Main points of investment
Event: Jiashitang released its 2018 annual report, during the reporting period, the company achieved operating income of 17.96 billion yuan, an increase of 26.1% over the same period last year, a net profit of 328 million yuan, an increase of 24.3% over the same period last year, and a net profit of 324 million yuan after deduction, an increase of 22.7% over the same period last year.
Comments: the company's performance is compounded with our expectations. Among them, Q4 achieved revenue of 4.8 billion yuan in a single quarter, an increase of 19.4% over the same period last year, and net profit of 67 million, an increase of 6% over the same period last year. The slowdown in growth in a single quarter is mainly due to a large increase in sales expenses. In 2018, the company's overall gross profit margin and profit margin after deducting the two expense rates were 10.23% and 5.57% respectively, which increased 53bp and 17bp respectively compared with last year, and showed a slight improvement in profitability. The net interest rate was 3.18%, a decline in 12bp, mainly due to the substantial drag on financial expenses. In terms of operation, the company's revenue turnover days and operating cycle are 114 days and 91 days respectively, which remains stable as a whole.
From a regional point of view, the income of Beijing achieved 8.09 billion, an increase of 10.8% over the same period last year, while that of non-local areas reached 9.54 billion, an increase of 37.5% over the same period last year, mainly due to the high growth of national equipment business income.
The equipment business maintained rapid development, among which the equipment wholesale business grew strongly: the total income of our equipment subsidiaries was about 10.67 billion yuan (excluding internal offset), an increase of about 33% over the same period last year. The two equipment platform companies Jiashi Weizhong and Jiashi Guorun achieved a total income of 3.58 billion yuan, an increase of 68% over the same period last year. In the second half of the year, the company added two companies, Fujian Jiashi Minyitong and Shaanxi Jiashi Qianrui, to further improve the coverage of the national equipment sales network.
Dingzeng is expected to greatly enhance the strength of the company, and the development of the company's out-of-town business is expected to accelerate. At the end of 2018, the company issued a fixed increase plan, which plans to issue no more than 41.18 million shares to the major shareholder Everbright Group to supplement working capital, with the amount raised at 1.5 billion yuan as the upper limit; if the maximum number of shares issued is 41.18 million shares, the total shareholding proportion of Everbright Group has increased to 28.47%, becoming the company's controlling shareholder, and the shareholding proportion has been greatly improved. The stability of the ownership structure can ensure the long-term sustained and stable development of the company. At the same time, the increase in working capital will reduce the company's debt ratio and reduce financial expenses, and the company's business expansion is expected to further accelerate.
Profit forecast and investment advice: regardless of the dilution of equity caused by additional offerings, we expect the company's earnings per share from 2019 to 2020 to be 1.64,2.00 and 2.40 yuan respectively. The current share price is only 10 times for 2019, which is much lower than the average historical valuation of the company. and significantly lower than the current valuation of the pharmaceutical business as a whole. We give the company 15-20 times PE in 2019, corresponding to the target range of 24. 6-32. 8 yuan, maintaining a "buy" rating.
Risk reminder event: business expansion in non-local areas is not up to expectations, equipment price reduction risk affected by industry policies
