Main points of investment
Company profile
Founded in 2002, the company is committed to drug research and development, production, marketing and technical services. at present, products are mainly concentrated in the fields of nervous system, cardio-cerebrovascular system and digestive system, and adhere to independent research and development. core technology as the company's core competitiveness A number of pharmaceutical products and technologies with broad market prospects have been developed, such as brain protein hydrolysate for injection, monosialic acid tetrahexosylganglioside sodium raw material, injection and ginkgo dipyridamole injection patent.
Through cooperation with Shanxi Pude and Southwest Pharmaceutical, the company successfully landed two varieties of brain protein hydrolysate for injection and monosialic acid tetrahexosylganglioside sodium injection, forming a win-win situation.
Profit forecast
We expect the company to be attributed to the parent company for net profit growth of 13.77%, 17.95% and 13.69% from 2017 to 2019, with corresponding diluted earnings per share of 0.44,0.51 and 0.58 yuan.
Company valuation and pricing
The company expects to raise 299.6845 million yuan net capital, assuming that the net fund raised is in line with expectations, the issuance fee is 32.7155 million yuan, the total amount of funds raised is expected to be 332.4 million yuan, and no more than 40 million shares are planned to be issued, all of which are publicly issued new shares, corresponding to the issue price of 8.31 yuan per share.
Considering the company's business structure and market competition, we believe that it is reasonable to give the company a 17-year price-to-earnings ratio of 35 times per share earnings. The reasonable valuation range of the company with the price-earnings ratio as the center and the positive or negative range of 20% is 13.86-16.63 yuan. Relative to the 2016 static price-to-earnings ratio (post-issue dilution) is 36.20-43.44 times.
First, industry background
1.1 the industry the company is in and its profile
Founded in 2002, the company is committed to drug research and development, production, marketing and technical services. at present, products are mainly concentrated in the fields of nervous system, cardio-cerebrovascular system and digestive system, and adhere to independent research and development. core technology as the company's core competitiveness It has successively developed a number of pharmaceutical products and technologies with broad market prospects, such as brain protein hydrolysate for injection, monosialic acid tetrahexosylganglioside sodium (GM1), injection and ginkgo dipyridamole injection patent.
The company's production mode is mainly divided into two kinds, namely independent production mode and third-party cooperative production mode. The drugs produced by the independent production mode mainly include GM1 raw materials, clindamycin phosphate for injection, pantoprazole sodium for injection and milrinone injection, which are currently produced by Yueyang Sailong. The drugs produced by the third-party cooperative production mode include the company's main products, brain protein hydrolysate for injection and GM1 injection. In the preparation production mode cooperated with Shanxi Pude and Southwest Pharmaceutical, the company is responsible for drug research and development and enjoys corresponding intellectual property rights. Shanxi Pude and Southwest Pharmaceutical Co., Ltd. is responsible for the production of cooperative preparations, and the company is responsible for the national distribution of the corresponding preparations.
The third-party cooperation model effectively avoids the situation that a huge amount of money is invested in the construction of the production line in the initial stage of the company without strong financial strength. Through production cooperation with partners, the production capacity of each other is effectively utilized, by virtue of the economies of scale of large-scale production by partners, the production cost is reduced, and the preparation production of cooperative drugs is carried out rapidly. Under this business model, the sales of brain protein hydrolysate and GM1 injection for injection increased steadily during the reporting period, and maintained a good business relationship with partners.
1.2 Industry growth prospects
Cerebrovascular disease (CVD) is one of the three major diseases leading to human death, which kills 4.6 million people worldwide every year, including one in industrialized countries and the rest in developing countries. Japan is one of the countries with the highest incidence and mortality of stroke, and China is also an area with a high incidence of stroke mortality. It is estimated that there are 6 million cerebrovascular patients in China, 1.3 million residents with new cerebrovascular diseases every year, and nearly 1 million people die of cerebrovascular diseases every year. About 3 percent of the survivors left residual symptoms such as hemiplegia, and some patients lost their ability to work and live.
