Events:
Hyundai Pharmaceutical released a report for the third quarter of 2017, showing that the company's operating income in the first three quarters of 2017 was 6.587 billion yuan, down 0.59 percent from the same period last year. The net profit belonging to shareholders of listed companies was 446 million yuan, up 16.14 percent from the same period last year. The net profit belonging to shareholders of listed companies after deducting non-recurrent gains and losses was 415 million yuan, an increase of 400.79% over the same period last year. The realization EPS is 0.40 yuan.
In 2017, the company's Q3 realized operating income of 2.007 billion yuan, down 1.82% from the same period last year; the net profit attributable to shareholders of listed companies was 89 million yuan, down 5.79% from the same period last year; and the net profit belonging to shareholders of listed companies after deducting non-recurring profits and losses was 61 million yuan.
Viewpoint:
1. The revenue end is the same as last year, affected by the sector of raw materials, and the growth rate of 16% in the first three quarters is relatively steady.
The company's revenue in the first three quarters was 6.587 billion yuan, down 0.59% from the same period last year, and its net profit was 446 million, up 16.14%. Q3 performance was slightly lower than expected.
From a quarterly point of view, the company's Q1, Q2 and Q3 revenue growth rates are 9.14%,-8.3% and-1.82% respectively, and the revenue side has begun to improve in the third quarter. At the time of the China Daily, we have analyzed that through the revenue of the dismantling companies (the total income accounts for nearly 80%), we can see that the income of Tianwei, Zhijun, and Yinxin subsidiaries has declined slightly. However, we believe that the greatest impact is due to Wichita, API, especially antibiotic APIs, there are certain production and price protection factors in the second quarter, the overall supply side shrinks, and the production capacity has been adjusted to a certain extent, so in the case of price increases, the growth rate at the income end is not reflected.
We infer that the income side of Q3 is still greatly affected by Wichita's production restrictions.
In terms of quarterly performance, the company's Q1, Q2 and Q3 performance were 160 million, 198 million and 89 million respectively, and the quarterly performance in the third quarter was slightly lower than expected. The main reasons are the following: historically, the consistent performance in the third quarter was lower than that in the previous two quarters, and more expenses were recognized in the third quarter. As for this year, in addition to expenses (sales costs have increased by 180 million while the revenue side is flat as a whole), Wichita's production restrictions have also had a greater impact.
In terms of financial indicators: the company's sales expense rate was 13.54%, which was higher than that of the whole year of 2016 (11.06%), and the company's sales expenses increased more (without much growth on the revenue side as a whole, the sales expenses increased from 717 million to 892 million, an increase of 185 million), which affected the performance growth to a certain extent. The rate of management expenses was 9.79%, which was 10.46% lower than that of last year's annual report, and 0.67pp was lower than last year's annual report. In terms of financial expenses, the company was affected by exchange rate fluctuations, resulting in a 9.6% increase in financial expenses.
Looking forward to the whole year, we believe that the company's expenses will be greatly reduced in the fourth quarter, especially sales expenses. The revenue side of the fourth quarter is expected to show positive growth, and the performance will return to more than 20% growth. Due to the influence of Wechida in the third quarter, we deducted the flexibility brought by antibiotic raw materials when we made the annual profit forecast. Overall, the annual performance is expected to reach more than 750 million. Restructuring and performance 470 million profit + original old and modern performance of about 200 million + Haimen turnround 80 million flexibility.
The performance is low in the third quarter, and the API is expected to provide greater flexibility in the fourth quarter.
Antibiotic raw material medicine plate (6 words APAGH ACA, penicillin industrial salt, etc.): according to the results of grass-roots research, in the second and third quarters, the production capacity of Coren, Wichita and the Federal has all been reduced since May, when the Ministry of Environmental Protection inspected the appropriate reduction of production capacity in Shanxi Province in May. At present, in the case of strict environmental protection, the price of antibiotic raw materials has increased significantly. 7-ACA quoted price 370,210 (average price in the first half of 2017 around 170,145) and penicillin industrial salt 70 (average price around 60 in the first half of 2017). Although it is not a transaction price, it also sends a signal of price stability. Wichita has now gradually resumed production, and antibiotic raw materials in the fourth quarter are expected to provide the company with greater flexibility.
In addition to the antibiotic raw drug sector, Haimen and Zoomlion will continue to improve and provide flexibility in the second half of the year.
Haimen company turnaround loss: Haimen company turnround is the company's key task, Haimen side multi-factor drive (order sales, cost reduction, Wechida guidance and assistance), has greatly reduced losses in the first half of the year, the overall turnround is expected to contribute 8000 million flexibility.
