Event: the company released its semi-annual report for 2018, with operating income of 1.15 billion yuan (+ 51.1%), net profit of 150 million yuan (+ 31.6%) and non-return net profit of 30.68 million yuan (- 49.1%) in 2018. Among them: non-recurrent gains and losses are mainly the investment income of 94.19 million yuan brought about by the transfer of 10% equity of China antibody in associated enterprises and the income generated by financial assets.
The two-vote system affects short-term performance and business transformation is under way. 1) the company's income is mainly composed of pharmaceutical business, which is affected by the change from low to high under the two-vote system. In the first half of 2018, the operating income was 1.15 billion yuan (+ 51.1%) and the gross profit margin was 65.7% (+ 20.3pp). At the same time, due to the adjustment of the sales model, the sales expense rate was 35.4% (+ 23.5pp). It is expected that the performance of the main business will return to a stable level after the adjustment period; 2) Business transformation is under way. Since 2011, the company has successively strengthened the layout of the medical and health industry chain by means of epitaxial mergers and acquisitions and self-established platforms. At present, it has initially formed the layout of pharmaceutical R & D and manufacturing, biomedical, medical devices, Internet medical and medical services.
Traditional pharmaceutical business has the advantage of industrial chain, the acquisition of Qili Pharmaceutical to achieve business coordination. 1) the company's preparation products include cephalosporin preparation series, gastrointestinal drug series, tumor drug series, API and intermediate series and other products. Unlike most preparation manufacturers in the market, which rely on outsourcing, the company produces its own products from radionuclides to raw materials to preparations, and its main products have strong industrial chain advantages and are expected to maintain steady growth in the future. 2) the company announced in July 2018 that it intends to pay cash to buy 100% of Haikou Qili Pharmaceutical shares, and the transaction price is tentatively set at 2.14 billion yuan. Qili pharmaceutical products are mainly used in anti-infection, cardiovascular medicine and digestive system, with a business income of 1.2 billion yuan, a net profit of 100 million yuan and a cash flow of 200 million yuan in business activities in 2017. it will contribute stable current runoff to the subsequent layout of the health industry.
A number of innovative drugs are in the clinical stage, holding hands with Youkadi layout CAR-T. 1) three of the 21.01% Chinese antibodies have entered the clinic, and the Ⅱ phase clinical trial results of 1.1 new drugs for rheumatoid arthritis have reached expectations and have entered the Ⅲ phase of clinical trials. The project has won the national science and technology major project "major new drug creation".
Other new drugs for lymphoma and lupus erythematosus have entered the Ⅱ phase. In addition, preclinical studies have been completed on SM09, SM06, TNF2, N009, N004 and other new drugs for tumor treatment. 2) Hainan Haiyou will be established jointly with Youkadi. Hainan Haiyou will first settle in Hainan Boao Lecheng International Medical Tourism demonstration Zone to carry out in-depth research and development in the field of gene-cellular immunotherapy oncology medicine to promote the healthy development of listed companies.
Profit forecast and rating. Leaving aside the merger and acquisition of Qili Pharmaceutical for the time being, it is estimated that the EPS from 2018 to 2020 is 0.22,0.28,0.36 yuan respectively, and the corresponding PE is 29 times, 22 times and 17 times respectively. We believe that the company has a multi-directional layout in the field of big health, and its long-term growth is promising, giving it an "overweight" rating for the first time.
Risk hint: Qili Pharmaceutical does not set performance commitment, performance or lower-than-expected risk; Great Health business layout is not as expected risk; major shareholder equity pledge risk.