What happened: the company recently received notification from Chongqing Pharmaceutical and Health Industry Co., Ltd., the controlling shareholder of Chongqing Chemical Medicine Holdings (Group) Co., Ltd., which is the controlling shareholder of Health Industry Co., Ltd., that the Chemical Medicine holding Group intends to reform the mixed ownership of Health Industry Company.
With the introduction of strategic investors, the internal management mechanism is expected to be optimized. The Chemical Medicine holding Group intends to openly solicit a strategic investor to transfer its 49% stake in the health industry company, the low transfer price is 4.1 billion yuan, and the intended transferee should be engaged in pharmaceutical business or pharmaceutical industry or health-related business, it is necessary to cooperate with the existing business of the pharmaceutical and health industry company. And the intended transferee or its controlling shareholders are the top 2018 Chinese enterprises published by the China Enterprise Confederation, or the top 15 enterprises in the "Top 100 Pharmaceutical Wholesale Enterprises in 2018" announced by China Pharmaceutical Business Association.
We believe that under the premise of keeping the Chongqing SASAC as the controlling shareholder of the company, this public transfer of equity will further supplement the company's competitiveness in the southwest and is expected to promote the infiltration of the company's business throughout the country. activate the market-oriented management mechanism within the Chemical Medicine Group and promote the company's health industry to become stronger and better.
2019H1 performance exceeded expectations, with the help of the "4-7" opportunity to continue to enhance the driving force of development. In 2019, H1 Company achieved an income of 16.2 billion yuan, an increase of 33.8% over the same period last year, a net profit of 460 million yuan, an increase of 49.7% over the same period last year, and a non-return net profit of 430 million yuan, an increase of 45.6% over the same period last year. The company continued to strengthen its growth momentum by taking advantage of the "4x7" policy opportunity, and actively participated in the drug distribution of the state-organized drug centralized procurement pilot program in the first half of 2019. Among the 25 shortlisted varieties, the company achieved full coverage in Chongqing, while the company also obtained some variety distribution rights in the pilot city Chengdu.
Vigorously ploughing the western region, the leading status continues to rise. The company has ploughed the western region for more than 60 years, and in the core sales area of Chongqing, it has achieved full coverage of Grade 3A medical institutions and basic coverage of secondary hospitals. The coverage rate of secondary and above medical institutions in Chongqing has reached more than 80%. In Chongqing, districts and counties have been shortlisted for 40 consortia, and the coverage rate of medical institutions in the whole city occupies a leading position. with the continuous improvement of industry concentration, the company is the leader in the commercial field in the western region. The position of the industry will continue to strengthen.
Profit forecast and investment advice. It is estimated that the net profit from 2019 to 2021 will be 890 million yuan, 1.08 billion yuan and 1.3 billion yuan respectively, covering for the first time with a "buy" rating and a target price of 7.65 yuan.
Risk hint: the progress of the mixed reform may not be as expected, and the operating efficiency may decline significantly.