sales team to promote sales in China, in the long run, the company can better control channel inventory, can effectively carry out more effective promotion strategies for different markets.
The tender price advantage is obvious, and the overseas market is progressing smoothly: Lei Yi de's tender this year is basically over, and 15 provinces across the country have won the bid. The price of the original research Bristol-Myers Squibb Co dropped from 240yuan to 149yuan in Shandong, and Lei Yide won the bid, maintaining a high price level. the winning price of the company was maintained at about 115,150 yuan in other provinces, while the price of the winning province of the competitive enterprise was lower, and the price advantage of the company was obvious. Reilly's sales in Hong Kong were steady in the first half and grew by 20 per cent under GSK orders in the second half. Overseas market certification in Vietnam, Africa and Central Asian countries is also in steady progress.
Other products grew steadily, and investment in R & D was gradually strengthened: the sales of the Ann series in the first half of the year were 218 million, an increase of 15% over the same period last year. API and intermediate business basically remained stable, with the gradual improvement of the production process, it is expected to reverse losses in the second half of the year. The company has about 30 varieties that need to be evaluated for consistency, which is expected to cost about 100 million. In recent years, R & D costs have also increased year by year, and more than 10 new varieties have been submitted for approval. The company has plenty of cash on hand and is expected to quickly supplement its product line through mergers and acquisitions or agency.
Maintain the "overweight" rating: as the change in the sales model of the core product Leiyi affects short-term sales, we downgrade the company's EPS of RMB 0.40 for 2016-2018 to RMB 0.48x0.56; the current share price corresponds to a price-to-earnings ratio of 10.8pm for 16-18, which is 7.6 times lower than the industry level. Taking into account the impact of short-term performance changes, we lowered the company's target price to HK $5.58, corresponding to 12 times PE in 2016.
Risk hint: bidding brings price pressure, and competition in raw material business intensifies.