Main points of investment
Event: the company's annual operating income, return net profit and non-net profit in 2017 were 500 million yuan, 74 million yuan and 64 million yuan respectively, an increase of about 38%, 22% and 14% respectively over the same period last year. The operating income, net profit and non-net profit of 2017Q4 were 180 million yuan, 22 million yuan and 14 million yuan respectively, an increase of about 85%, 57% and 27% respectively over the same period last year.
The income growth rate exceeded expectations, and the management inflection point appeared. 1) income side. Revenue in 2017 was about 500 million yuan, an increase of about 38 percent over the same period last year. Q4 revenue in 2017Q4 was about 180 million yuan, an increase of 85 percent over the same period last year. Mainly because the company continues to increase market development and investment, the layout effect appears one after another. During the period to sort out the product structure, increase advertising investment. And actively participate in hospital bidding in terms of channels and carry out in-depth cooperation with large chains. 2017Q4 continued to strengthen the product market promotion in a single quarter, and the channel carding work has been basically completed, we believe that the company's business inflection point trend is obvious. In the company's products, the stable growth rate of Liuwei Dihuang pills is about 20%, the faster growth rate of Ejiao is about 80%, and the other second-tier varieties, such as ginseng antler Guben pills and Xiaoyao pills, are expected to grow faster; 2) profit end. The net profit in 2017 was about 74 million yuan, an increase of about 22% over the same period last year. The net profit of Q4 in 2017Q4 was about 22 million yuan, an increase of 58% over the same period last year. The company's gross profit margin is about 30% the same as that of 2016, and the main reason why net profit growth is lower than income growth is that the expense rate has increased by about 1 percentage point during the period. And from the point of view of 2017Q4's single-quarter net profit margin, it is the lowest in the whole year, and we expect its sales investment in the channel to continue to increase. Due to the low base of the company's products, the input of sales expenses has a significant impact on revenue, and the production capacity in the new park is about to be completed, and revenue growth is expected to exceed 40% in 2018. And the scale effect of sales input on net profit will be gradually reflected in 2018, and the net profit growth rate in 2018 is expected to exceed 35%.
Strengthen the sales and promotion of core products, the layout of traditional Chinese medicine formula particles and the trade of traditional Chinese medicine. 1) the company has more product approvals, and its exclusive varieties, such as Guben, Liuwei Dihuang pills and Ejiao, are highly competitive in the market. with the gradual increase in the proportion of core products, it will lead to an increase in gross profit margin. Therefore, we believe that the company has the trend of gradual improvement in profitability. The company will not only benefit from the policy dividend of raising the price of low-cost drugs, but also benefit from the brand synergy between products, which will contribute to the sales and promotion of chain drugstores; 2) the company will be the first to benefit from the higher probability of opening the policy of granulation of traditional Chinese medicine formula. New progress has been made in the policy of traditional Chinese medicine formula granules in Zhejiang, Jiangxi, Guangdong and other provinces, and we believe that the liberalization of the pilot qualification of traditional Chinese medicine formula granules is the general trend. The company has submitted the quality standard and production record application of 300 kinds of traditional Chinese medicine formula granules to Gansu Food and Drug Administration, and reached the strategic intention of traditional Chinese medicine formula granules with Hongri Pharmaceutical Co., Ltd. the first advantage is obvious in the northwest region and even the whole country; 3) strengthen the production layout of authentic traditional Chinese medicine and cultivate new attractions. The company is building a standardized and large-scale base of bulk medicinal materials and Gansu Foci Natural Medicine Industrial Park, fully relying on the advantages of Gansu characteristic bulk traditional Chinese medicine resources, promote the integrated construction of the whole industrial chain of planting, warehousing, processing, distribution and management of characteristic Chinese medicinal materials, enhance the company's comprehensive competitiveness and sustainable development ability, and create new profit growth points.
Profit forecast and investment advice. It is estimated that the EPS from 2018 to 2020 is 0.20,0.27,0.35 yuan respectively, and the corresponding PE is 53 times, 40 times and 31 times respectively. We believe that the company has brand value, after the new capacity is put into production, it will solve the problem of production bottleneck, cooperate with market sales and promotion will usher in a period of rapid growth, the business inflection point is obvious. The gradual increase in the income share of products such as Liuwei Dihuang pills and Ejiao with high gross margin will optimize the profit structure, and will share the rapid growth of the traditional Chinese medicine formula granule market and the large health sector. The prospect is worth looking forward to, and the "buy" rating will be maintained.
Risk hint: raw material price fluctuation risk, new capacity construction may not meet expectations.
