Recommended logic: In the context of policies encouraging traditional Chinese medicine, the company focuses on specialty proprietary Chinese medicines and is expected to usher in a new stage of rapid development. 1) Cough medicine tablets are the company's core variety, with 100 years of brand accumulation. “Capacity expansion+channel transformation” is expected to drive this variety to more than double in 3-5 years; 2) The company will cultivate skin disease blood poison pills and hypoglycemic relief pills as major varieties after cough tablets, and it is expected that skin disease blood poison pills and hypoglycemic relief pills will become major varieties of traditional Chinese medicine with annual marketing revenue of about 300 million; 3) Production capacity expansion is expected to double the API revenue.
Cough Remedies: 100 years of brand accumulation, capacity expansion+channel transformation drive double space. The exclusive variety of Cough Remedies is one of the representatives of traditional Chinese medicine in Lingnan. It has a history of 100 years and a large user base. Cough Remedies are the company's core product. Sales of Cough Remedies exceeded 1 billion tablets in 2023, an increase of 91% over the previous year. The volume was significant, and the contribution of Cough Remedies to 41% of revenue was further increased to 41%. Production capacity expansion+channel transformation. The company takes the core variety of cough tablets as the goal of long-term operation in the future, and strives to achieve the goal of selling 2.4 billion cough tablets in about 3-5 years, and more than double the space growth compared to 2023, mainly due to the following reasons: 1) Cough tablets have remarkable curative effects, fast results, and have price advantages, and there is still room for price increases for subsequent products; 2) Cough medicine tablets have a large space to be developed; 3) The population is aging, and the number of consumers with high incidence of respiratory diseases is large; 4) Cough medicine tablets have a large consumer group with high incidence of respiratory diseases; 4) Cough medicine tablets have a large consumer group with high incidence of respiratory diseases; 4) Cough Remedies Gradual expansion of production, 2023 Production capacity has increased from 1 billion tablets to 1.8 billion tablets, and production capacity is expected to increase further; 5) The competitive pattern is excellent. In the 2023H1 TOP10 proprietary Chinese medicine brands for cough relief and expectoration relief in physical pharmacy terminals in China, Teyi Pharmaceutical ranked 7th. There are many competitors and the market share is scattered, showing a situation where small shares are evenly distributed, and the market share is expected to gradually increase in the future.
Dermatological blood poison pills and hypoglycemic relief pills: the release of potential new products is imminent. In view of the huge patient base for skin diseases and diabetes, the company has cultivated skin disease blood poison pills and hypoglycemic relief pills as major varieties after cough medicine.
1) Skin disease blood poison pill products were launched in 2020. They are suitable for freckles, rubella, eczema, etc., and are effective in treating external diseases. Currently, the competitive pattern is good. Only Tongrentang has similar products on the market. They are all in the marketing period, and will develop into a large variety of 300 million yuan over the next 3 to 5 years. 2) Hypoglycemic tablets were launched in 2019. They are hypoglycemic drugs. They function to nourish the kidneys, quench thirst, and are used for diabetes and systemic syndromes caused by diabetes. With advantages such as ease of use, wide range of applications, and sales channel collaboration, market development is expected to advance smoothly, and it is expected to develop into a large variety worth 300 million yuan in 3-5 years.
The expansion of production capacity is expected to double the revenue of APIs. The company's API production and sales are currently handled by Xinning Pharmaceutical Co., Ltd., a wholly-owned subsidiary. The main ingredients are aluminum, magnesium carbonate, phenytoin, glacial acetic acid, and calcium chloride, which have the highest market share in the national market. The production capacity of Xinning Pharmaceutical in 2023 is 2,100 tons per year, and production has reached full capacity in recent years. With the market space for specialty products being further enhanced, the company plans to expand production capacity to 4,200 tons, give full play to the superior potential of specialty products, and achieve the sales target of doubling the sales revenue of APIs.
Profit forecast and investment advice: With the release of cough medicine and high-potential new products, the company's net profit for 2024-2026 is estimated to be 2.8/3.4/420 million yuan, respectively, an increase of 11.6%/19.8%/23.8% over the previous year. First coverage, active attention is recommended.
Risk warning: risk of policy fluctuations; risk of sales of core products falling short of expectations; risk of channel development falling short of expectations; risk of factory price fluctuations.