Report highlights:
Jiuzhitang Co., Ltd., which is the number one time-honored enterprise in Hunan Province and has a modern market advantage, was established in 1999 and listed on the Shenzhen Stock Exchange in 2000. The company has two “famous trademarks in China”, “Jiuzhitang” and “Youbo”, and was recognized as a “time-honored brand in China” by the Ministry of Commerce in 2006. The company has more than 300 drug approvals in the fields of cardiovascular, mental health, gynecology, breathing, digestion, heat removal, facial organs, otolaryngology, orthopedics, dermatology, and pediatrics. The prescription drug field is represented by Shuxuetong injection, and the non-prescription drug field is represented by donkey gum blood supplements and Liuwei Dihuang pills. It has a good reputation and market advantage in the proprietary Chinese medicine market.
Balancing prescription drugs and OTC to produce high-quality star products
The company's main products are divided into non-prescription drugs and prescription drugs. It has established first-tier products centered on Huxetong injections, donkey gum blood supplements, Liuwei Dihuang pills, Yasugong Niuhuang pills, Ejiao, Zuguangsan, Sikkang, Naked Flower Purple Pearl tablets, etc., and second-tier filling products such as Kidney Tooth Supplement Pills, Xiaojin Pills, Xiaoyao Pills, Qijudi Huang Pills, Gui Ju Di Huang Pills, etc., to incubate exclusive and unique Ah Zhen Blood Supplement and Kidney Supplement Pills, etc. Third-tier products such as oral liquid, hair growth pills, lung health pills, and laryngitis pills.
In 2021, the company achieved sales revenue of over 100 million yuan from 6 product varieties, namely Shuxuetong Injection, Liuwei Dihuang Pills, Donkey Gum Blood Supplement Granules, Ejiao, Angong Niuhuang Pills, and Zu Guangshan; 26 product varieties achieved sales revenue exceeding 10 million yuan. The products on sale have sufficient consumer education and enjoy a good reputation and brand effect in the market.
Cooperate with Yifeng to promote the company's development
In April 2022, the company signed a “Equity Transfer Framework Agreement” with Yifeng Pharmacy Chain Co., Ltd. The company sold 51% of its shares in Hunan Jiuzhitang Pharmaceutical Co., Ltd. to Yifeng. This equity transfer helps to give full play to the advantages of both parties, helps achieve a strong alliance, and highlights the market advantages of both parties — the company not only maintains the “Jiuzhitang” brand name, but also expands the brand influence on the sales side through Yifeng's mature pharmaceutical layout and market competitiveness, which will help enhance the market competition pattern in the future.
Investment advice and profit forecasting
The company has many classic products, sufficient consumer education, and a strong partnership with Yifeng is expected to help increase the company's influence. It is estimated that in 2023-2025, the company's net profit attributable to shareholders of the parent company will be 4.52, 5.46 and 649 million yuan, respectively. The corresponding basic earnings per share are 0.53, 0.64 and 0.76 yuan/share, respectively, and the corresponding PE is 21, 17 and 14 times, respectively. Considering the company's position and brand advantage in the proprietary Chinese medicine industry, it was covered for the first time, and the company was given a “buy” investment rating.
Risk warning
Industry policy risks; raw material price fluctuations and supply risks; drug price reduction risks; R&D falling short of expectations.