In recent years, with the gradual increase of the elderly population and the enhancement of people's health awareness, the population of cardiovascular and cerebrovascular drugs in China has been expanding, and the cerebrovascular drug market in China has maintained a steady growth trend. From the perspective of the use of drugs for cerebrovascular diseases, the use of brain protective agents based on chemicals runs through the whole process of prevention, acute treatment and rehabilitation of cerebrovascular diseases. The drugs used for cerebrovascular diseases mainly include chemical drugs and proprietary Chinese medicines, in which chemical drugs are the mainstream. Among the cerebrovascular chemical drugs, they are also divided into brain protective agents and other cerebrovascular chemical drugs. In China, in recent years, cerebrovascular chemicals are mainly used as brain protective agents.
From 2009 to 2016, the sales of cerebrovascular chemicals in China maintained a steady growth, rising from 21.699 billion yuan in 2009 to 72.865 billion yuan in 2016, with a compound growth rate of 18.89% over the past eight years.
The chemical drugs of cerebrovascular diseases mainly protect the cerebral vessels and nerves. Generally speaking, the chemical drugs of cerebrovascular diseases can be divided into two categories: brain protective agents and other cerebrovascular chemicals.
In the past eight years, cerebrovascular chemicals in China have been mainly used as brain protective agents, and their market share has been maintained at more than 65%. By 2016, sales of brain protective agents were 47.519 billion yuan, accounting for 65.22%, while sales of other cerebrovascular chemicals were 25.346 billion yuan, accounting for 34.78%.
From the point of view of the sales of the top ten varieties entering the cerebrovascular chemical market, the sales volume in 2016 was more than 3 billion yuan. Among them, GM1 injection ranked first in the market in 2014,2015,2016 sales were slightly lower than clopidogrel hydrogen sulfate, ranking second, and brain protein hydrolysates ranked sixth. In terms of market share, the main varieties of brain protective agents in China accounted for a relatively stable market share of cerebrovascular drugs from 2014 to 2016. From 2014 to 2016, the market share of GM1 injection has been stable at more than 10%, and the market share of brain protein hydrolysates has been stable at more than 6%.
1.3 Competition structure of the industry and the position of the company
In terms of sales, the company's main varieties are concentrated in GM1 injection and brain protein hydrolysates for injection.
GM1 is one of the most important gangliosides, which has the effect of promoting nerve remodeling. It can accelerate repair and restore the original nerve function to the maximum extent by promoting the improvement of various forms, biochemical management behavior and parameters. It belongs to the natural component of human nerve cell membrane, so it is safe and widely used. The production enterprises of GM1 preparation are few, and the market competition is low. Judging from the market position of major enterprises in 2016, Qilu Pharmaceutical Co., Ltd. came on the market earlier and accounted for more than 50% of the market share of GM1 preparations. According to the data of Guangzhou punctuation, the market share of Saijiekang, a GM1 injection produced by the company in cooperation with Southwest Pharmaceutical Co., Ltd., is relatively stable. From 2014 to 2016, Sezecon's market share in GM1 preparations was 4.57%, 8.14% and 9.64% respectively, and its market share in brain protective chemicals was 0.88%, 1.59% and 1.75%, respectively.
Brain protein hydrolysate is an important neurotrophic agent, which has a good effect in the treatment of nervous system diseases. it can improve the energy metabolism in the brain and protect it from all kinds of ischemia, hypoxia and neurotoxin. it can be used for all kinds of craniocerebral trauma, sequela of cerebrovascular disease and so on.
From 2012 to 2016, the market sales of brain protein hydrolysates in China maintained a steady growth, rising from 2.747 billion yuan in 2012 to 4.464 billion yuan in 2016, with a compound growth rate of 12.91 percent over the past five years. According to the statistics of Guangzhou punctuation, the company cooperates with Shanxi Pude to produce brain protein hydrolysate for injection-- "Yizhenkang"
From 2014 to 2016, the market share was 30.19%, 27.12% and 24.58% respectively, ranking first and in the leading position in the market of brain protein hydrolysates in China. From 2014 to 2016, the sales share of Yi Zhen Kang in the terminal market of brain protective chemicals was 1.74%, 1.51% and 1.31%, respectively.
