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On the evening of April 17, the company released its 2019 annual report with revenue of 1.635 billion yuan (- 2.06%), net profit of 202 million yuan (+ 10.34%) belonging to shareholders of listed companies, net profit of 139 million yuan (+ 27.08%) after deducting non-recurring profits and losses belonging to shareholders of listed companies, and basic earnings per share of 0.40 yuan. It is proposed to add 4 shares and distribute cash of 2.00 yuan (including tax) for every 10 shares.
Comments:
The performance grew steadily, and the production line resumed and consolidated the main basic plate.
Revenue reached 1.635 billion yuan (- 2.06%) in 2019, with a slight decline, but basically stable. The transformation of some workshops and GMP recertification in 2018 affected the production and inventory of the company's main products to a certain extent, and brought some pressure on revenue growth in 2019, but production has now resumed. The output of the main products cefuroxime sodium, cefoxime hydrochloride, tropisetron hydrochloride and alanyl glutamine all rebounded significantly in 2019. Production increased by 40.89%, 40.28%, 32.84% and 40.21% respectively over the same period last year. We believe that under the premise of adequate production stocks, the company's annual sales growth is expected to return to positive. The company's variety focus and create a competitive single product strategy is appropriate, the core main products contribute to the company's main revenue, a number of varieties ranked in the top three of the domestic share. The revenue of the digestive system product line is 510 million yuan (- 9.96%), the gross profit margin is high (94.3%), the main product omeprazole sodium for injection has been maintained at about 30 million in the past three years, the company's products are 20/60mg specifications, the competition among industry varieties is relatively relaxed, and the company's market share ranks among the top three companies in the industry (injection form). The products are highly competitive in Guangdong and other major pharmaceutical provinces. According to the production and marketing data, we expect sales in 2019 to be about 400 million yuan, accounting for more than 80% of the revenue of the digestive tract product line. The revenue of parenteral nutrition product line is 280 million yuan (+ 0.45%), and the product line includes alanyl glutamine for injection (specification 10g/20g), injection fructose, converted sugar and so on. The main product is alanyl glutamine, which ranks second in the domestic industry, second only to Coren Pharmaceutical Co., Ltd., with sales of about 4.05 million bottles in 2019. We expect to account for the main sales of the company's parenteral nutrition product line. There are many kinds of anti-infective product line companies. Cefuroxime sodium (specification 1.25g/1.75g/3g) and cefotaxime hydrochloride (specification 0.25g/0.5g/1.0g) contribute to the main sales of the company's anti-infective product line. According to the production and marketing data, the sales are estimated to be about 300 million yuan and 200 million yuan. In addition, the company cefazoxime sodium market share industry second, cefmendol sodium ranked third in the industry, single product industry competitiveness is strong.
Most of the company's products are injection-based generic drugs, which are not subject to the pressure of volume procurement and consistency evaluation, but the company actively responds to them. Promote the consistency evaluation of generic drugs, including omeprazole, pantoprazole sodium, cefoxime hydrochloride, cefoperazone sodium sulbactam sodium, cefuroxime sodium, etc., and consolidate the product foundation. Speed up the progress of registration and application of drugs such as lansoprazole, levocarnitine injection, mezlocillin sodium sulbactam sodium, flucloxicillin sodium, cefazoxime sodium, ambroxol hydrochloride injection, etc. In 2019, the company obtained two drug registration documents of tropisetron hydrochloride injection and Ozagrel sodium injection, which further enriched the product pipeline.
New varieties with high gross profit, bright spots in the layout of large health industry
Under the premise of stabilizing the sales of basic products, the company will focus on developing new varieties with high gross margins in the future, which will provide the source power for the company's sustained growth. The company's reserve products, such as Huperzine A for injection, are the only domestic varieties for the treatment of Alzheimer's disease, with a market space of more than 30 billion; in addition, nicergoline for injection, labetalol hydrochloride for injection, acetylcysteine for injection are expected to release, and the company's profitability continues to rise. At present, the core variety of the company has not been affected by the volume procurement policy, so the revenue still maintains steady growth.
There are some bright spots in the layout of the large health industrial chain. The Boao Super Hospital, which is indirectly invested by the company, enjoys the "early and pilot" policy, which allows the trial of import registration of unlisted new drugs, medical devices and drugs, such as rapid and low tariffs, and allows declaration to carry out clinical research on stem cells, and other important preferential policies; it is co-initiating with Hainan State-funded system Company to set up a health insurance company, which is still waiting for the approval of the CBIC. In addition, the controlling shareholder has acquired Huaxi Shangjin Nanfu Hospital, with good quality and strong profitability (annual income exceeds 1 billion mark), so it is possible to buy into a listed company in the future.
Performance Forecast and Investment rating
We forecast that from 2020 to 2022, the company's operating income will be RMB 1.83 trillion, its net profit will be RMB 2.90 billion, and the reference share capital will be 510 million RMB, corresponding to an EPS of RMB 0.47 pm per share. The corresponding price-to-earnings ratio of today's closing price (RMB 11.96 yuan / share) is 25-21-17 times.
The company has abundant net cash, financial health, rich dividend since listing, dividend rate as high as 59.5%, coverage for the first time, given a "buy" rating.
Risk hint
Drug price reduction is higher than expected; the impact of medical policy; R & D progress is not as expected.
