Events:
The company released its annual report for 2018 and quarterly report for 2019: revenue of 1.322 billion yuan in 2018, an increase of 24.05% over the same period last year; net profit of 221 million yuan, an increase of 20.95% over the same period last year; and 0.17 yuan per EPS per share. 1.20 yuan (including tax) will be distributed for every 10 shares.
In the first quarter of 2019, revenue reached 367 million yuan, an increase of 8.46 percent over the same period last year; net profit returned to the mother was 89 million yuan, an increase of 6.29 percent over the same period last year; and EPS per share was 0.07 yuan.
Main points of investment:
The income continues to grow, and the preparation is slightly lower than expected.
Q4 revenue in 2018 was 317 million yuan, up 3% from the same period last year, which is lower than the growth rate in the first three quarters, which may be related to the overall market environment. For the whole year, the revenue of APIs in 2018 was 623 million yuan, an increase of 32.04% over the same period last year, which was mainly related to the increase in the price of heparin sodium raw materials, of which the sales volume of polysaccharide raw materials was 2.392421 trillion units, an increase of 13.81% over the same period last year, and the inventory was 112.535 billion units, a decrease of 48.88% over the same period last year, indicating the improvement of heparin sodium raw materials. In the preparation business, the revenue in 2018 was 698 million yuan, an increase of 17.80% over the same period last year, slightly lower than our previous expectation. It is estimated that the sales of pancreatic kininogenase preparation is nearly 500 million yuan, the income of compound digestive enzymes is over 100 million, and the combined income of enoxaparin and dahparin is close to 50 million.
The gross profit margin has decreased and the cost of sales has increased significantly.
In 2018, the comprehensive gross profit margin was 48.89%, down 2.88% from the same period last year, of which the gross profit margin of APIs was 24.13%, down 3.66% from the same period last year, mainly due to the increase in raw materials and labor costs; the gross profit margin of preparations was 70.98%, an increase of 0.17% over the same period last year, mainly related to the expansion of sales volume, depreciation and reduced energy consumption. In terms of the period expense rate, the total cost rate in 2018 was 28.73%, down 1.53 percentage points from the same period last year, mainly related to the decline in the management expense rate and the financial expense rate compared with the same period last year. In terms of sales expenses, it was 321 million yuan in 2018, an increase of 28.98% over the same period last year, mainly related to market development fees and salary and additional increases of sales staff.
The company's first-quarter results in 2019 are relatively lacklustre.
In the first quarter of 2019, revenue increased by 8.46%; net profit increased by 6.29%, and the performance was relatively lacklustre. Taking into account the rise in heparin sodium raw drug prices and the lag of price transmission in the first quarter, we believe that the performance is expected to improve in the following quarters. In addition, in terms of preparations, Natroparin calcium was approved in the first quarter of 2019, and the new products enoxaparin and dahparin are expected to continue to increase revenue this year, while the OTC team formed by compound digestive enzymes last year continues to expand its contribution this year, and overall income is expected to continue to grow by more than 20% in 2019. In terms of performance, as the company-level assessment in the 2017 equity incentive draft is based on the net profit of the parent company in 2017, the cumulative growth rate of net profit of the parent company in 2017-2019 is not less than 45%, so if incentives are to be reached, the net profit growth in 2019 should be about 30%.
Maintain the recommended rating.
We estimate that the company's EPS will be 0.22,0.26,0.28 yuan in 2019-2021, and the PE will be 23 times, 20 times and 18 times respectively. The current valuation level is relatively reasonable, but considering that the company's innovative drugs are expected to be harvested one after another, the performance may exceed expectations and maintain the "recommended" rating.
Risk Tips:
Sales promotion is not up to expectations; cost growth is faster than expected; product price reduction pressure, etc.