Main points of investment
2016H1's performance was lower than expected. The company's 2016H1 income was 209 million yuan, down 14.81% from the same period last year; the net profit was 73.2259 million yuan, up 2.59% from the same period last year, but after deducting tax subsidies, the deduction of non-net profit fell 35.78% from the same period last year and achieved EPS 0.28 yuan from the same period last year, down 20% from the same period last year.
The variety of drug reserve is rich, and the pulling effect of new products on the market is strong in the future. Due to the adverse impact of the changes in the national drug bidding policy on the company's drug prices, the company's 2016H1 overall pharmaceutical products gross profit margin fell 4.65PCTs, of which anti-infective drug revenue and gross profit margin declined the most seriously. However, up to the reporting period, the company has obtained a total of 84 varieties and 180 drug production approval documents, and another 17 new drug varieties and 105 generic drug varieties are in the process of applying for clinical approval. We believe that with the company's rich product reserves, we can get through the painful period of transformation more quickly. In the future, with the company's efforts to promote products such as prasugrel, Huperzine A for injection (exclusive dosage form of powder injection) and other drugs to open sales, performance rebound is expected.
The bidding of new provinces will be accelerated in the second half of the year, and the differentiated competition model will have a lot of stamina. As the bidding year gradually enters the last half year, there are still some provinces that have not completed a new round of bidding, and with the release of document No. 70 of the Health and Family Planning Commission last year, regions, including Anhui and Shanghai, are expected to start adjustment after the new bid, in order to meet the new document spirit of "one product, two dosage forms and three specifications". We believe that the company's main varieties, such as alanyl glutamine, omeprazole and cefmendol axetil, all have the advantages of differentiation in tendering, such as dosage forms, specifications and national awards. Under the spirit of document No. 70 of the Health and Family Planning Commission, the number of enterprises winning bids of various varieties has been greatly reduced, and the competitive pattern of omeprazole and other varieties has changed greatly since the NDRC cancelled separate pricing in July last year. Several main varieties of the company are expected to usher in a substantial increase in market share and achieve a reversal of performance.
Be optimistic about the company's epitaxial growth expectation. The company has been optimistic about the field of medical service market for a long time, and is also actively exploring to intervene in the medical service market through extension layout. It is expected that with the help of the company's high-quality dealer resources and major shareholder capital advantages, it is expected to achieve the target landing in recent years. At the same time, the company actively seeks the acquisition of new varieties, relying on Lingkang high-quality distribution platform to achieve rapid product volume, future growth is expected.
Risk factors. Drug price reduction pressure, new products on the market did not meet expectations, epitaxial expansion did not meet expectations.
Maintain the "overweight" rating. We are optimistic about the company's differentiated competition model in the generic drug preparation market, and the performance is expected to reverse significantly in the next few years, and the company is actively exploring extension layout such as medical services, with long-term development space to be expected. Combined with the company's reported results, adjust the company's 2016-2018 EPS forecast to 0.65 EPS 0.72 EPS 0.84 yuan (the original 2016 Universe 2017 EPS forecast 0.94x1.16 yuan), combined with the market comparable company to the company in 2016 49 times PE, maintain the "overweight" rating, the target price is 31.85 yuan.