Key points of investment
Incident: Yunnan Baiyao released its 2023 annual report. During the reporting period, it achieved revenue of 39.111 billion yuan (YoY +7.19%), net profit of 4,094 billion yuan (YoY +36.41%), net profit of non-return to mother of 3,764 billion yuan (YoY +16.45%); Single Q4 achieved revenue of 9.423 billion yuan (YoY -1.57%), net profit to mother of 0.3 billion yuan (-104.27% YoY); the results were in line with expectations.
The pharmaceutical business is the company's core business. In 2023, the pharmaceutical business group achieved revenue of 6.481 billion yuan, an increase of 8.16% over the previous year. The white medicine series maintained good growth, with a gross margin of 70.6%, of which aerosol sales revenue contributed more than 1.7 billion yuan, +15.27% over the same period; sales revenue of paste/capsules exceeded 9/60 billion yuan, respectively, and sales revenue of powders and band-aids exceeded 300 million yuan. Other brands of traditional Chinese medicine showed impressive growth. Sales revenue of Pudilan anti-inflammatory tablets and Agastache Zhengqi Water all exceeded 100 million yuan, up nearly 16% and 124% year on year, respectively; sales revenue of Gong She-ning capsules for gynecological inflammation rose 47% year on year; and Qi Xuekang Oral Liquid achieved sales revenue of 231 million yuan, an increase of 15% year on year.
The health products business group continued to focus on oral health and hygiene products, and achieved revenue of 6.422 billion yuan in 2023, an increase of 6.50% over the previous year. In the field of oral care, Yunnan Baiyao toothpaste has a domestic market share of 24.60% (data source: Nielsen retail research data YTD2312), and continues to rank first in market share. In the field of anti-shedding and washing care, Yang Yuanqing accelerated growth. Annual sales revenue exceeded 300 million yuan, an increase of 36% over the previous year.
The Chinese Medicine Resources Business Group focuses on Yunnan medicinal herbs and superior varieties of Baiyao. In 2023, it achieved external revenue of 1.71 billion yuan, an increase of about 22% over the previous year. Among them, the export revenue of Sanqi Chinese herbal medicines increased 81% year on year. In the natural plant extraction business, the market share of eucalyptus oil has further increased; sales of capsaicin have quadrupled, becoming a new business growth point.
Provincial pharmaceutical companies are deeply involved in the Yunnan pharmaceutical distribution market and achieved main business revenue of 24.490 billion yuan in 2023, an increase of 5.63% over the previous year. The overall operating efficiency of provincial pharmaceutical companies has been effectively improved throughout the year. The comprehensive order fulfillment rate increased by 7.4%, the order response speed increased by 22%, and the product delivery speed increased by 19%.
Actively explore and incubate emerging business units (BU). In 2023, the company reorganized the emerging business segment, and the Nourishing Health Products Division integrated major traditional Chinese medicine products such as 37 to develop the nourishing health products competition; the Beauty Division was based on natural herbs, with gentle, non-irritating and moisturizing care as the product characteristics, launched a beauty brand unique to Yunnan Baiyao; the Medical Device Division is committed to focusing on orthopedic and injury care; Tianyi Tea Products Division is committed to deepening the upgrading of the tea industry and exploring and innovating tea derivatives.
Continued to improve quality and efficiency, and the dividend rate exceeded 90% for two consecutive years. In 2023, the company's gross margin was 26.51%, +0.18pct year on year; sales expense rate/management expense rate/R&D expense ratio was 12.76%/2.71%/0.86%, +1.35/+0.42/-0.06pct year on year; net interest rate without return to mother was 9.62%, +0.77pct year on year; weighted average ROE was 10.51%, year on year +2.64pct. The company's 2023 dividend plan is a dividend of 20.77 yuan for every 10 shares, with a total dividend of 3.706 billion yuan; the dividend rate reached 90.53%, achieving more than 90% for two consecutive years.
Maintain a “buy” rating. The estimated net profit for 2024-2026 is 45.84/51.35/5.677 billion yuan, up 11.96%/12.02%/10.56% year-on-year, and EPS is 2.55/2.86/3.16 yuan, corresponding to PE20.09x/17.94x/16.22x. Maintaining a “buy” rating, considering that the company has strong brand advantages and channel advantages.
Risk warning: risk of policy adjustments, risk of cost fluctuations, increased market competition