Incident: The company announced that in 2023, it achieved revenue of 15.140 billion yuan (+6.92%, indicating year-on-year growth rate, same below), net profit of 2.74 billion yuan (+4.27%), net profit of non-return to mother of 1,960 million yuan (+13.06%); 2024Q1 achieved revenue of 40.472 billion yuan (-3.85%), net profit to mother of 538 million yuan (-4.19%), net profit of 522 million yuan (-9.01%).
Interpretation of operating data: On the profit side, the company achieved a gross profit margin of 8.07% (+0.27pct) in 2023, after deducting a non-net interest rate of 1.31% (+0.08pct). On the cost side, in 2023, the company's sales expenses ratio was 2.94% (the same as the previous year), the management expense ratio was 1.88% (+0.06pct), and the financial expenses ratio was 0.79% (-0.02pct). 2024Q1 achieved gross profit margin of 7.20% (-0.37pct), net profit margin of 1.29% (-0.07pct); sales expenses ratio of 2.55% (-0.28pct), management expenses ratio 1.61% (+0.03pct), and financial expenses ratio of 0.70% (-0.02pct). In 2023, the company distributed a cash dividend of 2.5 yuan (tax included) to all shareholders for every 10 shares, with a dividend rate of 44.95%, a total cash dividend of 977 million yuan, and a dividend rate of 3.57%.
New product strategy: CSO business is getting better, creating a second curve of profit growth. In 2023, the company's general manager (CSO) business achieved revenue of 19.584 billion yuan (+46.01%), gross profit of 2,789 billion yuan (+52.45%), and gross profit margin of 14.24% (+0.60pct). Among them, General Pharmaceutical Company achieved revenue of 10.696 billion yuan (+60.82%) and gross profit of 2,267 billion yuan (+54.83%); General Device Generation achieved revenue of 8.888 billion yuan (+31.44%) and gross profit of 522 million yuan (+42.91%). In addition, the company's general manager of pharmaceuticals set up a new brand “Quanqing Health” CSO management company, with a promotion team of more than 3,000 people, and represented 969 pharmaceutical products for famous brands such as Cowell, Beiping, and Kangwang (of which 27 have sold over 100 million products).
New retail strategy: 10,000 store franchises continue to advance, and B2C e-commerce channels are growing rapidly. The sales volume of the company's franchised pharmacies in 2023 was 3.48 billion yuan, an increase of 83.25% over the previous year. As of 2024Q1, the number of directly managed and franchised pharmacies by the company reached 21,192, and the number of stores is expected to exceed 30,000 in 2025. In addition, Good Pharmacist's B2C e-commerce general sales business had annual revenue of 1,215 billion yuan, an increase of 26.8% over the previous year; B2B e-commerce's annual revenue was 17.326 billion yuan (+1.32%), of which the Pharmaceutical Jiujiu self-operated e-commerce platform achieved revenue of 11.241 billion yuan (-3.40%), and the retail e-commerce service platform achieved revenue of 6.085 billion yuan (+11.47%).
Profit forecast and investment rating: Considering that the company is expected to issue about 1.2 billion yuan of REITS and 3 billion yuan of pre-REITS in 2024, we adjusted the company's net profit to mother in 2024-2025 from $28.30/3.239 billion yuan to $4,777 billion in 2026. Net profit without return to mother for 2024-2026 was 2,435/27.28/3,056 billion yuan, a compound increase of about 12% over three years, 13/12/11 times after deducting non-corresponding PE, maintaining the “buy” rating.
Risk warning: business model risk, policy risk, market competition risk, risk of bad debts due to accounts receivable, etc.