Main points of investment:
Characteristic specialist drugs have entered a rapid release period, driving the rapid growth of the company's income. Since 2017, the rapid growth of esomeprazole enteric-coated capsules and nano-carbon suspension injection has driven the recovery of the company's revenue growth. The company is the first domestic manufacturer of esomeprazole oral preparation in China. Esomeprazole enteric-coated capsules are obviously released after winning the bid in most provinces of the country. The company's nano-carbon suspension injection is the exclusive product in the country. with the continuous academic promotion, it has formed a coverage advantage in the thyroid field, and is constantly advancing in the three major fields of breast, gastrointestinal and gynaecology. We believe that these two products will still be able to maintain high growth in the next 2-3 years, supporting the company's performance growth.
The company's profitability recovered and its performance bottomed out. The company's net profit level fluctuated greatly from 2012 to 2016. The period from 2012 to 2014 is mainly due to the substantial increase in fixed assets investment, the increase in debt ratio and the increase in financial expenses. After the completion of the renovation or construction projects of the three factories in 2014, the total scale of fixed assets and projects under construction increased by 520 million yuan (compared with the end of 2012), resulting in a substantial increase in depreciation, while the revenue side was affected by the delay in bidding. The growth rate can not keep up with the growth rate of total operating costs. With the smooth development of the company's bidding in various provinces throughout the country since 2017, the revenue of core products has accelerated, and the company has gradually digested the impact of depreciation of fixed assets. In the future, with the expansion of revenue scale and the increase of scale advantage, we believe that the company's profitability will be further improved.
The company has won the exclusive right to sell Tadalafie's first imitation drugs, which is expected to bring greater performance flexibility. Tadalafil is an oral PDE5 selective inhibitor, which is mainly used to treat ED (erectile dysfunction). According to a survey of 3991 men by the Health and Family Planning Commission of Shandong Province, the prevalence rate of ED in people aged 40 and above is 33.83%. It can be estimated that there are about 332 million ED patients over 40 years old in China, and the potential market for ED drugs is huge. In the market of commonly used PDE5 selective inhibitors (including tadalafil, sildenafil and vardenafil), tadalafil has the greatest sales potential. Compared with sildenafil and vardenafil, tadalafil has obvious advantages: (1) Tadalafil has a longer half-life, and daily use can maintain an effective therapeutic concentration, allowing medication to be separated from sexual activity. (2) the effect of sildenafil and vardenafil may be delayed or decreased by the intake of high fat diet. The effect of tadalafil was not affected by eating and drinking.
Profit forecast and investment rating: the company is a pharmaceutical company with specialty drugs as the core source of income. Esomeprazole enteric-coated capsules and carbon nano-suspension injection are the company's main products. Since 2017, esomeprazole enteric-coated capsules have gradually won the bid in most provinces of the country. At the same time, with the gradual embodiment of the academic marketing effect, the rapid growth of esomeprazole enteric-coated injection has been sustained. In the future, the company will make use of its existing advantages in product layout and focus more on the field of digestive tract and oncology drugs. In addition, the company has won the exclusive right to sell Tadalafie's first imitation drugs, which is expected to bring a large increase in performance to the company. It is estimated that the profit forecast EPS of the company from 2018 to 2020 is 0.14,0.20,0.27 yuan, and the corresponding PE is 51.84,36.26,27.00 times respectively. The company has high growth, covering it for the first time and giving it a buy rating.
Risk tips: product sales do not meet expectations; product price reduction risk; the risk of intensified competition; academic promotion does not meet expectations.