Incidents:
On October 27, 2023, the company released its report for the third quarter of 2023. In the first three quarters of 2023, the company achieved revenue of 6.5 billion yuan, an increase of 38.03% over the previous year, and realized net profit of 278 million yuan, an increase of 42.03% over the previous year.
Stores continue to expand rapidly, driving high growth in the company's performance:
On the revenue side, the company achieved revenue of 6.500 billion yuan in the first three quarters of 2023, an increase of 38.03% over the previous year.
Among them, proprietary Chinese and Western medicines, Chinese herbal medicines, health food, medical devices, and convenience products achieved revenue of 4.643 billion yuan (+47.91%), 273 million yuan (+41.78%), 337 million yuan (+14.98%), 537 million yuan (+14.52%), and 311 million yuan (+9.77%), respectively. On the profit side, in the first three quarters of 2023, the company achieved net profit of 278 million yuan, an increase of 42.03% over the previous year. Thanks to the rapid advancement of the company's “self-build+merger and acquisition” strategy, the company's performance achieved high growth.
With the steady expansion of stores and the increase in the proportion of mature stores, the company has entered a profitable harvest period:
As of 2023Q3, the company had 4711 stores (603 self-built and acquired stores and 61 stores, respectively), an increase of 18.28% over the previous year. Currently, the company's stores cover various regions such as Yunnan, Sichuan, Chongqing, Guangxi, Hebei, and Liaoning, forming a trend of gradual expansion throughout the country with Yunnan as its base. The share of the company's new stores and sub-new stores fell to 24.05% from 28.42% in the same period last year. The share of the company's mature stores has increased, and it is optimistic that the company's performance will continue to grow at a high level.
Investment advice:
We expect the company's net profit from 2023 to 2025 to be 401 million yuan, 479 million yuan, and 566 million yuan respectively, up 10.3%, 19.5%, and 18.2% year-on-year respectively; it is estimated that the 2023 EPS will be 3.11 yuan/share, giving a 20-fold valuation, corresponding to the six-month target price of 62.20 yuan/share, giving a buy-A investment rating.
Risk warning: store expansion falls short of expectations; risk of drug price reduction; profit of new stores falls short of expectations; outflow of prescriptions falls short of expectations, etc.