Key points of investment
Incident: Jianmin Group released its 2024 quarterly report. During the reporting period, it achieved revenue of 970 million yuan (-4.27%), net profit to mother of 100 million yuan (-0.04% year over year), and net profit of 90 million yuan (+0.05% year over year) after deducting non-return to mother; the results were in line with expectations.
The level of profit is generally stable. In 24Q1, the company's net interest rate after deduction was 9.33%, +0.40pct year-on-year. The gross margin, sales expense ratio, management expense ratio, and R&D expense ratio were 42.50%/31.36%/4.34%/2.37%, respectively, -7.16/-6.06/-0.02/+0.61 pct. 24Q1 gross margin declined significantly year-on-year. We expect it to be mainly due to an increase in the share of the pharmaceutical business; without considering investment income, the 24Q1 company's net profit withheld from its main business was 31 million yuan, or -33.88% year-on-year. We expect it is mainly due to the year-on-year decline in the pharmaceutical industry under a high base of 23Q1.
The performance of beef yolk in physical training was outstanding. The 24Q1 company's investment income was 60 million yuan, +35.85% year over year, of which investment income from joint ventures and joint ventures (estimated to be mainly Jianmin Dapeng, responsible for the production and sale of in vitro cultivation of beef yolk) was 61 million yuan, +35.53% over the same period last year.
The overall operating level is under slight pressure. We expect this is mainly due to the year-on-year decline in the pharmaceutical industry and an increase in the share of the pharmaceutical business. In 24Q1, the company's accounts receivable were $1,025 million, +19.45% month-on-month; the number of accounts receivable turnover days was 87.39 days, reaching a nearly 10-year high.
Adhere to brand-driven and academic leadership. In 2024, the company will strengthen marketing digital construction to achieve refined marketing management: OTC product line, continue to strengthen the “Longjiao” and “Jianmin” brands, accelerate the introduction of new product chains, store delivery, continuously improve product coverage, strengthen store staff training and patient services, carry out public welfare activities, enhance brand reputation, strengthen talent team training, strengthen terminal management, and increase the number of OTC terminal store services and specialized service capabilities; Rx product line, continue to carry out medical research, clinical observation, accelerate the admission of new products to hospitals, improve market coverage and develop new hospital drug coverage Market access, health insurance negotiations, strengthen agent team building, and continuously improve specialized service capabilities.
Maintain a “buy” rating. We expect 2024-2026 net profit of 592/7.01/821 million yuan, up 13.53%/18.34%/17.14% year over year, and EPS of 3.86/4.57/5.35 yuan, corresponding to PE14.71x/12.43x/10.61x. Considering the company's strong brand strength and the exclusivity of sports beef, it maintains a “buy” rating.
Risk warning: risk of policy adjustments, risk of cost fluctuations, volume of core products falling short of expectations