From July 17 to 18, I participated in the reverse roadshow of Jintian Pharmaceutical, visited its Shenyang headquarters and Harbin Company, and met many management and the leaders of its "drugstore alliance" (that is, the distributors of Jintian Pharmaceutical), that is, the heads of chain drugstore enterprises across the country.
Jintian Pharmaceutical mainly operates drugstore chains in the northeast and distributes products to other regional chains. According to the company, its 2H2013, retail and distribution businesses contribute 62% and 38% of the company's overall gross profit, respectively, that is, RMB340 million and RMB220 million. According to my simple calculation, the proportion of operating profit contributed by the retail and distribution business is about 40% and 60% respectively. Accordingly, Jintian Pharmaceutical's main source of profit is its distribution business, not drugstore retail. This is one of the misunderstandings of the market.
The company's individual store sales and profits are much higher than those of the same industry, which may cause the market to be a little uneasy about its financial figures. However, given the large proportion of the company's distribution business (sold to other pharmacies), it is very inappropriate to use the overall revenue and profit scale and the number of pharmacies. The correct calculation method should be compared with the retail calculation of its drugstore. According to our rough calculation, in 2013, the average sales of Jintian Pharmaceutical store was RMB2.2 million, and the per capita sales of shop assistants was RMB310,000 yuan, while that of Neptune Xingchen was RMB1.31 million yuan, and that of shop assistants was RMB220 million yuan. In contrast, Jintian Pharmaceutical's single-store sales and average staff performance are 68% and 41% higher than those of Neptune, respectively. Within a reasonable range.
Why is the single-store sales of Jintian Pharmaceutical much higher than that of the same industry?
1. Through "follow the mass line", engage in various forms of membership activities, such as square dance competitions, regard drugstores as cultural centers for community service activities, and strengthen ties with members. In 2013, Jintian Pharmaceutical had 965000 members, with a per capita consumption of 752 yuan per year, accounting for 47% of the drugstore's retail revenue. We believe that in second-and third-tier cities, the spare time life of retirees is very poor. Jintian Medicine has given these people a new way of life in the form of community activities, which, in a sense, is a good deed.
two。 The high gross margin of your own brand. The company actually owns four brands: Royal room (high-end traditional Chinese medicine), Kang doctor (high-end western medicine), naughty cat (children's medicine), community doctor (low-cost general medicine), with 371 varieties. These brands have high profit margins, high unit prices and high profits. For example, the price of a single box (12 bags, 4 days) of a high-end product with similar effect to Liuwei Dihuang pills (12 bags, 4 days) is RMB68 yuan, which is more than 5 times that of Liuwei Dihuang pills. The main products are "products used by 26 emperors", with a high-end image. In addition, under the Royal Room brand, there are also commonly used cheap drugs such as Liuwei Dihuang pills. With the successful shaping of the "high-end brand image", these cheap drugs sell well, and although they are cheap drugs, their own brand profit margins are also high.
What does Jintian Pharmaceutical export to other alliance members?
We also communicated with the heads of other members of the drugstore alliance. Jintian Medicine has a high position in these alliances. We believe that Jintian Pharmaceutical not only distributes drugs to these drugstore chains (especially its own brand), but also distributes and operates drugstores. Because drugstores are difficult to do in recent years, these chain drugstores see a new business model and hope from Jintian Pharmaceuticals: 1) to be their own brand, and 2) to turn drugstores into community culture and service centers. We believe that this is the guarantee for the continued growth of Jintian Pharmaceutical distribution business, and Jintian Pharmaceutical also has the potential to acquire these enterprises through its close relationship with regional alliances.
Future growth points:
1) the products of our own brand are more abundant, and the image shaping is more and more perfect; 2) acquisition; 3) milk powder and diversified operation.
The valuation of the company is low and the downside risk is limited. However, as it has not yet been officially covered, there is no report yet. I will only discuss the research findings with you. Criticism and correction are welcome.
