The results in the first three quarters are under pressure. In the first three quarters of 2022, the company realized revenue of 4.9 billion yuan (- 10.68%), net profit of 470 million yuan (- 26.15%), and non-return net profit of 410 million yuan (- 34.10%).
Among them, the revenue in the third quarter was 1.589 billion yuan (- 20.58%), the net profit was 118 million yuan (- 40.63%), and the non-return net profit was 99 million yuan (- 50.00%). Revenue and profits declined in the first three quarters compared with the same period last year, and the decline at the profit end was greater than that at the revenue end.
The promulgation of the national standard of formula granules is slow, the variety is still insufficient, and the business recovery is not as expected. At present, only 200 varieties of national standards have been promulgated and implemented, while the 50 national standards announced in May have not yet been formally promulgated, resulting in no great progress in the filing of national standards in the past two months; in terms of provincial standards, there are great differences in the number and parameters of varieties in different provinces, and the degree of mutual recognition is low, which brings difficulties to the record of provincial standards. It is difficult for the provincial standard to put on record and the slow promulgation of the national standard leads to the insufficient number of new standard products that the company can sell, the sales volume is greatly affected, and the business recovery is slow.
The long-term prospect of formula particles is broad, and it is expected to usher in several times expansion. After the end of the pilot project in 2021, the terminal of formula granules will be expanded from secondary Chinese medicine hospitals to all medical institutions with traditional Chinese medicine practice at all levels, and the scope of use will be greatly increased, and it is expected to usher in several times the growth space. At present, although the industry is limited by the number of varieties in the short term, it has broad long-term prospects. As an important step in the modernization of traditional Chinese medicine, the standardization of formula particles is irresistible. With the subsequent promulgation and implementation of GB varieties, the formula granule industry will gradually recover. It is expected to usher in the inflection point in 2023 and enter the opportunity period of market expansion.
The product line is rich and the layout of the whole industry chain. The company takes the research and development of fine drugs and the production of good drugs as its own responsibility, focusing on the research and innovation in the fields of critical diseases, tumors and immunity, cardio-cerebrovascular, respiratory system, and neurodegenerative diseases. Business covers six major areas: finished drugs, traditional Chinese medicine formula granules and slices, raw and auxiliary materials, medical devices, medical and health services, and pharmaceutical equipment wisdom supply chain. With the expansion of the business field, the company continues to transform from an excellent manufacturer of traditional Chinese medicine products to an excellent health industry service provider.
Risk hints: the epidemic situation is repeated; the promotion of formula particles and the launch of new products are not as expected; goodwill impairment venture capital advice: the promulgation of national standards is imperative, and formula particles are expected to be restored and "increased".
The promulgation of the national standard for formula particles is imperative, and the formulation and release of the standard will be speeded up. With the introduction of the national standard at the end of the year and next year, the business will usher in an inflection point and get a strong recovery. The estimated income from 2022 to 2024 is 65.66 million yuan 81.33 billion yuan, with a year-on-year growth rate of-14.40 percent, 20.52 percent, and a year-on-year growth rate of 5.53 million yuan, and the year-on-year growth rate is 31.66 percent. The current stock price corresponds to PE=37/29/22x. Combined with absolute valuation and relative valuation, the reasonable valuation of the company is 7.10-8.22 yuan. Considering that the company is a leader in formula granules and the layout of multi-business such as finished drugs and medical devices is perfect, the company is given an "overweight" rating for the first time.