Investment highlights
For the first time, it covered Jiangsu Wuzhong (600200) and gave it an outperforming industry rating. The target price is 8.50 yuan, corresponding to 43x P/E in 2024. The company is based on the main pharmaceutical business and strategically boosts the medical and aesthetic circuit. We are optimistic about the company's deep pharmaceutical industry accumulation, differentiated medical and aesthetic pipeline layout, and perfect core team building, which is expected to achieve rapid growth. The reasons are as follows:
The Chinese medical and aesthetic market is booming, and new blue ocean racetracks such as regenerants and collagen are on the rise. The Chinese medical and aesthetic market is in a period of rapid growth. We believe that light medicine and aesthetics, represented by injections, are expected to be the first to benefit from increased medical and aesthetic penetration. According to Frost & Sullivan, the domestic injectable terminal market is 42.4 billion yuan in 2021, of which the hyaluronic acid market is 21.7 billion yuan. The CAGR is expected to reach 18% in 2022-27, with broad growth space. Regenerative drugs, collagen, etc. are emerging blue ocean tracks, with a market size of about 31/37 billion yuan in 2021, and their estimated CAGR is about 22% in 2022-27. We believe that the expansion of new supply-side products is expected to catalyze a faster release of demand.
Core competitiveness: ① The pharmaceutical industry has a deep foundation, and collaboration empowers the development of medical aesthetics. As an established pharmaceutical company, the company has accumulated a deep accumulation of talents and expert resources, product research and development, clinical and registration applications, etc., effectively empowering the expansion of medical and aesthetic business. ② Agent+self-research are carried out in parallel to create a complete and differentiated medical and aesthetic pipeline. Pipeline products have been distributed into categories such as baby skin needles, hyaluronic acid, collagen, lipolytic injections, and hemp. Among them, Aesthefill, the exclusive agent, has the advantages of high collagen production efficiency, high flexibility in multi-concentration compounds, and high safety; at the same time, it is the agent of Himedix's HARA hyaluronic acid, which develops its own strategic categories such as collagen and fat-dissolving injections, so we believe the prospects for pipeline products are promising.
③ Talent and organizational support: The medical and aesthetic industry has high operating barriers. The company has built a Wuzhong aesthetic platform to improve the talent echelon and introduce expert teams around R&D, production, and sales. We believe it is expected to accelerate the clinical, reporting, and marketing of its research pipeline to support the rapid implementation of medical and aesthetic business.
Growth drivers: The pharmaceutical business is stabilizing, and medical and aesthetic growth can be expected. ① Pipeline products continue to be implemented: In the short term, Aesthefill's exclusive agent, is in the high-growth regenerative blue ocean market. Domestic clinical registration is progressing smoothly. The company expects to go on sale in 2024. Good overseas sales performance lays confidence in the domestic market's relatively rapid expansion; mid-term pipeline relay for hyaluronic acid, collagen, and hemp; long-term fat-dissolving acupuncture projects are progressing steadily. ② Continued improvement in sales capacity: The company built a marketing team prior to medical and aesthetic product forensics, and continued testing and run-in teams through category II, collagen and other categories. We believe that the subsequent increase in sales capacity is expected to accelerate the incubation of medical and aesthetic products.
The biggest difference between us and the market? We believe that the market has underestimated the differentiated advantages and medium- to long-term growth potential of the company's medical and aesthetic pipeline.
Potential catalysts: mergers and acquisitions; pipeline product implementation time exceeds market expectations.
Profit forecasting and valuation
We expect the company's EPS for 2023-24 to be 0.01 yuan and 0.20 yuan, respectively. For the first time, coverage gave an outperforming industry rating. The current stock price corresponds to 2024e P/E 37x. Using segmented valuation, considering that the medical and aesthetic pipeline has not yet been implemented, based on 2024e, which is the first year after the implementation of medical aesthetics, the medical and aesthetic sector is given 40x P/E and the pharmaceutical sector 1x P/B, corresponding to the target price of 8.5 yuan, with 14% room for growth.
risks
Increased competition in the industry; ongoing research progress and new product promotion falling short of expectations; quality control issues; stricter supervision.