The performance growth of the three major subsidiaries was in line with expectations: Baiqiang Pharmaceutical, Magic Pharmaceutical and Jinqiao Pharmaceutical achieved operating income of 56741, 38854 and 190.15 million yuan in 2013, up 32.51%, 12.96% and 23.48% respectively, and net profit of 7654, 7717 and 21.38 million yuan, up 37%, 25.76% and 41.59% respectively. The net profit of Q1 in 2014 was 2505 yuan, 876 yuan and 6.95 million yuan, and the growth was in line with our previous expectations.
The subsidiaries have large and sustainable growth space: in 2014, Jinqiao Pharmaceutical launched sodium cantharidinate 5ml specification instead of 2ml specification, which doubled in the first quarter compared with the same period last year; Magic Pharmaceutical will have new products such as sodium cantharidate tablets, Nanning syrup and amino acid capsules on the market from May to June, and future growth is guaranteed. Baiqiang Pharmaceutical Sodium cantharidate VB6 is in the start-up stage of rapid growth, the price system has been straightened out, and the company is actively preparing to enter the 2014 edition of the national health insurance catalogue, which will open up more room for the growth of sodium cantharidate varieties.
Extension and integration is the booster of the rapid growth of the company: there are more than 170 pharmaceutical enterprises in Guizhou province, of which less than 1/3 operate normally, and the rest are the subject of mergers and acquisitions. As the "Huangpu military Academy" of the pharmaceutical industry in Guizhou Province, the company has the strength and conditions for mergers and acquisitions. Internal integration to practice internal skills is the cornerstone of the rapid and good development of enterprises, sales coordination is only the first step of integration, the company still has a long way to go in terms of internal integration.
Investment suggestion: we are strongly optimistic about the future growth space of the company's anti-tumor varieties, excellent and rich product echelon, with the integration of in-depth synergy, the business situation will gradually improve, maintain EPS 0.53,0.71 and 0.97 yuan in 2014-16, maintain the Buy-An investment rating, and maintain the target price of 21.60 yuan for 12 months.
Risk hint: internal integration may take a long time and difficult; about 45 million shares will be lifted in July 2014