Isshindo released its 2023 three-quarter report. In the first three quarters of 2023, the company achieved operating income of 12.813 billion yuan, an increase of 6.55% over the previous year; net profit of 686 million yuan, an increase of 1.26% over the previous year; and net profit after deducting non-return mother of 679 million yuan, an increase of 4.85% over the previous year. In 2023Q3, the company achieved operating income of 4.137 billion yuan, a year-on-year increase of 1.89%; net profit of 181 million yuan, a year-on-year decrease of 30.02%; net profit after deducting non-return net profit of 174 million yuan, a year-on-year decrease of 30.33%.
Revenue is in line with expectations, and profitability is under pressure in the short term. 2023Q3, the company's gross sales margin was 32.21%, down 4.15pp from the previous year, mainly due to: In terms of customer unit prices, health products with higher gross profit margins and customer unit prices in the Yunnan region have successively stopped using health insurance cards since January 2023, and the company's participating stores in the outpatient coordination area have implemented the same price policy as medical institutions. Both have an impact on the company's gross margin; in terms of customer traffic, the initial flow of prescriptions in the outpatient care policy is not obvious, and some patients with chronic diseases have returned from pharmacies to medical institutions. As the company includes more and more integrated medical insurance stores, patients return to pharmacies, consumer confidence in the pharmaceutical retail market is boosted, and sales and share of non-pharmaceutical products such as health products increase, the company's profitability is expected to increase.
The expansion of stores outside the province is accelerating, and the Sichuan and Chongqing regions are focusing their efforts. By the end of 2023Q3, the company had 5,358 stores in Yunnan Province, up 2.6% from the beginning of the year; the number of stores outside Yunnan Province was 4650, up 16.8% from the beginning of the year; the proportion of stores outside Yunnan Province was 46.46%, up 3.21pp from the beginning of the year. Among them, there were 1983 stores in Sichuan and Chongqing (accounting for 42.65% of stores outside the province), up 23.3% from the beginning of the year.
Profit forecast and investment suggestions: The company's encrypted store layout in Yunnan Province, expansion and integration outside the province accelerates, forming a unique three-dimensional direct business development pattern; the category structure is continuously optimized, and the layout of diverse business formats continues to increase profits; chronic disease stores and hospital-side stores continue to increase profits; the number of chronic disease stores and hospital-side stores continues to increase, and the ability to accept outflow prescriptions has improved. We adjusted our profit forecast. We expect the company's 2023-2025 EPS to be 1.60, 1.89, and 2.23 yuan respectively, and the PE corresponding to the stock price on November 8, 2023 will be 14.3X, 12.1X, and 10.3X respectively, maintaining the “increased holdings” rating.
Risk warning: Health insurance policy changes have exceeded expectations, expansion and integration have fallen short of expectations