Qizheng Tibetan medicine released its annual report in 2018: business income reached 1.213 billion yuan in 2018, an increase of 15.20% over the same period last year; net profit returned to its mother was 319 million yuan, an increase of 5.96% over the same period last year, deducting non-net profit of 275 million yuan, down 0.29% from the same period last year. The profit distribution plan is as follows: cash dividend of 4.10 yuan (including tax) for every 10 shares and 3 bonus shares (including tax). The company also released its quarterly report for 2019: the operating income in the first quarter was 254 million yuan, the net profit was 85 million yuan, and the non-net profit was 79 million yuan, up 11.78%, 9.98% and 1.97% respectively over the same period last year.
All sectors are growing steadily, and the strategy of "one axis, two wings and three supports" continues to advance. From the perspective of income split, the paste revenue in 2018 was 923 million yuan, up 17.39% from the same period last year, and the gross profit margin was 87.76%, up 0.61 pct from the same period last year; the ointment revenue was 205 million yuan, up 1.44% from the same period last year, and the gross profit margin was 90.02%, down 1.05 pct from the same period last year; pill revenue was 81 million yuan, up 31.59% from the same period last year, and the gross profit margin was 83.99%, increasing 3.56pct over the same period last year. 2018 is the opening year of the company's new strategy of "one axis, two wings and three supports". With Xiaotong paste as the core, the company has gradually strengthened the promotion of other new products on the market, with stable overall growth and a slight increase in gross profit margin.
Three fees remain stable, channel layout and market expansion speed up. The company's overall expense rate in 2018 was 58.39%, an increase of 1.44pct over the same period last year. Among them, the sales expense rate increased to 51.93%, an increase of 2.79pct over 2017, the management expense rate of 5.80%, a decrease of 1.94pct over the same period last year, and the financial expense rate of 0.67%, an increase of 0.6pct over the same period last year. The company expands the coverage of the target market through channel sinking, constantly explores and realizes the clinical value of various products in academic marketing, gives full play to the characteristic treatment advantages of Tibetan medicine, and provides patients with "pain integration products + Tibetan medicine characteristic program".
Clinical research and development and clinical research on new drugs continue to advance. The multicenter clinical research project of Xiaotong plaster in the treatment of osteoarthritis was successfully concluded, and the development of new products based on the combination of Tibetan medicine and medicine was carried out. In terms of new drug clinical research, Zutang granule is conducting phase Ⅲ clinical study; Zhengrutie completed phase Ⅱ clinical study; Xia Sade capsule is in phase Ⅱ clinical study as planned; Ⅱ phase a clinical study of indomethacin aerosol in the treatment of acute contusion is being carried out, and research and development is progressing smoothly.
Profit forecast: the company's net profit from 2019 to 2021 is expected to be 358 million, 400 million and 444 million respectively, and the corresponding PE is 35X, 31x and 28X respectively. Maintain the "overweight" rating.
Risk tips: product promotion is not as expected, high sales costs erode profits, and so on.
