Performance:
The company recently released its 2023 semi-annual report that 2023H1 realized operating income of 1.819 billion yuan (- 3.72%), net profit of 245 million yuan (- 33.55%), and net profit of 236 million yuan (+ 77.40%). From the point of view of 2023Q2, the operating income is 730 million yuan (+ 5.35%), the net profit is 82 million yuan (- 66.08%), and the net profit is 76 million yuan (+ 293.61%).
Comments:
The performance is in line with expectations, and the growth of the pharmaceutical industry is bright. The company transferred 51% of Jiuzhitang Pharmaceutical shares in May 2022, with a transaction consideration of 204 million yuan, and 2022Q2 achieved a net profit of 245 million yuan.
Excluding the impact of pharmaceutical business, the company achieved a business income of 1.769 billion yuan (+ 22.96%) in the first half of 2023, restoring and maintaining a good growth trend. In addition, the OTC business (mainly Liuwei Dihuang pills, Ejiao, Lujiao Buxue granules, Zukuang Powder and two or three echelon products, etc.) achieved operating income of 843 million yuan, gross profit of 53.46%, and prescription drugs (mainly Shuxuetong injection and Angong Niuhuang pills) achieved operating income of 912 million yuan, gross profit of 73.44%.
OTC and Angong Niuhuang pills accelerate their release and are expected to grow in the future. The operating income of 2023H1, the parent company of Jiuzhitang, is 1.017 billion yuan (+ 21.56%), and that of Chengdu Jinding is 192 million yuan (+ 51.39%). The income of OTC+ Angong Niuhuang Pill can be referred to the operating income of the parent company + Jiuzhitang Jinding. 2023H1 has achieved a total of 1.208 billion yuan (+ 25.48%), with a bright growth performance and is expected to maintain a good growth trend in the second half of the year.
The reform of integration of production and marketing has injected vitality into the growth of subsidiaries. Traditional Chinese medicine injection mainly benefited from the recovery of the hospital drug market and achieved restorative growth. The subsidiary Mudanjiang Youbao Pharmaceutical Co., Ltd. (the main product is Shuxuetong injection) achieved operating income of 452 million yuan (+ 25.28%), net profit of 109 million yuan (+ 56.24%) and net interest rate of 24.02% (+ 4.76pct). The good growth trend is expected to continue in the second half of the year. In addition, Chengdu Jinding achieved operating income of 192 million yuan (+ 51.39%), Hunan Siqi Biology (the main product is Siqikang) achieved revenue of 24 million yuan (+ 4.43%), Hainan Jiuzhitang (the main product is naked flower purple bead series) achieved revenue of 26 million yuan (+ 117.65%).
Profit forecast and investment advice. In view of the fact that the company's results in the first half of 2023 are in line with expectations, we estimate that the company's operating income in 2023, 2024, will be $3278 million, net profit of 535 million, and PE will be 22.51, 17.98, 14.38 times, respectively. Combined with the comparable company valuation, with reference to the 2024 30 times PE valuation, the target price is 18.75 yuan, maintaining the "buy" rating.
Risk hints: the dynamic sale of products is not as expected; the price fluctuation of traditional Chinese medicine; collection risk and so on.