昆药集团(600422):华润入主持续赋能 品牌重塑焕发新生

Kunming Pharmaceutical Group (600422): China Resources Joins and Continues to Empower Brand Regeneration and Revitalization

東吳證券 ·  Dec 11, 2023 20:42

Key points of investment

Core logic: Kunming Pharmaceutical Group is one of the top 100 enterprises in the Chinese pharmaceutical industry. After China Resources 39 completed control of the company in 2022:1) personnel changes, organizational structure adjustments, business integration, and channel docking proceeded smoothly; 2) the “777,” “Kunming Traditional Chinese Medicine 1381,” and “KPC1951” divisions have clear business lines. Empowered by China Resources 39, it is expected to achieve brand rebranding and help performance take off.

After China Resources joined, “integration” progressed smoothly, and future industrial revenue is expected to achieve a growth rate of more than 20%: since China Resources 39's merger and acquisition of Kunyao Group was completed in 2023:1) Personnel replacement was completed, laying a solid foundation for the high-quality development of the “14th Five-Year Plan”: 399 Chairman Qiu Huawei as Chairman of Kunyao, OTC Division General Manager and General Manager of the Rehabilitation and Chronic Disease Division Yan Wei, as Vice Chairman of Kunyao, President, etc.; 2) Channel connections progressed smoothly, and operating efficiency improved markedly: The company's “1381” and “777” business divisions and the product has been successfully integrated into the 39 Commercial Road, which has been completed Aiming at the integration of first-level channel providers in 20 provinces and regions in China, it is expected that the company's operating efficiency will be significantly improved; 3) The business line is clear, and brand reshaping is imminent: the company has established three divisions of “1381, 1951, and 777”. “1381” carries Kunming Traditional Chinese Medicine, which has a history of more than 640 years, “1951” carries serious medical products in the hospital, and “777” carries 37 oral preparations. The three divisions will become the core support for the company to build quality Chinese medicine, deeply cultivate chronic disease management, and expand the aging health industry, and help the industrial sector to generate revenue Achieve growth of more than 20%.

“777”: In the context of aging, the prospects are huge. Resolving competition in the industry and building a leading position in the industry in 37, the profit margin has increased both: the number of patients with cardiovascular and cerebrovascular diseases in China is huge, reaching 330 million in 2020. In the context of an aging population, the demand for prevention and treatment of related diseases is huge. 37 has a long history of drug use. Among them, there is rich clinical research on XueZetong softgels. The company has a full industry chain layout from planting to formulation to sales. In 2022, the company's Xuejitong oral administration series revenue reached 8.0 billion yuan. Among them, only the company and China Resources Torch currently have approval, and the overall net interest rate of the 22nd torch is as high as 27%. We believe that in the future, after the company and the torch resolve the competition between peers, it is expected that the synergy between channels and terminals will achieve “1+1>2”, which will drive up the revenue of both parties, while also boosting the company's net interest rate. Furthermore, the “Closing Meeting for Secondary Prevention of Ischemic Stroke” shows that it has clear economic advantages, and it is expected that the number of users will be greatly expanded in the future. Referring to the market volume of major products such as salvia salvia drops, which are currently in the market, we believe that Xuetong softgels (two brands) are expected to become 3 billion grade varieties in the future.

Kunming Traditional Chinese Medicine 1381: The rebranding of long-established brands in 640, and the fast-digesting marketing strategy has steadily created a quality Chinese medicine platform: Kunming Traditional Chinese Medicine Factory has a history of more than 640 years, is one of the top five traditional Chinese medicine brands in China, has 143 drug approval numbers, and 21 exclusive products nationwide. Since 2019, the company has focused on “big variety - big brand - big category”, focusing on creating three gold products, including Ginseng, Lingjian Spleen and Stomach Granules. Shenlingjian spleen and stomach granules began a rapid digestion model, extending from a single drug variety to large health products. The academic advantages of liver relief granules are obvious, and there is huge market space for expanding to people with depression. Key varieties such as Shenlingjian spleen and stomach granules, hepatic relief granules, fragrant sand calming granules, pantalum clearing granules, and purifying sputum pills all achieved an increase of more than 30% in 23Q3. We believe that in the future, “Kunming Traditional Chinese Medicine 1381” is expected to be empowered by 39 to achieve brand value restructuring, and is expected to create 2-3 billion-level products in the future.

Profit forecast and investment rating: We are optimistic about 39's empowerment of Kunyao Group in terms of channels and brand building. At the same time, we are optimistic about the development prospects of Kunyao Group in the 37th industry chain after resolving peer competition and the rebranding of Kunming Traditional Chinese Medicine in the new era as a long-standing brand with a history of more than 640 years. We expect the company's industrial sector revenue to achieve 20% + growth in 2023-2025, while net interest rate is also expected to increase. Net profit is 535/6.94/855 million yuan. The current stock price corresponding to PE is 324/19 times, coverage for the first time.” “BUY” rating.

Risk warning: Risks such as business integration falling short of expectations, brand building falling short of expectations, and price reduction in collection.

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