Incident: In 2023H1, the company achieved revenue of 79.357 billion yuan (+16.73%), net non-attributable profit of 1,295 million yuan (+17.09%), net cash flow from operating activities of 518 million yuan (+125.22%); in the single Q2 quarter, it achieved net profit of 782 million yuan and 722 million yuan, an increase of 39.32% and 26% over the previous quarter. The performance was in line with expectations.
The general manager continued to contribute to performance, creating a second profit growth curve. By splitting the main business, the pharmaceutical distribution business grew steadily. 2023H1 achieved revenue of 67.488 billion yuan (+14.01%), with a gross profit margin of 6.74% (+0.01pp); the total agency business achieved revenue of 8.637 billion yuan (+38.74%), accounting for 10.90% (+1.74pp), with a gross profit margin of 16.95% (+2.45pp), of which total pharmaceutical agent revenue was 4.949 billion yuan (+48.60%). As of 2023H1, the company's total number of pharmaceutical substitutes reached 915 million yuan (expected to exceed 1.9 billion yuan per year). Individual); in addition, the pharmaceutical industry had revenue of 1,182 million yuan (+5.44%) and pharmaceutical retail revenue of 1,442 billion yuan (+14.42%).
In-hospital channels are growing rapidly, and online platforms have performed well. Split channels, 2023H1's first terminal achieved revenue of 19.01 billion yuan (+18.17%), of which public hospitals increased 23.29% year on year. As of 2023H1, the company had obtained 2,480 distribution rights with national procurement volume, including 270 exclusive distribution rights (including 102 exclusive provincial distribution rights), effectively covering 13,300 public hospital customers; the second terminal achieved revenue of 14.280 billion yuan (+11.87%), of which single pharmacies increased 24.85% year on year. As of 2023H1 The total number of retail pharmacies covered was about 376,800, an increase of nearly 50,000 over the previous year; the third terminal achieved revenue of 7.689 billion yuan (+26.27%); 2023H1 signed 23 new private hospitals, totaling 13,300; B2B e-commerce achieved revenue of 9.308 billion yuan (+28.78%), of which the Internet platform (fourth terminal) achieved revenue of 3,254 billion yuan (+62.56%).
The strategic transformation is being vigorously promoted, and the REITs project is about to be implemented. The company continues to promote the “Ten Thousand Stores” program. As of 2023H1, it has achieved 15,856 self-operated and franchise pharmacies, with stores spread across 31 provinces, municipalities and autonomous regions across the country, covering 291 prefecture-level cities, with a total of 1301 counties. The number of stores is expected to exceed 30,000 by 2025. Furthermore, the company's REITs project officially submitted application documents in August, with an estimated value of about 1.4 billion yuan. After the project is implemented, it is expected that the company's asset-light business model will be restructured, reliance on traditional debt financing methods will be reduced, and diversified benefits will be achieved.
Profit forecast and investment rating: The company's basic distribution and emerging general agency business continue to grow. We maintain the company's net profit of 24.4/28.3/3.24 billion yuan in 2023-2025. The PE corresponding to the current market value is 12X/10X/9X, maintaining a “buy” rating.
Risk warning: Business model risk, policy risk, market competition risk, and risk of bad debts in accounts receivable.