Investment logic

The company is the second largest pharmaceutical commercial enterprise in Zhejiang Province. In 2014, the company's revenue was 14.1 billion yuan, which basically covered medical institutions and chain drugstores at and above the county level in Zhejiang Province, and the coverage rate of primary health care structure reached more than 50%. The company has built modern logistics centers in Hangzhou and Ningbo, and Wenzhou and Jinhua have also started the construction of modern logistics centers.

We will introduce a restructuring plan and enter a new stage of development. The company recently announced the restructuring plan, and the remaining 50% stake in Intel Pharmaceutical Company was injected into the listed company, becoming a wholly-owned subsidiary of the listed company. We think this will be a landmark event in the development of the company. The injection of this part of assets will not only bring about the thickening of profits, so that the company's ownership structure will be further clarified, and we believe that the company's equity financing channels will be opened and enter the capital era.

The use of the capital market platform is expected to accelerate the development of enterprises. The company has also carried out epitaxial mergers and acquisitions of businesses in the province in the past, but the amount is relatively small. With the opening of financing channels, Intel Pharmaceutical will have more conditions to speed up the development of enterprises with the help of the platform of listed companies. With reference to other regional commercial companies such as Ruikang Pharmaceuticals and Jiashitang, the space driven by corporate capital is very likely.

New business exploration is under way, the future development is worth looking forward to. As one of the leading pharmaceutical enterprises in Zhejiang Province, the company has strong logistics and distribution capacity, strong channel stickiness and government affairs ability. At present, the major pharmaceutical commercial enterprises are exploring new business layout, and we think that the business expansion of the company's business is also worth looking forward to. for example, the expansion of high-margin distribution business, the strengthening of retail business, the exploration of e-commerce, and the exploration of various new business models around the hospital.

Investment suggestion

On the basis of the above, we judge: after the completion of the reorganization, the equity relationship will be straightened out, and the development path will be clearer, and with the promotion of capital, the further business development in the future is worth looking forward to; at the same time, as a state-owned enterprise, in the context of the current state-owned enterprise reform, there is also the possibility of reform.

Profit forecast

According to the calculation of the equity and profit after the completion of the reorganization, the company's fully diluted earnings per share from 2015 to 2017 are expected to be 0.501 yuan, 0.598 yuan and 0.750 yuan. At present, PS is 0.7 times, compared with similar pharmaceutical commercial companies, the company is one of the lowest targets of PS, giving an "overweight" rating for the first time.

Risk

The approval risk of the restructuring process; financial pressure; the process of new business extension.