Incidents:
On August 24, Tong Ren Tang Technology released its semi-annual report: 2023H1. The company achieved revenue of 3,946 million yuan, an increase of 30.91% over the previous year; net profit of Gimu was 368 million yuan, an increase of 15.65% over the previous year.
Investment highlights:
Large product volume, achieving high revenue growth In the first half of 2023, under the guidance of the large variety strategy, the company's first-tier and second-tier products competed around the theme of “Tong Ren Tang Imperial Medicine for 300 Years”. The company achieved revenue of 3,946 billion yuan, an increase of 30.91% over the previous year. The parent company (after deducting internal offsets) achieved revenue of 2,523 million yuan, an increase of 26.27% over the previous year. Among them, revenue from the Cold Remover series increased 158.11% year on year; revenue from the Shengmai Drink series increased 70.86% year on year; revenue from the Ejiao series increased 55.88% year on year; revenue from the Jinqui Kidney Gas series increased 22.78% year on year; and revenue from the Niuhuang Detox series increased 13.36% year on year.
The company's operating conditions are good, and the cash flow is stable. The net cash generated from the company's operating activities in the first half of 2023 was 848 million yuan, an increase of 59.65% over the previous year. The company's overall business conditions are improving.
The company's gross margin declined in the first half of 2023, and the company achieved gross profit of 1,567 billion yuan, an increase of 21.17% over the previous year. The gross profit margin was 39.71%, down 3.19 percentage points from the previous year. The cost of sales ratio was 15.67%, down 0.8 percentage points from the previous year. The management fee rate was 7.94%, up 0.43 percentage points from the previous year. Financial revenue was 17.59 million yuan.
Guided by the profit forecast and investment rating strategy, the company's first-tier and second-tier products compete for volume, and are optimistic about the long-term development of the company. It is estimated that 2023/2024/2025, the company's revenue will be 71.61, 84.91, and 10.150 billion yuan, respectively, up 20%/19%/20% over the previous year; the corresponding net profit of the homologated mother is 677, 795, 937 million yuan, up 16%/17%/18%; corresponding PE valuation is 11.7X/10.0X/ 8.5X Covered for the first time, giving it a “buy” rating.
Risk indicates the risk that the volume of core products falls short of expectations. There is a risk of inter-industry competition within the group. The risk of falling short of expectations in price increases for core products. There is a risk that the cost of raw materials will rise too much. Policy risk.