Zoomlion reduces losses: Zoomlion's loss in 2016 is related to relocation (increased expenses and depreciation). The main solution is to reduce administrative expenses and expand sales, which has also reduced losses in the first half of the year.
3. Reorganize the investment logic of the company: the vanguard of the reform of state-owned enterprises with clearer strategic planning, bottoming out performance, large room for improvement, expectant extension and a new look.
The company announced that the board of directors examined and passed the "bill on the formulation of the company", further defining the strategic orientation of modern pharmaceuticals in the future: one body and two wings, with the chemical pharmaceutical industry as the main body, biological pharmaceuticals and big health business as the two wings of the three major business pattern.
The strategic concept includes the following points:
Create a platform: an efficient and flattened management platform with sharing, linkage and integration
Shape two kinds of abilities: M & An ability and integration ability.
Realize three unifications: unified planning, unified brand, unified management and control.
Promote the four major synergy: industrial and commercial collaboration, industrial and industrial coordination, R & D coordination, marketing coordination
Focus on five areas: anti-infection, cardio-cerebrovascular, anti-tumor, narcotic drugs, metabolism and endocrine
Strategic goal: to become an innovation-driven, leading domestic and internationally renowned multinational pharmaceutical company.
The logic of future growth is as follows:
The new capacity is put into production to further consolidate the position of the "chemical medicine platform": the project has an investment of 1.45 billion yuan, with a production capacity of 5.5 billion tablets / tablets / bags / bottles, and is expected to contribute nearly 3 billion of the income scale in the future, providing a guarantee for sustained growth.
Consistency evaluation: at present, the company has carried out consistency evaluation of 60 varieties, some of which have initiated bioavailability consistency evaluation.
Carding and integration of existing varieties: after the completion of the reorganization, the company has 21 products worth more than 100 million yuan. Through the integration of resources, resources will be allocated more efficiently in the future, and the disorderly product layout scattered in various factories will be reasonably planned and integrated. The echelon position of modern pharmaceuticals in key areas will be more stable.
Health insurance catalogue flexibility: the company and its subsidiaries, there are a number of new products into the health insurance catalogue. The new products in the health insurance catalogue will have a positive impact on the company, especially the exclusive products such as dextromethorphan sustained release suspension, minapram tablets and Jinye Baidu granules, which are expected to release volume in the future and make a positive contribution to the company's profits.
API: Haimen is expected to reverse losses, 6-APA, 7-ACA, penicillin industrial salt raw materials contribute elasticity.
Extension: as a chemical platform, the company's expectation of extension is still strong. In March and May 2016, the company held a general meeting of the board of directors and shareholders to reshape the strategic positioning of the company and reorganize the company's future development goals. The company's strategic positioning is adjusted as follows: "with the existing business as the supporting point, the combination of endogenous growth and epitaxial expansion, we are committed to becoming a comprehensive innovative pharmaceutical enterprise with scientific system and mechanism, leading talents, leading products and leading quality. The company's new strategic goal is to develop into a leading domestic and internationally renowned excellent pharmaceutical enterprise integrating R & D, production and marketing. "
In the short and medium term, the performance is expected to achieve ultra-high growth (750 million for the whole year) due to the flexibility brought by the improvement of operating efficiency and the price increase of APIs.
From a medium-and long-term point of view, the stock of 2013 varieties coruscate the second spring + dozens of new medical insurance varieties + R & D rich reserves to provide growth guarantee for the company.
Conclusion:
We expect that after the completion of the reorganization, the company, as a chemical platform under the National Pharmaceutical, will take on a new look, and the operating efficiency is expected to continue to improve. In the short and medium term, the performance is expected to achieve ultra-high growth due to the flexibility brought by the improvement of operating efficiency and the increase in the price of APIs. From a medium-and long-term point of view, the stock of 2013 varieties coruscate the second spring + dozens of new medical insurance varieties + R & D rich reserves to provide growth guarantee for the company. In addition, as a collectivized drug platform, it is expected that there will be actions in the future resource integration extension. So now, the company belongs to low valuation, performance reversal, high growth rate, catalysis, change target. We estimate that the net profit from 2017 to 2019 will be 760 million yuan, 945 million yuan and 1.178 billion yuan, respectively, and the corresponding growth rate will be 59.43%, 24.20%, 24.70%, respectively, and the corresponding PE will be 24x, 19x, 15x. We are optimistic about the development of the company for a long time and maintain a "highly recommended" rating.
Risk Tips:
Reorganization and integration is lower than expected, and water needles and antibiotics are restricted.
