This report is read as follows:
2023Q3 company performance steady growth, maintain a stable store opening speed, Tianshili project normal progress, and after the statement is expected to bring performance increment.
Main points of investment:
The performance is in line with expectations, and the maintenance holds and increases the rating. Considering the delay in the arrival time of M & A projects, the EPS for 2023-2025 is lowered to 0.700.91max 1.22 yuan (the original 0.74 less 0.98 pound 1.31 yuan), and the target price is maintained at 24.27 yuan, corresponding to 2024 PE 27X, maintaining the overweight rating.
Income is growing steadily. 2023Q1-3 realized income of 6.534 billion yuan (+ 24.53%), net profit of 162 million yuan (+ 24.52%), net profit of 160 million yuan (+ 30.17%), income of 2.273 billion yuan (+ 22.36%), net profit of 22.83 million yuan (+ 23.58%) and net profit of 27.79 million yuan (+ 65.82%), in line with expectations. The zero growth rate of 2023Q3 Chinese and Western proprietary Medicine Society has slowed down, and the growth rate of the same drugstore is also under pressure, but the company has achieved steady growth with the help of self-construction and extension.
The low absolute value of profit is a normal fluctuation between quarters. 2023Q3 gross margin continues to rise to 28.52% (+ 1.53pct), and the retail side is expected to continue to improve as a result of category restructuring. The 2023Q3 sales / management / financial expense rates are respectively + 0.44/-0.06/+0.33pct, which is relatively robust. With the improvement of human efficiency, the expense rate is expected to show a downward trend. The absolute value of Q3 profit of the company over the years is at a low level, mainly due to the high cost of recruiting new employees and other reasons, Q4 is expected to improve month-on-month.
The growth rate of stores is steady, and 2023Q4 is expected to accelerate. As of 2023Q3, there are a total of 6778 stores (4015,2763 direct sales / franchise respectively) and 299 new self-built / M & A / franchise stores. The company is the leading drugstore in Shandong Province, but its market share is still low and there is broad space for follow-up growth. According to the announcement, the Tianshili project is progressing smoothly in Liaoning and other places outside the province. In 2022, Tianshili in Liaoning and Pingjia in Jinan have an operating income of 994 million yuan, with a total of 556 stores. If the merger and acquisition is successful, it will bring increment to the company's performance and contribute to the company's strategic layout in Liaoning.
Risk hint: the market competition aggravates the risk, and the prescription outflow is less than expected.