Together with the controlling shareholder, China General Technology (Group) holding Co., Ltd. (hereinafter referred to as "General Technology Group"), the company intends to transfer 49% of the shares of Chongqing Pharmaceutical and Health Industry Co., Ltd. (hereinafter referred to as "Chongqing Pharmaceutical Health"). The two sides contributed a total of 4.1 billion yuan, accounting for 49% of the equity of Chongqing Pharmaceutical and Health Industry Co., Ltd. Among them, China Pharmaceutical plans to contribute 2.259 billion yuan and transfer 27% of Chongqing Pharmaceutical Health's equity.
The situation of the target company: Chongqing Pharmaceutical Health holding 4 enterprises, the scope of business covers pharmaceutical commerce, pharmaceutical industry, health care three major business sectors. The main body of pharmaceutical commercial operation is listed company heavy Pharmaceutical Holdings Co., Ltd. (hereinafter referred to as "heavy Pharmaceutical Holdings", stock code: 000950), which is mainly engaged in pharmaceutical circulation business. Chongqing Corey Pharmaceutical (Group) Co., Ltd. (hereinafter referred to as "Corey Pharmaceutical"), which has two complete industrial chains of traditional Chinese medicine and chemical medicine. Chongqing Heping Pharmaceutical Co., Ltd. (hereinafter referred to as "Heping Pharmaceutical"), a pharmaceutical enterprise, mainly produces powder, granule, water, tablet and other dosage forms, as well as Akafen powder, gold herb, oral glucose and other drugs; the main body of health operation is Chongqing Qianye Health Management Co., Ltd. (hereinafter referred to as "Qianye Health"), mainly engaged in hospital management and operation business.
The impact of related party transactions on listed companies: (1) the funding sources of this trading company are self-owned funds and self-raised funds. In this transaction, the amount of investment in Chinese medicine is about 2.259 billion yuan, with a shareholding ratio of 27%, of which 500 million yuan is self-owned capital and 1.759 billion yuan is loan. It is estimated that this transaction will increase China's pharmaceutical asset-liability ratio by about 2.45 percentage points, which will have no impact on the normal operation of listed companies. (2) the projected profit of Chongqing Pharmaceutical Health, the target company of this transaction, is 525 million yuan in 2019, which is reflected in the investment income account of the profit statement of listed companies by 142 million yuan because it is not consolidated with listed companies. (3) the company's acquisition of Chongqing Pharmaceutical Health equity is of great strategic significance, which can rapidly expand the market and form a synergistic effect.
Profit forecast, valuation and investment rating. We expect the company to achieve revenue of 36.874 billion (+ 18.9%), 42.749 billion (+ 15.9%) and 47.465 billion (+ 11%) respectively in 19-21, and estimated net profit of 1.293 billion (- 16.3%), 1.362 billion (+ 5.4%) and 1.503 billion (+ 10.4%) in 19-21 years. In view of the company's stable expectation of free cash flow in the future, the DCF valuation method is used to forecast the target price of 15.2yuan. The company's performance is stable, covering for the first time and given a "recommended" rating.
Risk hint: Chongqing Pharmaceutical Health performance is not up to expectations, long-term equity investment growth slowdown risk.