Core viewpoints
The performance is lower than expected and the performance of the main products is not good. The company released its annual report for 2017. during the reporting period, the company achieved operating income of 3.374 billion yuan, down 12.75% from the same period last year. The net profit reached 451 million yuan, down 31.56% from the same period last year, and the corresponding EPS was 0.15 yuan, which was lower than we and the market expected. In terms of main varieties:
The business of Xuebijing injection and traditional Chinese medicine formula granules both declined, with the former achieving revenue of 684 million yuan, down 39.13% from the same period last year, while the latter achieved revenue of 1.753 billion yuan, down 6.62% from the same period last year. At present, the two major products are still facing adjustment pressure, and the prospect is not optimistic.
The gross profit margin has declined and the rate of various expenses has remained stable. During the reporting period, the gross profit margin of the company's products fluctuated. Specifically, traditional Chinese medicine formula granules increased 2.75pp, Xuebijing injection decreased 1.33pp, excipients and APIs decreased 3.73pp. Affected by the decline in gross profit margin of Xuebijing and auxiliary raw materials, the company's overall gross profit margin fell 2.89pp to 72.51%. In terms of expenses, the sales expenses decreased by 22.01% compared with the same period last year, and the expense rate decreased to 39.46%; the management expense rate increased (+ 1.92%); and the financial expenses increased by 741.45% due to exchange losses.
The research and development of PTS and KB are progressing smoothly and will form a "1x N" business pattern. In January 2018, the company submitted an application for listing (CXHS1700011) of class 1.1 new drug PTS (p-Toluenesulfonamide injection) to CDE, which was accepted and included in the newly published priority review list (batch 27). Recently, the company's new sepsis drug KB (picolamine mesylate B for injection) was approved for Ⅱ / Ⅲ phase clinical. We believe that the company will take the traditional Chinese medicine formula granule business as the pillar, promote research and development, expand new business growth points, and eventually form a "1x N" competition pattern.
Financial forecasts and investment suggestions
Due to the decline of the company's main products, the future is still uncertain. According to the 2018 annual report, we re-forecast the company's return net profit for 2018-2020 (the original forecast for 18-19 years net profit is 545pm 560 million yuan), the corresponding EPS is 0.17Universe 0.19 yuan, with reference to the comparable company's average valuation of 27 times PE over 18 years, and the corresponding target price is 4.59 yuan Maintain the "overweight" rating.
Risk hint
If the market development of traditional Chinese medicine formula granules is unfavorable, it will have a great impact on the overall performance of the company.