Main points of investment
Leading enterprises of proprietary Chinese medicine with rheumatic bone injury. The company's leading product Panlong seven tablets is the exclusive production variety, the national medical insurance category B catalogue variety, the national patent variety, other manufacturers may not imitate production during the patent protection period, Panlong seven tablets rank among the top five in the market share of proprietary Chinese medicine for rheumatic diseases and have strong competitiveness. At the same time, the company currently has 9 dosage forms, 73 drug production approval numbers and 3 varieties of health products, showing the advantages of multi-level, diversified and multi-dosage forms. The company's stable and excellent product quality and good brand image have laid a solid foundation for the company's marketing and new product promotion.
The sub-industry of proprietary Chinese medicine is developing actively, and the market of proprietary Chinese medicine with rheumatic bone injury has more room to rise. In order to promote the structural optimization and development of the traditional Chinese medicine industry, the state has issued relevant policies and laws to support the traditional Chinese medicine industry. It is expected that the proprietary Chinese medicine industry will usher in a good opportunity for development in the next few years. By 2021, the market scale of proprietary Chinese medicine for skeletal and muscular diseases in China will probably reach 51.095 billion yuan, and that for rheumatic diseases will reach 16.823 billion yuan.
Valuation and investment advice: we expect the company's EPS in 2017-2019 (based on the issuance of 2167 million new shares) to be 0.56,0.65,0.73 respectively. Taking into account the comparable company's PE level, industry cycle and the company's profit growth, give the company 23-28 times PE in 2017, we think the reasonable price of the company is about 12.88-15.68yuan. According to the way of issuing new shares, the issue price is 10.03 yuan, it is recommended to apply at this price.
Risk hints: market competition risk, industry policy change risk, single leading product risk, new product development and approval risk