1.4 competitive advantage of the company
The company's main competitive advantages are: 1) R & D advantage, 2) technology advantage, 3) quality advantage, 4) cost control advantage, 5) sales channel advantage.
II. Company analysis and fund-raising investment
2.1 History and ownership structure of the company, the predecessor of the company, Cylon Biology, was established in 2002 and changed into a joint-stock company as a whole in 2014. Cai Nangui and Tang Lin, former natural persons of IPO, directly hold 90926199 shares of the company, accounting for 75.77% of the total share capital of the company. Cai Nangui holds 47.13% of the shares of Sailong Juzhi, and indirectly holds 6.30% equity and 7562643 shares of the company through Sailong Juzhi. He holds a capital contribution of 2487487 yuan, and indirectly holds 0.62% equity and 744757 shares of the company through Sepulo investment. Hold the investment of 3098264 yuan, and indirectly hold 0.77% equity and 927624 shares of the company through Segecon investment. The two persons are the controlling shareholders and actual controllers of the company.
2.2 the company's main business is outstanding and its revenue and profits grow steadily.
From 2014 to 2016 and the first half of 2017, the company's operating income was 178.0936 million yuan, 23749.5 million yuan, 255.8368 million yuan and 143.0095 million yuan respectively. From 2014 to 2016, the company's operating income grew at an average annual compound growth rate of 19.86%. The company's main products are GM1 injection and brain protein hydrolysate, and the combined income of these two products accounts for more than 90% of the main business income in recent years.
From 2014 to 2016 and the first half of 2017, the company's return net profit was 50.153 million yuan, 55.5305 million yuan, 57.862 million yuan and 29.5831 million yuan respectively, maintaining steady growth.
2.3 Comprehensive gross profit margin remains basically stable
From 2014 to 2016 and from January to June 2017, the company's comprehensive gross profit margin remained at a high level of 55.76%, 56.86%, 54.97% and 63.72%, respectively. There was little change in the comprehensive gross profit margin from 2014 to 2016, and the company's comprehensive gross profit margin increased greatly from January to June 2017, mainly due to the higher gross profit margin from the sales of new products such as sodium glucoside oral liquid and new sodium glucoside raw material drugs, as well as the increase in gross profit margin of GM1 injection.
2.4 raise funds to invest
The company intends to issue no more than 40 million RMB ordinary shares (A shares) this time, and the net capital raised is expected to be 299.6845 million yuan, all of which will be used for the projects related to the company's main business and the working capital needed for the development of the main business:
III. Financial position and profit forecast
3.1 Expenditure rate decreases year by year during the analysis of profitability, growth and asset turnover indicators
The company's period expenses are mainly composed of sales expenses and management expenses. The expenses for the period 2014-2016 were 69.8551 million yuan, 62.0576 million yuan and 67.2866 million yuan respectively, accounting for 39.22%, 26.13% and 26.30% of operating income respectively. The expense rate decreased year by year.
The main asset turnover index is good.
From 2014 to 2016, the turnover rate of accounts receivable of the company was 62.94, 2438.57 and 2768.85 respectively, and the turnover rate of accounts receivable of the company remained at a high level. As the company adopted the dealer agent sales model and sold according to the principle of "payment before goods", the final accounts receivable were relatively small.
From 2014 to 2016, the company's inventory turnover was 4.70,4.32 and 3.39 respectively. With the expansion of the company's business, the inventory scale expanded faster than the growth rate of operating costs, resulting in a decrease in inventory turnover.
3.2 profit forecasts and key assumptions
1) the stable development of the company's main business
2) the gross profit margin of the company remains stable
3) the rate of expenses in the company remains stable
4) the company's fund-raising project is progressing smoothly.
