The performance of the China report is basically in line with expectations. The company reported that its operating income in the first half of 2019 was 610 million yuan, an increase of 12.44 percent over the same period last year, and the net profit attributed to shareholders of listed companies was 202 million yuan, an increase of 6.28 percent over the same period last year, corresponding to an EPS of 0.38 yuan. From a quarterly point of view, Q2 realized revenue of 356 million yuan, an increase of 15.20% over the same period last year, and the net profit belonging to shareholders of listed companies was 177 million yuan, an increase of 3.76% over the same period last year, in line with market expectations. In terms of expenses, the company's sales expense rate was 42.36%, which was 0.17% lower than that of the same period last year, and the management expense rate was 7.58%, an increase of about 0.53% over the same period last year, mainly due to the amortization of restricted stock expenses, but the whole is still within control. In terms of gross profit margin, the company's comprehensive gross profit margin in the first half of the year was 88.06%, down 0.02 percentage points from the same period last year, and basically remained stable.
The strategy of pain integration was further deepened. During the reporting period, the company persisted in implementing the "one axis, two wings and three supports".
The new strategy, with Xiaotong plaster as the center, continues to maintain the leading position of pain plaster products in the market, while strengthening the layout of analgesic products, actively cultivating new products, expanding the variety of pain production lines, and ensuring sustained growth in performance. In terms of products, the company's plaster reached 465 million yuan in the first half of the year, an increase of 11.32% over the same period last year, ointment revenue of 103 million yuan, an increase of 17.63% over the same period last year, and income of 40 million yuan for pills and powders, an increase of 13.30% over the same period last year. In terms of research and development, the company still takes new drugs and non-pharmaceutical products in the field of pain as the core, uses Tibetan medicine theory to promote the combination of characteristic clinical therapy and medicinal products, and further increases the development of new products and the secondary development of original products, forming a competitive barrier centered on product + research and development. the company's R & D investment in the first half of this year was 18 million yuan, an increase of about 10 million yuan over the same period last year.
Equity incentive landed, optimistic about the long-term development of the company. In March this year, the company launched an equity incentive plan to further bind the interests of the company's core personnel to the company's interests. this equity incentive covers a wide range of people, including 65 directors, senior managers and core managers of the company. after the incentive, it is expected to further mobilize the enthusiasm of the company's personnel and be optimistic about the long-term development of the company.
Financial forecasts and investment suggestions
We maintain the company's EPS of 0.77, 0.83, 0.88 yuan in 2019-2021, 31 times valuation in 19 years, corresponding to the target price of 23.87 yuan, and maintain the overweight rating.
Risk hint
The promotion of the company's brand is not up to expectations; the promotion of channels is not up to expectations.
