Events:
The company released its 2018 annual report: revenue in 2018 was 5.208 billion yuan, up 15.33% over the same period last year; net profit was 251 million yuan, up 19.68% over the same period last year; net profit after deducting non-return was 233 million yuan, an increase of 38.37% over the same period last year; EPS per share was 0.40 yuan. It is proposed to distribute 1 yuan in cash (including tax) for every 10 shares.
Main points of investment:
The volume and price of API business has risen, and the income has continued to grow steadily.
In 2018, Q4 achieved 1.248 billion yuan in revenue, an increase of 17.42% over the same period last year. Overall, the growth rate in the second half of the year was higher than that in the first half of the year. We believe that this is related to the increase in the price of ibuprofen, the main API, in the second half of the year. According to wind data, ibuprofen offered 110 yuan / kg in the first half of 2018 and continued to rise to 180 yuan / kg in December 2018, an increase of 64%. Considering the company's main exports of ibuprofen and the lagging price increase effect, combined with the current high situation in 2019, we believe that ibuprofen is still expected to maintain a volume-price rise in 2019. For the whole year, the company's API revenue in 2018 was 2.319 billion yuan, an increase of 18.07% over the same period last year, and the overall sales volume of API was 31800 tons, an increase of 11.65% over the same period last year. In terms of preparations, revenue reached 2.213 billion yuan in 2018, an increase of 11.65 percent over the same period last year. The company focused on the sales of new products of six major preparations, such as Shutaide, and implemented the policy of one product, one product. Sales of new products of preparations increased by 40.4 percent over the same period last year, up from 33.91 percent in 2017.
Profitability continues to improve, and the rate of sales expenses has increased.
In 2018, the company's comprehensive gross profit margin was 29.92%, an increase of 1.84% over the same period last year, mainly due to the highest gross profit margin of the API business among the three businesses, while the benefit volume and price rose simultaneously, and the API gross profit margin increased by 3.07% to 31.98% compared with the same period last year. In addition, benefiting from the further expansion of the scale of preparation sales, the gross profit margin of the preparation business was 31.89% in 2018, an increase of 1.60 percentage points over the same period last year. Overall, during the company's strategic transformation, the consolidated gross profit margin has continued to increase over the past five years, from 20.47% in 2014 to 29.92% in 2018. In terms of period expenses, in 2018, the three expense rates totaled 21.82%, and the sales expense rate, management expense rate and financial expense rate were 12.58%, 8.58% and 0.66% respectively, of which the sales expense rate and management expense rate increased by 1.29% and 0.06% respectively compared with the same period last year. The financial expense rate decreased by 1.11% year-on-year.
The consistency evaluation continues to advance, and the contribution of international cooperation projects is expected to increase.
The company actively promotes the evaluation of the consistency of generic drugs. 14 specifications of 10 varieties have passed the clinical BE,6, 8 document numbers have been declared to CDE and accepted, 3 products have completed the on-site verification of the State Drug Administration, and 5 varieties have been approved for consistency evaluation in 2019. Considering that the income of the larger products of the company is only more than 100 million, most of which are millions and tens of millions of dollars, coupled with the fact that most of them are general medicines at low prices, the price reduction has little impact on the company, and once it passes the consistency evaluation, it will lead to the rapid release of varieties. In addition, the first phase of the company's Modern Medicine International Cooperation Center has passed the GMP certification and is ready to be used. the second phase of the project completed the main body cap in November 2018 and entered the purification and decoration stage. With the introduction of more international cooperation projects, this part is expected to become a new increase in performance.
Maintain the recommended rating.
We estimate that from 2019 to 2021, the EPS of the company will be 0.49,0.59 and 0.71 yuan respectively, and the PE will be 16 times, 13 times and 11 times respectively. The valuation level is currently low, taking into account the company's preparation strategy, the API business is expected to contribute performance flexibility and maintain the "recommended" rating.
Risk Tips:
The raw material drugs are booming, the market sales are disadvantageous, and the cost is growing faster than expected.
