1. Channel control, large infusion business and non-recurrent profit and loss affect short-term performance

The company's operating income in the first three quarters was 226 million yuan, down 15.01% from the same period last year; the net profit attributable to the owner of the parent company was 1.0291 million yuan, down 98.14% from the same period last year; and basic earnings per share was 0.0046 yuan, down 98.14% from the same period last year. The decline in performance is mainly affected by the precise control of goods by Guhan's health care. In addition, the handling of Nanyue Pharmaceutical's equity brought a non-recurrent investment income of 100 million yuan last year.

2. The price of Guhan health essence is expected to increase at the end of the market.

The formula of this variety is selected on the basis of the health prescription unearthed in Mawangdui. It has been sold in the province for more than 30 years and has a good reputation, but because the profit space between the highest retail price and the ex-factory price is not high, the sales power of the terminal dealer is insufficient. It is sold only as an "eyeball product". This variety has been implementing the maximum retail price limit established in 2002, and the rise in product costs has seriously affected the company's profit space and market development enthusiasm. According to the announcement of Hunan Provincial Price Bureau on May 15, the maximum retail price of 30 pieces of package specifications has been raised from 68 yuan to 99 yuan, with a price increase of 45.6%, a price increase of 10% for 12 pieces, an increase of 20.6% for 10 pieces.

At present, the company mainly sells 12 and 30 specifications in the province, but has not yet raised the price at the terminal. 30 specifications can basically be sold at a price increase. The terminal retail price is 63-65 yuan. It is expected to increase the price to about 68 yuan next year. At present, the price of 12 units is still serious. The ex-factory price is 30 yuan, and the terminal price is also 30 yuan (dealers only earn 5-10 points tax rebate) It is estimated that the company is expected to push the terminal to implement a price increase of more than 10% (about 33 yuan) at the terminal next year, bringing the dealer's profit margin back to the normal level of 15-20%. It will obviously improve the enthusiasm of dealers.

A new production base of 400 million ancient Han health essence will be laid this month, which will provide the basis for further market expansion outside the province.

3. The continuous increase of major shareholders' holdings shows confidence in the long-term development of the company.

Tsinghua Ziguang Group, a major shareholder of the company, announced at the end of 2012 that it would choose an opportunity to increase its holdings of no more than 5 million shares within a year, and senior executives of the company also increased their holdings one after another, demonstrating their confidence in future development. If the increase of 5 million shares is completed, the shareholding proportion of Ziguang Group will reach 20.26%. Hengyang SASAC holds 16.99% of the shares. The change of shareholding ratio at the shareholder level may make new adjustments to the division of labor and the next development strategy.

4. The adjustment of management is expected to bring new changes.

The company recently announced the resignation of former chairman Li Yi and nominated Qiao Zhicheng as a candidate director. General Manager Qiao used to be the core talent of Yongjin Department, general manager of Qianjin Pharmaceutical Industry and Secretary of Shanghai Fosun Pharmaceutical. He has a deep understanding of the pharmaceutical industry, Hunan local pharmaceutical market and capital market, which is expected to bring new energy to the company. The division of labor among senior executives may be adjusted. After straightening out the price confusion and improving the distribution of dealers' interests (which may involve the adjustment of dealers), if the company is actively looking for inter-provincial chain dealer partners and cooperating with appropriate promotion and publicity, the volume of the market outside the province is worth looking forward to. It is expected that 16 pieces of package specifications will be used outside the province to solve the problem of serial goods in the market, through the distribution of goods in large chain drugstores outside the province, leaving a reasonable profit space for chain drugstores outside the province, while cooperating with satellite TV advertising.

In addition, the development of second-line varieties is also worthy of attention. Yangxinding palpitation granule has entered the supplementary catalogue of Guangdong base medicine, which is produced by only two enterprises in the country, with a bidding price of 39.82 yuan, which is relatively ideal, and its sales are expected to exceed 10 million yuan soon.

The company started the project of renaming Danzao Oral liquid to Xinnao Baotai Oral liquid as cardio-cerebrovascular adjuvant. It is composed of jujube, salvia miltiorrhiza, mulberry, safflower and Hawthorn, which has the effect of invigorating qi and activating blood circulation and reducing blood lipids. Because the oral liquid has good compliance and is easy to be accepted by patients, it still has great promotion value.

Hengyang Pharmaceutical is still the company's loss point, losing 18 million yuan last year and 11 million yuan in the first half of this year. At present, we are facing the suspension of production at the end of the year, and the new version of GMP certification after relocation may still bring a loss of about 20 million to the company in 2014. the new production base will take at least a year and a half to build, and it is initially estimated that it will cost 200 million yuan.

5. Profit forecast and investment rating.

Due to the decline in sales revenue and the increase in investment in sales expenses and management expenses, the sales expense rate is expected to increase from 18% in 2012 to about 19% in 2013, while the management expense rate will increase from 18.4% to about 24%, and will remain at a high level in 2014 and 2015. It is cautiously predicted that the company's earnings per share in 2013, 2014 and 2015 will be 0.08,0.14,0.21 yuan, and the corresponding price-to-earnings ratio will be 160,94,62 times. Considering that the company is undervalued, small in scale and flexible in performance in the short term, it is not suitable to use PE to measure valuation. Based on the possibility of price increase at the product terminal, the expansion of the market outside the province is expected to exceed expectations, so it will be rated.

6. Risk hint: the chemical medicine business may continue to lose money, the channel price increase is not implemented effectively, and the slow production expansion outside the province leads to lower-than-expected performance.