Event: in 2017, the company's operating income was 2.5918167 billion yuan, up 17.05% from the same period last year; the net profit belonging to shareholders of listed companies was 526.1374 million yuan, up 9.08% from the same period last year.
Event comments:
Revenue growth is in line with expectations, and profits are squeezed by a decline in gross profit margin and a rise in sales expenses. In 2017, the company achieved operating income of 2.5918167 billion yuan, an increase of 17.05% over the same period last year, in line with our expectations. In 2017, the pharmaceutical distribution business of Anshun Da Health Pharmaceutical sales Company, a controlling subsidiary of the company, increased significantly. The sales income of the company's western medicine sales reached 130 million yuan, an increase of 829.95% over the same period last year. The gross profit margin of this business was low, which pulled down the comprehensive gross profit margin. It fell 1.1 percentage points from the previous year to 63.27%. The company strengthens the construction and improvement of the marketing network, vigorously develops the primary medical service market, and increases the in-depth development of the sales network throughout the country. At the same time, with the full implementation of the two-vote system, the company actively integrates the prescription drug sales system, continuously improves the construction of compliance system, promotes the mode of high-quality products plus academic promotion, and creates large products and categories of traditional Chinese medicine. The above factors led to a 2.47% increase in the company's sales expense rate in 2017, affecting operating profit of 64.0179 million yuan.
The development of grass-roots market has achieved good results, and the sales of granule products have increased rapidly. 1) with the landing of the national low-price drug policy, the sales team of the company's self-built primary health care institutions has begun to take shape, with sales in five provinces exceeding 10 million, and more than 45000 in the development of clinics and other primary health care institutions. The income of the primary medical service market has exceeded 500 million yuan, which has laid a solid foundation for the construction of the company's marketing network system. 2) Yindan Xinnaotong soft capsule, the company's star product, achieved a sales income of 650 million yuan and continued to maintain a steady growth. The production of granules represented by Xiaoer Chaigui antipyretic granule, Shuangyanghou Bitong granule and Xiaoke granule increased rapidly, and the sales revenue increased by 34.77% compared with 2016.
Continuous progress has been made in the research and development and promotion of Tangning Tongluo project. 1) the operating income of Guiyang traditional Chinese Medicine Diabetes Hospital has maintained rapid growth. In 2017, the company's Guiyang Diabetes Hospital of traditional Chinese Medicine received more than 36000 patients, and the number of patients in the medical service center reached more than 30,000. The hospital achieved an income of 71.8868 million yuan, an increase of 37.61% over the same period last year, still maintaining rapid growth. 2) expand Guiyang traditional Chinese Medicine Diabetes Hospital and improve the comprehensive service capacity. Guiyang Diabetes Hospital of traditional Chinese Medicine originally opened 100 beds, and there were no professional departments related to all kinds of complications involved in diabetes, which limited the hospital's treatment ability and profitability. The company plans to invest 49.85 million yuan to expand Guizhou bailing traditional Chinese Medicine Diabetes Hospital, and set up a series of supporting departments, such as diabetic nephropathy clinic, hemodialysis center, diabetic neuropathy clinic, diabetic ophthalmopathy clinic, diabetic heart disease clinic, rescue room, operating room and so on. After the completion of the expansion project, the influence of the diabetes hospital will be further expanded and the receiving capacity will be greatly enhanced. 3) in March this year, the company signed a "Clinical trial contract" with the PLA General Hospital (301 Hospital). The clinical trial project of "randomized, double-blind, placebo-controlled study to observe the efficacy and safety of Tangning Tongluo capsule in the treatment of newly diagnosed patients with type 2 diabetes" was officially launched from March 2018 to April 2019. At present, the company cooperates with Guangdong Hospital of traditional Chinese Medicine, Ruikang Hospital affiliated to Guangxi University of traditional Chinese Medicine and other top institutions in China. We believe that the landing of the Tangning Tongluo capsule project developed by the company in cooperation with the PLA General Hospital will accelerate the research and development of Tangning Tongluo capsule.
New drugs of 1.1 categories in clinical trials will be added and will be promoted in the research project. The company has conducted clinical trials of tifentine for the treatment of hepatitis B, and the tifentine project has completed the clinical phase Ⅰ trial. On March 27, the company announced that the company has fully completed the preclinical work of the class 1.1 new hematoma drug, and plans to apply to CFDA for clinical trials from April to May 2018, and to declare to FDA (P-IND) 6 to 8 months after the completion of the above work. If the drug Pueilitar clinical trial is approved, the company will add a new class of 1.1 new drugs that enter the clinical trial. At that time, the company's chemical drug category 1.1 new drug project will form a step-by-step progress state of 1 preclinical project (anti-tumor G50), 1 clinical Ⅰ phase project and 1 clinical Ⅰ phase project.
Investment advice:
We estimate that the net profit of the company from 2019 to 2020 is 600 million yuan, 691 million yuan and 800 million yuan respectively, EPS is 0.43,0.49,0.57 yuan, corresponding to PE is 33.60,29.49,25.35 times. At present, the median of traditional Chinese medicine Ⅲ (TTM) is 33.36 times. Considering that the key varieties of the company maintain steady growth, the market potential of Tangning Tongluo capsule is great, the cooperative R & D project with the PLA General Hospital has been landed, the grass-roots market development has achieved good results, and the company can be valued at a certain premium. We maintain its "buy" investment rating.
Risk Tips:
Product price reduction; Tangning Tongluo capsule market promotion progress is slow; focus on the research and development of product research and development results are lower than expected.