The 15-year performance is in line with expectations. Tailing Pharmaceutical's 15-year net profit increased strongly by 4102% to 87.69 million yuan, and the performance was in line with our expectations. As the company stopped acting for Fudaxin in July 15, full-year revenue fell 2 per cent year-on-year to 848 million yuan. Benefiting from the rapid growth of high-margin varieties such as Lipodo and Shusi, and stopping the sale of low-margin varieties such as Fudaxin, the company's overall gross profit margin surged 8.0 percentage points to 53.3% in 15 years. As the company spun off Fudaxin's sales team, the sales expense rate fell 3.6 percentage points to 27% in 15 years. In addition, thanks to ample cash from 15 years of additional share issues and financial savings from loan repayment, the company's financial costs fell 65 per cent to 27 million yuan compared with the same period last year. Operating profit rose 41.5% to 136 million yuan in 15 years compared with the same period last year. For the first time, the company declared a dividend of HK $0.01 per share, corresponding to a dividend ratio of 14%.
The growth rate of Lipido has slowed down. Sales of Ribodo rose 106 per cent year-on-year to 542 million yuan in 2015. However, the company adjusted the accounting treatment of Ribodo in 15 years, resulting in an inflated income and cost at the same time. Excluding the impact of accounting adjustments, real income growth in Lipido is 23%, a significant slowdown from the 127% growth in 14 years. Over the past 15 years, Baodou's sales have maintained a strong growth momentum, increasing by 38% to 84,000 units for the whole year. However, due to the decline in the winning price, the average annual sales price of Ribodo fell 9.9 per cent to 3860 yuan per unit compared with the same period last year. Taking into account the impact of volume and price, we expect the sales of Reebodo to reach a growth rate of 25% in 16 years.
Self-owned varieties perform well. The overall revenue of the company's own varieties increased by 38.1% to 217 million yuan in 15 years. Among them, Shusi performed strongly, with sales growing at a high speed of 81.9% to 140 million yuan in 15 years. On the one hand, there are only three domestic quetiapine manufacturers, and the market competition is relatively mild. AstraZeneca PLC, the main competitor, adopts a passive strategy in marketing promotion, which brings Shusi the opportunity to expand market share; on the other hand, 14 years' low base is also the reason for high growth. In 15 years, the sales volume of Shuth increased by 54.8%, and the average sales price also increased by 17.5% due to the reduction of discounts given to dealers by Tai Ling. We believe that Shusi's market share is expected to expand further, and sales growth is expected to reach 30% in 16 years. Zhuo'ao performed smoothly, with sales rising 5 per cent to 52.5 million yuan in 15 years compared with the same period last year. Taking into account capacity constraints, we estimate that Zhuo ao's future growth rate will be limited, with income growth of about 5% in 16 years.
Maintain the buy rating. We expect Songjia Pill to go on sale in the second quarter of 16 and contribute about 100 million yuan in sales in 16 years. We expect net profits for 16, 17 and 18 years to be 126 million yuan (up 44% year-on-year), 178 million yuan (up 41% year-on-year) and 239 million yuan (34% year-on-year growth). We believe that strong earnings growth and potential mergers and acquisitions will be the catalyst for the rise in share prices. We keep the target price of HK $3.25 unchanged, corresponding to a 16-year price-to-earnings ratio of 34 times earnings and an upside of 50%.
