Event: ① released its 2018 annual report, with an annual turnover of HK $231 million, an increase of 2.4 times over the same period last year. The profit attributable to listed companies was HK $80.537 million, an increase of 0.6% over the same period last year. Excluding the impairment of goodwill during the year, the profit of listed companies was HK $98.071 million, an increase of 22.5% over the same period last year. ② and Yunnan Hansu signed a non-legally binding memorandum of cooperation to cooperate with Yunnan Hansu to build the second phase of Yunnan Hansu's production capacity project-Hanpu Biotechnology Co., Ltd.
Fully take into account the impairment of goodwill, the performance continues to grow
During the reporting period, due to the increase in steel trading business, the company's revenue from the trading sector increased significantly to HK $119 million, an increase of 107 times over the same period last year, leading to an increase in the company's overall turnover. The company's income from its health care business reached HK $46.248 million, an increase of 7.5% over the same period last year, and its profit reached HK $2.985 million, an increase of 10.7 times over the same period last year, reflecting the company's efforts and effectiveness in the positioning of "great health". During the reporting period, the company's goodwill impairment reached HK $17.534 million. Excluding the effect of goodwill impairment, the company's profit increased by 22.5% compared with the same period last year.
Cooperate closely with the domestic industrial hemp leader, and is expected to become the controlling shareholder of Hampu.
Industrial hemp is widely used in textile, health food, cosmetics, medicine and other industries, and it is a new and competitive biological industry in recent years. In February 2018, the company invested in Yunnan Hansu (a company under the Hanma Group), which was the only company in China that met the GMP (good production practices) standard, and became the second largest shareholder (20% shareholding) and director unit of Yunnan Hansu. In 2018, the company earned a profit of HK $11.5 million from its stake in Hansel. In addition, the company introduced Hanma Investment Group as the strategic shareholder of the company, and the parent company Yuye Group invested 200 million RMB to become the main shareholder of Hanma Group.
On March 29, 2019, the company signed a non-legally binding memorandum of cooperation with Yunnan Hansu to cooperate with Yunnan Hansu to build the second phase of Yunnan Hansu's production capacity project-Hanpu Biotechnology Co., Ltd. Yunnan Hansu will authorize Hanpu Biotechnology to use its technology. After the implementation of the project, the company will become the controlling shareholder of Hampu Biotechnology. The annual capacity of Hanpu Biotechnology Plan to deal with industrial hemp mosaic leaves is about 2200 tons. Upon completion, it will become one of the largest and most technologically complete industrial marijuana extraction and processing enterprises in the world, and is expected to be completed and put into production in the first half of 2020. We believe that the company's in-depth cooperation with Hanma and the company's layout of industrial marijuana are expected to bring significant performance increments for the company, and complement each other with other large health businesses of the company, in line with the company's unified and healthy positioning.
Positioning big health, steady development of high-end clinic business, and new expansion of stem cell business.
At present, the company mainly has a high-end anti-aging brand "Paris Clinic", which has a number of chain clinics in nine countries and regions in the United States, France, Switzerland, Japan, South Korea, Saudi Arabia, Malaysia, Hong Kong, China and mainland China. And actively explore the Chinese market. In 2018, the company invested 55.278 million yuan in Shenzhen Yinguan Biotechnology Co., Ltd. and obtained 45% equity. Yinguan Biology is a state-level high-tech enterprise specializing in cell and gene biotechnology innovation research and development, transformation applied research and technical services, with dozens of independent biotechnology patents and international leading technology products, and undertakes more than 20 government science and technology projects. We believe that the company's high-end clinic business is developing steadily, and the new stem cell business is expected to become a new performance growth point of the company.
Profit forecast and investment suggestion
We estimate that the operating income of the company's existing sectors from 2019 to 2021 will be HK $2.24,2.45 and HK $266 million, and its net profit will reach HK $1.03,1.26 and HK $147 million. In view of the fact that the company regards industrial marijuana as its future core business and has been deeply involved in the industry through the acquisition of shares in Yunnan Hansu, we expect the company to be directly involved in industrial marijuana-related business in 2020 and 2021, and generate additional revenue of HK $71 million and HK $196 million, respectively. We believe that the company's original business is stable, stem cell business and new industrial marijuana business are developing rapidly, leading in layout, and maintaining a "buy" rating.
Risk hints: industrial marijuana should be strictly distinguished from intermediate marijuana and recreational marijuana / drug marijuana; resolutely oppose the legalization of recreational marijuana; industrial marijuana-related business may contain policy change risks and R & D operational risks; the terms and conditions of the company's potential cooperation projects are still in the negotiation stage and there is no legally binding agreement.
