Conclusions and suggestions:
Compared with the same caliber, the performance increased slightly: the company achieved revenue of 41.26 billion yuan in 2017 and recorded a net profit of 1.06 billion yuan, which was the same as the same period last year and down 10.9% respectively. The decline in the company's performance is mainly due to the fact that the comparative report includes three pharmaceutical industry companies reorganized in October 2016. Excluding this factor, the company's revenue and net profit increased by 3.0% and 9.1% respectively compared with the same period last year. The company's actual net profit growth is in line with our expectations. The company plans to pay a cash dividend of 3 yuan (including tax) for every 10 shares.
Short-term distribution pressure: due to the two-vote system, GPO and variety price reduction and other factors, the company's distribution business growth is under short-term pressure. In 2017, the total revenue of the distribution business was 31.52 billion, and the net profit of YOY+1.2%, was 640 million yuan, YOY+6.0%. Among them, the reorganization and incorporation of Oriental New Special Medicine, Foshan Nanhai and Southern Medical Trade have all completed their performance commitments in 2017. In the medium to long term, we believe that the integrated company's distribution business has become the leader of Guangdong and Guangzhou, and will continue to benefit from the policies of the two-vote system and revenue increase in the future, and with the docking of new Jinzi companies, we expect the company's distribution business to return to a state of steady growth.
Be optimistic about the long-term development of retail business: in 2017, National University Pharmacy achieved revenue of 10.03 billion yuan, an increase of 10.1% over the same period last year, and a net profit of 262 million yuan, an increase of 17.6% over the same period last year. The net interest rate rose another 0.2 percentage points from 2016 to 2.6%, continuing to improve. On November 30, 2017, the company announced that the National University Pharmacy plans to increase its capital and shares and introduce Walbolian, the world's leading pharmaceutical retailer (it is expected to hold 40% of the shares of the National University Pharmacy after the capital increase, with a capital increase of 2.76 billion yuan). We believe that the introduction of Wobilian into the National University Pharmacy will be able to improve the company's operating capacity and individual store efficiency with the help of advanced foreign management experience, and accelerate the improvement of the company's net interest rate. In addition, under the background of the increased concentration of the chain pharmacy industry, the national university pharmacy after the increase of capital will have a strong financial advantage, and we expect the company to accelerate the realization of extension mergers and acquisitions in the future. We are optimistic about the long-term development of the company's retail business.
The company now obtains the development dividend of pharmaceutical industry enterprises mainly through equity participation in Zhijun Pharmaceutical (49%), Pingshan Pharmaceutical (49%), Hyundai Pharmaceutical (15.6%), Wanle Pharmaceutical (35.2%) and so on. The company achieved a total investment income of 260 million yuan in 2017, slightly lower than we expected. Modern Pharmaceutical is currently in the first year of restructuring and integration, and we expect that with the deepening of integration, the company's performance will continue to improve, and the performance of Zhijun Pharmaceutical and Pingshan Pharmaceutical, which are merged into Modern Pharmaceutical, are also expected to continue to grow. the company will continue to receive the development dividend of pharmaceutical industry enterprises in the future.
Profit estimate: we expect the company's net profit in 2018 and 2019 to be 1.19 billion yuan respectively.
(YOY+12.8%) / 1.36 billion yuan (YOY+14.2%), EPS is 2.79 yuan / 3.18 yuan, corresponding to A-share PE is 21 times / 19 times, corresponding to B-share PE is 10 times / 9 times. After integration, as the retail leader of the country and the distribution leader of the two regions, the company will continue to benefit from the industry trend of increasing industry concentration and separation of medicine and medicine. 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.