Based on the above assumptions, we expect the growth rate of net profit attributed to the parent company from 2017 to 2019 to be 13.77%, 17.95% and 13.69%, with corresponding diluted earnings per share of 0.44 yuan, 0.51 yuan and 0.58 yuan.
IV. Risk factors
4.1 Drug quality risk
Medicine, which is related to the national economy and people's livelihood, is a special commodity, which directly affects the life safety and health of patients. The company's drug production includes many links, including cooperative production with other enterprises, and drug quality may be affected by a variety of factors. In the whole process, if there are problems in the procurement of raw materials, drug production, storage and transportation, the quality of drugs may be affected; in addition, the above problems may also occur during the cooperative production of drugs by the partners. in turn, it affects the operation of the company.
4.2 the risk of price decline brought about by health care system reform
For a long time, the state has continued to reform the medical system through various policies. The new round of medical system reform involves public hospital reform, drug price reform, medical insurance system reform, improvement of essential drug system and drug circulation order reform and so on. With the deepening of medical reform, the increase of government investment, the adjustment of medical technical service prices and the improvement of hospital management efficiency, the current situation of hospitals using drugs to supplement and support hospitals will be further improved. at the same time, with the continuous change of the drug bidding system in various provinces and cities, the pricing method of drugs will change with the change of the whole medical system, and the company's main products have entered the catalogue of multi-provincial health insurance. There may be a risk of falling prices.
4.3 risk of R & D and production of new drugs
The company takes new drug research and development as the cornerstone of the company's development, and new drug research and development has a certain risk. According to the provisions of the National Drug Registration Administration measures, new drug research and development includes preclinical work, clinical research and drug production approval and other stages. Research and development work may be terminated at any of the above stages due to its own factors or approval. If the drug varieties developed by the company fail to achieve the expected safety and efficacy, or fail to pass the drug review, it may lead to the failure of new drug research and development.
4.4 risk of cooperative production mode
1) risk of termination of cooperation: both the company and the partner agree that the term of cooperation shall be subject to the validity of the registration approval of the cooperative variety, and if the cooperative variety is completed and re-registered, the cooperation period shall be extended synchronously to the date of expiration of the re-registration. If the cooperative variety cannot be successfully re-registered when the registration period expires every five years, the cooperation between the issuer and the partner is at risk of termination, which in turn affects the performance of the issuer. 2) quality risk: in the cooperative production of drugs by the partner, if the partner fails to produce in strict accordance with the requirements of GMP, or the product quality is affected due to raw material procurement, storage, transportation and other reasons, and the company's cooperative production quality assurance team fails to find the above quality problems, the drug quality may not be guaranteed. 3) the risk of price increase: the cooperative production between the company and the partner is a normal business behavior, and the two parties will negotiate and adjust the processing cost according to the actual production cost. If the final processing cost has a large increase compared with the previous processing, there is a risk that the profit of the issuer will decrease due to the increase of processing cost.
V. valuation and pricing analysis
5.1 Comparative Analysis of similar companies in China
Based on the published results in 2016 and the average forecast results in 2017 and 2018, the average dynamic price-to-earnings ratio of 17-year and 18-year listed companies in the same industry is 34.77 times and 25.19 times. The median dynamic price-to-earnings ratio of Shenwan chemical preparation industry in 17 and 18 years is 38.85 times and 31.04 times.
5.2 valuation level and price range that can be given by the company
The company expects to raise 299.6845 million yuan net capital, assuming that the net fund raised is in line with expectations, the issuance fee is 32.7155 million yuan, the total amount of funds raised is expected to be 332.4 million yuan, and no more than 40 million shares are planned to be issued, all of which are publicly issued new shares, corresponding to the issue price of 8.31 yuan per share.
Considering the company's business structure and market competition, we believe that it is reasonable to give the company a 17-year price-to-earnings ratio of 35 times per share earnings. The reasonable valuation range of the company with the price-earnings ratio as the center and the positive or negative range of 20% is 13.86-16.63 yuan. Relative to the 2016 static price-to-earnings ratio (post-issue dilution) is 36.20-43.44 times.
