Core views:
The three-quarter report of '23 was released, and the profit side was under short-term pressure. The company achieved operating income of 12.813 billion yuan in the first three quarters of 2023, an increase of 6.55% over the previous year; realized net profit of 686 million yuan, an increase of 1.26% over the previous year; and realized net profit of 679 million yuan after deducting non-return mother, an increase of 4.85% over the previous year. Looking at a single quarter, the company achieved operating income of 4.137 billion yuan, an increase of 1.89% over the previous year; realized net profit of 181 million yuan, a decrease of 30.02% over the previous year; and realized net profit of 174 million yuan after deduction, a decrease of 30.33% over the previous year. The company's profit side was under pressure in the third quarter, mainly due to health product policy adjustments, Kunming regional inclusion policy, pharmacy participation policy, and outpatient co-operation policy, which had a certain adverse impact on the company's gross profit.
Strengthen expansion outside the province and continue to promote the specialization and upgrading of stores. The company had a net increase of 802 stores in the first three quarters of 23 years. By the end of the third quarter, the company had a total of 1,0008 direct-run stores, of which 53.54% of stores were located in Yunnan Province, while the share of non-Yunnan stores continued to rise. There are 1983/924/708/510/410 stores in Sichuan/Guangxi/Shanxi/Guizhou/Hainan, respectively. The company is gradually increasing the speed of expansion outside of Yunnan and increasing the scale effect of store operations in various markets. By the end of the third quarter, the company had 1,231 chronic disease stores, 329 special disease stores, 213 dual-channel qualifying stores, and 735 outpatient coordination stores.
Multi-point collaborative development to enhance the company's operational stability. The company increased its major health industry layout to further expand the company's business scope. The beauty and personal care business achieved sales of 250 million yuan (yoy +19.58%) in the first three quarters. In terms of new retail business, the total sales volume of the company's new retail business in the first three quarters was 599 million yuan. Among them, the O2O business has already covered 10 provincial administrative districts across the country, and a total of 9580 stores have been launched. The O2O business completed sales of 483 million yuan in the first three quarters.
Profit forecasts and investment advice. We lowered the company's EPS to 1.72/1.99/2.36 yuan/share in 23-25, respectively, corresponding to PE13.05x/11.27x/9.50x. Referring to comparable company valuations, we gave the company a reasonable PE valuation of 15x for 24 years, corresponding to a reasonable value of 30 yuan/share, maintaining a “buy” rating.
Risk warning. The risk of regional expansion; the outflow of prescriptions falls short of expectations; the risk of Internet medical diversion.