Leading private pharmaceutical distribution enterprise, transformation and upgrading to digitalization, platformization, and internet
Kyushu Pharmaceutical Group Co., Ltd. is a technology-driven full-chain pharmaceutical industry integrated service provider and the largest private pharmaceutical distribution enterprise in China. In 2022, the market share of CR4 (Sinopharm Group, Shanghai Pharmaceutical, China Resources Pharmaceutical, and Kyushu Express) in China's pharmaceutical distribution industry increased from 40% in 2019 to 48.7%, and the “state-owned 3+private 1” pattern of China's pharmaceutical distribution market has already taken shape. As a leading private distribution company, Kyushu Express's market share increased from 5.1% in 2019 to 6.28% in 2022.
Kyushu Express took the lead in implementing the transformation and upgrading of traditional pharmaceutical distribution business to digitalization, platformization, and internet-based, and implemented a comprehensive service model of “pharmaceutical distribution+logistics distribution+product promotion” in line with the needs of upstream and downstream customers. Remarkable results have been achieved. The company has gradually built a “100 billion” pharmaceutical supply chain service platform that is scarce in the industry.
Strongly push forward the implementation of the new strategy, which is expected to establish a second profit growth curve and promote the improvement of business quality and efficiency
The company vigorously promoted the implementation of the four new strategies of “new retail, new products, internet medical care and real estate securitization (REITs)” to improve business quality and efficiency.
In terms of new product strategy, the company has formed different supply chain service systems in different market channels by strengthening marketing and marketing capabilities, and continues to enrich the general brand promotion business product echelon. At the same time, pharmaceutical OEMs continue to launch new products. 2023Q1-3's general brand promotion business revenue increased 25.90% year on year, and gross profit increased 41.49% year on year; in terms of new retail strategy, the number of Good Pharmacist “10,000 stores joined” in the first three quarters of 2023 has reached 17,272. The number of stores is expected to exceed 30,000 At home, 2023Q1-3's new pharmaceutical retail business revenue increased 26.21% year on year, and gross profit increased 20.20% year on year; in terms of the Internet medical strategy, based on the supply chain, to provide patients with medical treatment, drug supply and medical insurance operation services, and strive to build the most professional prescription outflow platform in the industry. 2023Q1-3's healthcare and technical service business revenue increased 23.21% year on year, and gross profit increased 36.52% year on year.
The infrastructure public investment REITs strategy is being promoted, and the underlying asset value highlights that the company relies on more than 3.3 million square meters of pharmaceutical logistics storage assets and supporting facilities as underlying assets. It is expected to be distributed in installments (REITs) to revitalize the company's huge pharmaceutical warehousing and logistics assets and supporting facilities, restructure the company's asset-light operation business model, and accelerate asset liquidity to enhance the company's asset operation capabilities and achieve diversified benefits. The public offering REITs project company officially submitted application materials to the National Development and Reform Commission in October 2023. The application process is progressing in an orderly manner. In the future, the company will continue to expand and continue to revitalize its assets.
Profit forecasts and investment advice
The company's fundamentals are expected to change positively from 2024. While wholesale growth is steady, the proposed issuance of REITs will speed up capital turnover, the high-margin business is expected to receive capital help, and the company is expected to usher in valuation reshaping. The company's revenue for 2023-2025 is estimated to be 1591.88/1757.65/199418 billion yuan, respectively, and net profit to mother will be 2,42/29.43/3.392 billion yuan, respectively. The corresponding EPS is 0.63, 0.75, and 0.87 yuan/share, respectively. The current stock price corresponding to PE is 12.82/10.68/9.26 times, respectively. First coverage, giving a “buy” rating.
Risk warning:
The implementation of digital transformation falls short of the expected risks; the operation of REITs funds falls short of the anticipated risks.