Events:
The company recently released its annual report for 2019. During the reporting period, the company realized operating income of 2.026 billion yuan, down 16.64% over the same period. Net profit and return net profit were-17.12 yuan and-1.71 billion yuan, respectively, from profit to loss compared with the same period last year, deducting non-return net profit of-1.721 billion yuan. There are no conditions for profit distribution in 2019, so the company will not distribute cash dividends in 2019. In Q1 in 2020, the company achieved revenue of 286 million yuan, down 32.53% from the same period last year, with a net profit of-27 million yuan and a relatively narrowed loss.
Main points of investment:
The traditional chemical business is obviously under pressure, and the impairment of assets affects the company's short-term performance in 2019. The overall performance of the company declined in 2019. From the perspective of business, the company's pharmaceutical operating income was 396 million yuan, down 42.17% from the same period last year, and the total profit was 59 million yuan. Tongzi chemical business has an income of 1.615 billion yuan and a total profit of-1.683 billion yuan. The loss is mainly due to the company's provision of 1.569 billion yuan for impairment of fixed assets and 71 million yuan for intangible assets. From the product side: the company's income mainly comes from urea, methanol and western medicine products, with revenues of 9.66,5.88 and 344 million yuan respectively during the reporting period, down 3.96%, 8.80% and 28.76% respectively compared with the same period last year.
Subject to the overall pressure of the industry, the prices of urea, chemical fertilizer and methanol are lower than those in 2018.
At the same time, the core products of western medicine companies are affected by "volume procurement" and market competition pressure, drug prices and sales have declined. Quarterly point of view: except for Q2 to achieve a net profit of 10 million yuan, other quarters failed to achieve profits, of which Q3 quarter was affected by asset impairment to achieve a net profit of-1.652 billion yuan. On the expense side: the sales expense rate was 9.58%, a decrease of 0.84% over the same period last year; the management expense rate was 6.96%, an increase of 1.5% over the same period last year; the R & D expense rate was 3.63%, an increase of 1.31% over the same period last year; and the financial expense rate was 2.69%, a slight increase of 0.16%. In 2020, the chemical business of Q1 company declined year on year due to the joint influence of the epidemic, Tongzi chemical overhaul parking and the price decline caused by the oversupply of urea and methanol market; the pharmaceutical business was affected by the superimposed price decline of volume procurement, with revenue of 48 million yuan, down 44.38% from the same period last year.
Divestiture chemical business to improve operation quality, pharmaceutical manufacturing business is expected to pick up in chemical business: on March 28, 2020, the company announced that it would publicly list and transfer 100% equity of Guizhou Chitianhua Tongzi Chemical Co., Ltd. By divesting the chemical fertilizer and chemical business with weak profitability, the company will help the listed company to reduce the operating burden and improve the company's profitability and financial situation. The move also marks the company's focus on the big health business with pharmaceuticals as its core. In terms of pharmaceutical manufacturing business: in 2019 and Q1, the company was obviously affected by the epidemic and collection, but when glimepiride tablets (Shengping) won the bid in "National Mining" in 2020, the company will gain the first share in the domestic public hospital market. with the epidemic has been basically controlled, it is expected that the performance of the pharmaceutical business will pick up this year.
Strengthen the research and development of pharmaceutical products and cultivate the sales growth points of stem cell therapy and traditional Chinese medicine products
In the research and development of chemical drugs and stem cells: the company strengthens the layout of diabetes product preparations, develops acarbose, and has completed bioequivalence (BE) trials. Guizhou Meso Biology, a subsidiary of the company, mainly carries out the research of stem cell biotechnology, the production of biological products and the research of genetic technology. At present, the company has received the "test report" of umbilical cord mesenchymal stem cells and placental amniotic mesenchymal stem cells issued by the Central people's Procuratorate. The report shows that the functions of the first batch of stem cell samples submitted by the company are consistent with the characteristics of umbilical cord mesenchymal stem cells and placental amniotic mesenchymal stem cells. Stem cell business is expected to become the company's new business growth potential in the future. In the aspect of traditional proprietary Chinese medicine: the company has five exclusive Miao medicine products (Zhonglou jiedu tincture, compound Zhonglou tincture, Boxekang medicine film, Danqing capsule, Jiulong jiedu capsule). Among them, Zhonglou jiedu tincture is the exclusive variety that enters the 2019 edition of "National basic Medical Insurance, Industrial injury Insurance and Maternity Insurance Drug catalogue" and has good market competitiveness. In the future, the company will focus on cultivating products such as Zhonglou jiedu tincture, Jiulong jiedu capsule, Eucommia ulmoides granule and so on, as the growth point of the company's future development. Improve the utilization rate of the company's production line and improve the comprehensive efficiency of the company.
Profit forecast and investment advice:
It is estimated that the company's net profit in 2020, 2021 and 2022 is 0.59,0.66 and 74 million yuan respectively, the EPS is 0.03,0.04,0.04 yuan respectively, and the share price PE before the corresponding is 89 times, 79 times and 71 times respectively. In view of the current divestiture of the chemical business, there is still some uncertainty, as well as the impact of epidemic factors on the company this year, the follow-up will be closely followed up, given a "wait-and-see" rating.
Risk factors:
Risk of suspension or failure of major asset sales, risk of failure of drug research and development and follow-up submission of stem cells, slow cultivation of growth points