Conclusions and suggestions:
Events:
The company announced that the wholly-owned subsidiary National University Pharmacy confirmed the introduction of Walgreens Boots Alliance as a strategic investor by way of capital increase and share expansion. WBA (WBA), through its wholly-owned subsidiary Walgreens Boots Alliance (Hong Kong) InvestmentsLimited in Hong Kong, subscribed for shares in the National University Pharmacy as the main body of the capital increase, with a capital increase of 2.76 billion yuan and a 40 per cent stake in the National University Pharmacy. At present, the project needs to be submitted to the Anti-monopoly Bureau of the Ministry of Commerce for review.
Comments:
The introduction of overseas retail drugstore giants has helped accelerate the development of national pharmacies: WBA is the world's leading drugstore-led healthcare retailer (Nasdaq: WBA), operating more than 13200 stores, including more than 8500 in the United States. The company's retail and business brands include Walgreens, Duane Reade, Boots and Alliance Healthcare. Referring to the development history of American pharmaceutical retail chain drugstores and the merger and acquisition history of WBA, we believe that the introduction of WBA as a strategic investor in National University Pharmacy will play a positive role in the expansion of the company's chain drugstores in China. At present, there is still a big gap between the net interest rate level of the National University Pharmacy (about 2%) and the private chain drugstore (about 6%), and the introduction of advanced management experience from abroad will enhance the company's operating ability. we expect that the net interest rate level of the National University Pharmacy will continue to rise; the introduction of a capital increase of 2.77 billion will provide a solid financial foundation for the future expansion of the National University Pharmacy. In terms of valuation, Sinopharm Group injected 2.16 billion of the 100% stake in Guoda Pharmacy in 2016, and acquired a 40% stake in Guoda Pharmacy with this WBA capital increase of 2.77 billion. Based on this calculation, the overall value of Guoda Pharmacy has reached 6.93 billion yuan, a big increase over the previous period. We believe that this will be conducive to the market's re-understanding of the valuation of National University Pharmacy. We estimate that the net profit of the National University Pharmacy in 2018 will be about 240 million. In the short term, the 40% equity increase will slightly dilute the company's net profit, but we attach more importance to the medium-and long-term development of the National University Pharmacy after the introduction of overseas investment.
Profit forecast: without considering the impact of capital increase, we expect the company's net profit in 2017 to be 1.2 billion yuan (YOY+2.8%) / 1.34 billion yuan (YOY+11.9%), EPS 2.8 yuan / 3.14 yuan, corresponding A-share PE 21 times / 19 times, corresponding B-share PE 11 times / 10 times. After integration, the company will benefit from the industry trend of increasing industry concentration and separation of medicine and medicine as the retail leader of the country and the distribution leader of the two regions. In addition, as a holding subsidiary of the state-owned pharmaceutical department, the company benefits from the mixed ownership reform of state-owned enterprises, which is expected to further improve the operating efficiency and achieve the improvement of the net interest rate. At present, the valuation of A shares of the company is reasonable and the "buy" investment advice is maintained, while the valuation of B shares is relatively low and the "buy" investment advice is maintained.
