Revenue and profit are growing rapidly, maintaining a “buy” rating
The company released the three-quarter report for 2023:2023Q1-Q3 achieved revenue of 6.5 billion yuan (+38.03%); net profit of 278 million yuan (+42.03%); net profit of 277 million yuan (+37.26%) after deducting non-return net profit of 271 million yuan (+37.26%). Looking at Q3 alone, it achieved revenue of 2.162 billion yuan (+26.96%); net profit of 120 million yuan (+13.94%); net profit of 120 million yuan (+13.94%) after deducting non-return net profit of 116 million yuan (+11.69%). In terms of profitability, the 2023 Q1-Q3 gross margin was 35.88% (-0.68pct) and net profit margin was 4.27% (+0.20pct). On the cost side, the 2023 Q1-Q3 sales expense ratio is 26.37% (-0.67pct); the management fee rate is 2.09% (-0.44pct); and the financial expense ratio is 1.45% (+0.10pct). The company's overall growth is rapid, and endogenous and epitaxial store expansion lays the foundation for development. We maintain our profit forecast for 2023-2025. We expect net profit for 2023-2025 to be 4.02, 5.05, and 645 million yuan respectively, corresponding to EPS of 3.12, 3.92, and 5.01 yuan/share. The current stock price corresponding to PE is 18.9, 15.0, and 11.8 times, respectively, maintaining the “buy” rating.
“Self-build+Acquisition” is the main theme of store expansion. The online business also empowers the company to adhere to the “self-build+acquisition” strategy and strategically promote the expansion of the physical store network. As of 2023Q3, the company's total number of stores reached 4,711, an increase of 16.18% over the beginning of the year, including 603 self-built stores and 61 acquired stores. 8 stores were closed due to development plans and business strategy adjustments, a net increase of 656 stores. The company continues to consolidate its regional store coverage in the current six provinces and cities, insist on intensive distribution in Yunnan and Hebei, continue to penetrate the Sichuan, Chongqing, and Guilin markets, and gradually deepen its brand influence. While stores expand rapidly and offline business continues to grow, the 2023Q1-Q3 online business increased by 67.92% compared to 2022Q1-Q3, and supplier service revenue increased steadily.
Strengthen professional ability to handle the outflow of prescriptions, provide differentiated competitive advantages in multiple services, keep abreast of customer needs, actively conduct professional training and service guidance for pharmacists and store staff, and apply for various professional pharmacy qualifications at the same time. As of 2023Q3, the company has 565 chronic disease stores, 188 special disease stores, 132 dual-channel qualified stores, and 304 outpatient co-ordinated pharmacies. Increased specialization capacity is conducive to better serving patients, accepting the outflow of prescriptions, and improving performance. In addition, focusing on the customer's pursuit of a full life cycle, high quality and healthy life, the company actively explores the needs of multi-age customer groups and covers them from multiple angles to provide treatment and other diversified products and services related to healthy lifestyles to enhance customer stickiness.
Risk warning: Market competition is intensifying, mergers and acquisitions integration falls short of expectations, and store expansion falls short of expectations.