In the first half of the year, revenue fell by 17.35%, and non-net profit decreased by 29.17%. The company issued a semi-annual report for 2019: operating income of 541 million yuan (- 17.35%), net profit of 117 million yuan (- 18.69%), and non-net profit of 100 million yuan (- 29.17%). The company's performance was slightly lower than expected, but the quality of operation was significantly improved.
During the reporting period, the company's cash flow further improved, and accounts receivable were effectively controlled to 1.478 billion yuan, slowing down to 10.46% compared with 2018; the company's net operating cash flow was-78.4772 million yuan, a significant improvement from-235 million yuan in the same period last year. With the company's follow-up business adjustment, the net cash flow is expected to continue to improve.
The income of traditional Chinese medicine and high-quality traditional Chinese medicine has declined, and the health wine business has performed well.
In 2019, the pharmaceutical industry revenue of H1 company was 469 million yuan (- 21.81%), and the gross profit margin was 82.67% (- 2.60pp). The decline in revenue is mainly due to the overall decline in China's macro-economy, medical consumption is facing greater pressure; in addition, it is affected by policy factors such as the landing of medical insurance fees and stricter industry supervision.
By product: the revenue of traditional Chinese medicine products is 406 million yuan (- 20.59%), and the gross profit margin is 82.06% (- 2.44pp); the revenue of high-quality traditional Chinese medicine products is 62 million yuan (- 28.96%), and the gross profit margin is 86.67% (- 3.12pp). We believe that the main reason for the decline in revenue is the tightening regulation of the pharmaceutical industry, and the decline in gross profit margin is mainly due to the rise in the price of raw materials and the corresponding increase in manufacturing costs such as depreciation and fuel power after the new plant is put into operation. In 2019, the revenue of H1 health wine was 33.6216 million (+ 47.07%), mainly because the company set up a new medicine canal marketing team to expand sales, and the revenue of newly listed products was incorporated. The gross profit margin is 63.23% (- 5.01pp), which is mainly due to the increase in the price of package materials for some products and the increase in manufacturing costs after the new plant is put into operation.
From a regional point of view: excluding pharmaceutical commercial income, the operating income in central China increased by 29.66% over the same period last year, mainly because the company used the platform of Kyushu Tong Pharmaceutical Group to cultivate Henan and Hunan markets. continue to sink business chain to expand terminal commercial coverage and product sales, driving the traditional Chinese medicine sector sales revenue increased by 28.66% over the same period last year.
At the initial stage of the operation of the new plant, the overall cost control was good.
The company's sales expenses in the first half of the year were 191 million yuan (- 30.17%), and the sales expense rate was 35.2%. The R & D expenses were 18 million yuan, an increase of 14.60% over the same period last year, accounting for 3.33% of operating income (+ 0.9pp). The main reason is that the company's R & D depreciation and amortization increased sharply during the reporting period, and materials and energy costs increased by 72.1% compared with the same period last year. The management fee is 53 million yuan (+ 10.35%), the management expense rate is 9.80%; the financial expense is 18 million yuan (+ 268.65%), and the financial expense rate is 3.41%. The sharp increase in financial expenses is mainly due to the sharp increase in handling fees and interest expenses.
The company's follow-up performance is expected to pick up and maintain its "buy" rating.
Due to the overall macroeconomic downturn, stricter supervision of the pharmaceutical industry, fluctuations in the prices of traditional Chinese medicine raw materials, and a decline in the company's performance in the first half of the year, we slightly downgrade our profit forecast, adjusting the 2019-2021 net profit forecast from 5.09,6.69,826 million yuan to 4.12,4.67,544 million yuan, the current price corresponds to PE for 22,20,17 times. After the completion of the new plant, the initial investment is relatively large, and the performance is expected to pick up after the operation of the new plant in the later stage, maintaining the "buy" rating.
Risk tips: 1. The impact of macroeconomic and medical policies; 2. Terminal turnover is less than expected, resulting in a continuous increase in accounts receivable; 3. The multi-channel promotion mode leads to the higher sales cost of the company; 4. The release of new capacity is not as fast as expected.
