occurrences
In the first half of 2023, the company achieved revenue of 664 million yuan, an increase of 38.47% over the previous year; net profit attributable to shareholders of listed companies was 10.6641 million yuan, an increase of 28.61% over the previous year; non-net profit attributable to shareholders of listed companies was 10.96.74 million yuan, an increase of 152.63% over the previous year.
Incident reviews
The effects of the reform are gradually showing. Gross margin has increased, and expenses have been gradually reduced. The company's main revenue for a single quarter was 295 million yuan, up 22.04% year on year; net profit totaled 273,600 yuan, up 305.05% year on year; net profit after deducting 1,252,600 yuan in a single quarter, up 140.34% year on year. In the first half of the year, the pharmaceutical industry's revenue increased by 41.86% over the same period last year, and sales of the company's core products, Yasumiya Niuhuang Pills and Turtle Age Collection, increased.
Through the “cost reduction and efficiency increase” campaign in the first half of 2023, the company's overall gross margin increased to 71.80%, +3.49 percentage points year on year; the cost rate for the period was 64.84%, -2.20 percentage points year on year; of these, the sales expense ratio was 55.16%, +1.91 percentage points year on year. Major companies continued to strengthen terminal marketing, and net sales growth led to an increase in sales expenses; the management expense rate was 8.43%, -2.59 percentage points year on year; the financial expenses rate was 1.25%, -1.51 percentage points year on year, mainly through “old account settlement”,” Initiatives such as “cash delivery” have contributed to a sharp increase in operating cash flow and a continuous reduction in the scale of interest-bearing debt.
Accounts receivable continued to decline and cash flow increased significantly
In the first half of the year, the company adopted “settlement of old accounts” and “cash delivery” measures, which boosted a sharp increase in operating cash flow. The first is to launch a special “old account settlement” campaign to promote the continuous decline in accounts receivable. Net accounts receivable for the first half of the year decreased by 228 million yuan from the beginning of the period, a decrease of 25.45%, and a decrease of 130 million yuan from the first quarter.
The company firmly implements the “cash delivery” policy, which not only avoids the generation of new accounts receivable, but also increases cash inflows from operating activities. Net operating cash flow was $279 million, an increase of 419% over the previous year.
Revenue from the three product lines has increased markedly. The product strategy shows that kinetic energy has strong momentum for reform after state-owned assets have taken over, and the company's operations are on the right track. By product, the revenue of traditional Chinese medicine was 416 million yuan, a year-on-year growth rate of +22.38%; gross margin was 73.71%, an increase of 3.98 percentage points over the previous year. Focusing on goods control, fee control, and control channels, channel inventories have declined markedly, returned to a healthy level, net sales have continued to increase, debt settlement efforts have increased, and repayment has reached a record high; accelerated the recruitment of regional partners and the development of empty markets; and promoted the improvement of the quality of tasks such as direct flow, reasonable inventory, and random price control.
The revenue of premium traditional Chinese medicine was 186 million yuan, a year-on-year growth rate of +120.60%; gross margin was 77.17%, a year-on-year decrease of 3.55 percentage points. The company is committed to implementing the “boutique traction” product strategy, expanding sales channels, and bringing about a significant increase in the revenue of quality traditional Chinese medicine. Through high-quality investment and accurate services, agent management and terminal quality were optimized. In the first half of the year, 16 new agents were recruited and 43 new stores were opened.
Part of the revenue of health alcohol was 20 million yuan, a year-on-year growth rate of +15.45%; gross margin was 55.35%, a year-on-year decrease of 2.09 percentage points. Carry out product streamlining and sorting, category selection, focus on core markets, focus on core products, and carry out various themed activities.
Investment advice
According to the 2023 semi-annual report, we adjusted our previous profit forecast. We expect that the company's revenue for 2023-2025 was 14.2/21.3/3.21 billion yuan, respectively, up 42.9%/50.1%/50.3% year on year, and net profit for return home was 0.7/234/49 billion yuan (original value was 1.1/25/49 billion yuan), respectively, with year-on-year increases of reversed loss/ 223.0%/109.2%. The corresponding valuation is 203X/63X/30X.
The company's various financial indicators have improved, and the results have been remarkable since the state-owned capital was invested, and we look forward to the release of more reform momentum. Combined with the company's own product strength and brand power, the company's investment value will be highlighted. Therefore, we maintain our “buy” investment ratings.
Risk warning
Risk of fluctuations in raw material supply and prices; risk of governance improvements falling short of expectations, etc.