Recommended logic: 1) the company has a solid market position as a leading enterprise of cardio-cerebrovascular proprietary Chinese medicine, with three best-selling drugs ranking TOP20, with a total market share of 8.5%. 2) in recent years, it has gradually transformed into chemical and biological drugs. To increase the investment in original research and generic drugs, three category 1 chemical drugs have entered the clinical stage, generic drugs are expected to achieve bend overtaking under the volume procurement policy, and two kinds of biological drugs have entered the clinical phase of Ⅲ. 3) with a number of products under research gradually on the market to improve the product line, the compound growth rate of revenue in the next three years is expected to achieve a rapid growth of 9.4%.
The leading position of cardio-cerebral vascular proprietary Chinese medicine is stable. The company has three exclusive patent varieties of traditional Chinese medicine, Naoxintong capsule, Wenxin granule and Danhong injection, with a total income of 8.71 billion yuan, and ranks among the top 20 in the market share of cardio-cerebrovascular proprietary Chinese medicine in 2019. At the same time, the company is actively exploring the application of drugs and biological drugs in the field of cardio-cerebrovascular diseases, and has cultivated exclusive patent varieties such as Shenxiong glucose injection, compound brain peptide ganglioside injection, compound tripeptide injection, ginkgo honey ring oral solution and so on, with a total income of 2.26 billion yuan in 2019.
Adhering to the strategy of "focusing on major diseases and cultivating large varieties", we will distribute the use of drugs for a variety of chronic diseases. Based on cardio-cerebrovascular, the company has gradually expanded to gynecology, pediatrics, prostate, diabetes and other "chronic diseases" areas, including a total of 66 national essential drug catalogue products, a total of 162 national basic medical insurance, industrial injury insurance and maternity insurance drug catalogue products. Gynecological medicine red nuclear Fujie lotion is the third kind of new medicine of national traditional Chinese medicine and is the exclusive variety of the company. In addition, product coverage has also been achieved in pediatrics, anti-tumor, urinary digestion, bone joints and respiratory system.
Independent R & D + acquisition strategy is promoted synchronously, and the variety under research is rich. Spending on R & D has been increasing, totaling 640 million yuan in 2019, accounting for 4.5 per cent of revenue. As of December 2019, there were 219 products under research (12 traditional Chinese medicine, 197 chemical medicine and 10 biological drugs). 1) Biopharmaceuticals: at present, 10 therapeutic biological products (including 8 category 1 therapeutic biological products) and 2 preventive biological products (vaccines) are under development. Some of the products have entered the clinical II or III stage, covering tumors, osteoporosis, anemia, arthritis, cardio-cerebrovascular diseases, etc. 2) Chemical medicine field: under the policy of consistency evaluation and volume procurement, the original research drugs with clear targets are put into the Ⅰ phase, and at the same time, generic drugs are actively distributed to strive for bend overtaking; 3) Vaccines: indirect acquisition of Zhejiang Tianyuan, a subsidiary of GSK, to obtain the international leading R & D resources for influenza and meningitis vaccines.
Profit forecast and investment advice. It is estimated that the EPS from 2020 to 2022 will be 1.77, 1.91 and 2.19 yuan, respectively, and the corresponding PE will be as much as that of 15-14-12. Considering that a number of varieties under research will be listed one after another in the future, the income level will be greatly increased with the gradual improvement of the product line. For the first time, it is given a "hold" rating with a target price of 30.09 yuan.
Risk tips: drug price reduction, product research and development is not as expected, goodwill impairment risk.
