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中信建投:药店行业经营边际改善预期较强 具备配置机会

CITIC Construction Investment: The pharmacy industry has strong expectations of marginal improvement in operations, and there are allocation opportunities

Zhitong Finance ·  11/09/2023 15:56

The operating pace of the pharmacy industry is expected to improve sequentially in '24, and valuations have entered a low level.

The Zhitong Finance App learned that CITIC Construction Investment released a research report saying that looking ahead to 24 years, there are strong expectations for marginal improvements in the pharmacy industry: 1) Consumption power is expected to improve marginally, the impact of household inventories of the superimposed four types of drugs will gradually subside, and demand for medication is expected to continue to be released; 2) the overall policy for outpatient clinics is gradually becoming clear, and marginal improvements in single-store growth are expected; 3) the impact of the high operating base is marginal weakening. The pharmacy growth rate may improve quarterly; 4) valuations have entered a historically low level, and there are opportunities for allocation.

Looking at the short term, the overall drainage effect of coordinated stores is quite obvious, which is expected to accelerate revenue growth. Moreover, since the outflow of prescriptions is still slow at this stage, the pressure on the short-term gross margin of pharmacies is limited. In the medium to long term, the bank believes that co-ordinated store positioning will be more similar to health insurance stores. Leading pharmacies have excellent related sales capabilities and obvious scale effects, and gross profit and ROE levels are expected to continue to rise.

CITIC Construction Investment's views are as follows:

The pace of operations in '24 is expected to improve month-on-month, and valuations have entered a low level

1) Looking back on 22 years: The business environment has improved marginally, and pharmacy operations have continued to improve. In the first quarter of 2022, due to the impact of the external environment, sales of the four types of drugs continued to be restricted. As restrictions on the four types of drugs were relaxed one after another, residents' overall demand continued to be released. In '22, the profit side of the pharmacy industry showed a quarterly improvement trend, and the valuation of the pharmacy sector continued to recover.

2) 2023: Drug store stock price performance is relatively weak due to multi-factor suppression. In the first three quarters of 2023, the pharmacy sector's performance was relatively weak, mainly due to: ① transient factors: household inventories of four types of drugs and tax policy adjustments for small-scale taxpayers; ② sustainability factors: weak consumption power, impact of outpatient coordination policies.

3) Looking ahead to 24 years: Expectations of marginal improvements in operations are strong. ① Consumption power is expected to improve marginally. The impact of household inventories of the superimposed four types of drugs will gradually subside, and demand for medication is expected to continue to be released; ② the overall outpatient policy is gradually becoming clear, and expectations for marginal improvements in single-store growth are strong; ③ the marginal impact of the high operating base has weakened, and the growth rate of pharmacies may improve quarterly; ④ Valuation has entered a historically low level, and there are opportunities for allocation.

Fundamentals continue to be optimized, and industry development is steady and improving

1) The market outside the hospital is growing at an accelerated pace, and there is still a lot of room for improvement in concentration. The Chinese pharmaceutical market is showing a steady upward trend. Driven by the outflow of prescriptions, from 2018 to 2022, the share of drug sales in retail pharmacies increased from 22.88% to 29.04%, growing rapidly. In terms of revenue share, the revenue concentration of listed pharmacy chains increased from 5.74% in 2015 to 18.76% in 2022. With the gradual implementation of policies such as outpatient coordination, the gap between small and medium-sized chains and leading department stores will widen further, and there is still plenty of room for market concentration to increase.

2) The management side is expected to continue to be optimized. In recent years, the overall gross margin of the industry has increased slightly. As labor costs continue to rise, the share of employee compensation expenses in the industry has increased slightly, driving a slight increase in the overall cost side, but the overall net interest rate has remained relatively stable at around 5%. Affected by the external environment, pharmacy operations have fluctuated greatly in recent years. The level of human efficiency and efficiency is in a low position, and there is still some room for improvement.

Outpatient clinics coordinate short-term marginal optimization to promote long-term store growth.

Looking at the short term, the overall drainage effect of coordinated stores is quite obvious, which is expected to accelerate revenue growth. Moreover, since the outflow of prescriptions is still slow at this stage, the pressure on the short-term gross margin of pharmacies is limited. In the medium to long term, the bank believes that co-ordinated store positioning will be more similar to health insurance stores. Leading pharmacies have excellent related sales capabilities and obvious scale effects, and gross profit and ROE levels are expected to continue to rise.

1) Industry side:

① Deterministic factors drive the expansion of the market outside the hospital, which is beneficial to the increase in concentration. Judging from the current policy, the reimbursement ratio of coordinated pharmacies favors the outflow of prescriptions, and the higher requirements for inclusion in store qualifications and drug categories, which favors the increase in market concentration.

② Uncertainties focus on the revenue and gross profit side, and wait until the policy is clear. At this stage, the integration of integrated stores is slow. In the short term, some consumers are returning to primary medical institutions, and the degree of acceptance of prescriptions from Internet hospitals varies, affecting the speed of patient outflow. Drug pricing in Hebei and other places is also relatively strict, which may affect the gross profit margin of stores.

③ Focus on the direction of industry policy optimization and anchor the lower limit of the overall influence of outpatient clinics. The bank believes that uncertainties at this stage still have certain restrictions on store development, but after the restrictions are lifted, there is a favorable trend. Follow-up attention can be paid to: the speed at which outpatient clinics are included in co-ordinated pharmacies in various regions affects the lower limit of incremental passenger flow, the progress of prescription outflow in various regions determines the lower limit of store revenue growth, and the level of drug price limits in each region determines the lower limit of store profit growth.

2) Enterprise side: Focus on building the core competencies of pharmacies and raise the upper limit of the overall impact of outpatient clinics. ① Leading chains are expected to fully enjoy the dividends of outpatient coordination, focusing on enterprises with perfect supply chains, strong specialization capabilities, more cooperation with local Internet hospitals, and strong related sales capabilities. ② Focus on the differentiated competitiveness of non-coordinated stores, and focus on enterprises with strong brand power, convenience, and online capabilities such as 020.

Investment advice:Focus on: 1) Yifeng Pharmacy (603939.SH): cost reduction and efficiency are progressing steadily, and performance potential continues to be unleashed; 2) ordinary people (603883.SH): Q3 performance is growing steadily, and fee control effects continue to show; 3) Yixintang (002727.SZ): performance is under pressure for a short time, cost reduction and efficiency continue to advance; 4) Jianzhijia (): cost control continues to advance, and various business formats are steadily gaining strength. 605266.SH It is recommended to pay attention to Shuyu Civilian (301017.SZ), First Medicine (600833.SH), Dajia Weikang (301126.SZ), and Chinese Health (301408.SZ).

Risk warning:Outpatient coordination policies have changed; health insurance policies have become stricter; the outflow of prescriptions has fallen short of expectations; and the expansion of enterprise stores within the industry has fallen short of expectations.

The translation is provided by third-party software.


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