Event: The company released its 2024 quarterly report, and its performance continued to grow steadily.
In the first quarter of 2024, the company achieved operating income of 12.122 billion yuan, a year-on-year increase of 7.98%, net profit of 459 million yuan, a year-on-year increase of 10.86%, net profit after deducting non-return to mother of 458 million yuan, an increase of 11.00% over the previous year, and the overall performance of the company achieved continuous steady growth.
The overall cost rate for the period has been optimized, and profitability has improved.
In the first quarter of 2024, the company achieved a gross margin of 7.03% /-0.67pct, a net profit margin of 3.79% /+0.10pct, and an expense ratio of 2.37% /-0.63pct for the period. Among them, sales, management, R&D, and financial expenses were 1.66% /-0.46pct, 0.83% /-0.11pct, 0.12% /-0.03pct, and -0.24% /-0.03pct, respectively. Overall, the company's sales expense ratio, management expense ratio, R&D expense ratio, and financial expense ratio were all optimized in the first quarter, and profitability improved.
The basic distribution market for pharmaceutical devices is developing steadily, and diversified development is gradually being achieved.
The company is based on the basic distribution market of pharmaceutical devices and promotes diversified development in sectors such as pharmaceutical retail, pharmaceutical industry, dental academic services, and pharmaceutical logistics.
(1) In terms of direct sales in the Beijing region, the company maintains its leading position in the Beijing market, continues to follow up the implementation of volume-procured varieties, national negotiation varieties, and newly marketed varieties, and accelerates the transformation from simple drug sales to providing pharmaceutical solutions. It has achieved 100% coverage of regional hospitals in Beijing, and has covered more than 4,700 primary medical institutions. Among them, the company's sales in secondary and tertiary hospitals rank first in the region, and has strong medical terminal coverage and service capabilities in Beijing.
(2) In terms of national pharmaceutical distribution, the company continues to optimize and expand upstream varieties to meet the diverse business needs of suppliers, provide high-quality services, stabilize channels, and carry out marketing transformation to enable distribution. After years of accumulation of commercial resources, the company has maintained stable cooperative relationships with thousands of domestic and foreign upstream suppliers, and the overall operating regulations are tens of thousands.
(3) In terms of the narcotics business, the company continues to improve the level of professional academic service for narcotics customers, promote the “cannabis drug” strategy, enhance its narcotics supply chain management capabilities, expand market space, and consolidate its channel advantage and leading position in the field of narcotics specialty drugs. The company's hemp drug business has covered 31 provincial and administrative regions across the country, radiating more than 50,000 national anesthetic medical customers.
(4) In terms of the industrial sector, the company focuses on transforming the marketing system, optimizing the product structure, and laying out the field of new drugs. The subsidiary Guorui Pharmaceutical continues to enhance R&D capabilities, give full play to the complementary advantages of schools and enterprises, increase scientific research efforts, and continuously enhance enterprise competitiveness and sustainable development capabilities.
(5) In the retail business sector, the subsidiary Sinopharm New Specialty Pharmacy continues to expand its scope of business and increase the layout of new outlets. By the end of 2023, the company's specialty retail business had expanded to three.
(6) In the dental business sector, the subsidiary Sinopharm's prospects revolve around the four main product lines of “painless, periodontal, sensory control, and orthodontics”, and continuously optimize the product structure. In terms of marketing business, the company's marketing sales revenue and service revenue both maintained a relatively rapid growth rate in 2023. In terms of logistics services, the company's logistics business continues to expand third-party logistics services on the basis of meeting the needs of its own distribution services.
Investment advice:
Buy-A investment rating, 6-month target price of 40.64 yuan. We expect the company's revenue growth rates from 2024 to 2026 to be 10.07%, 9.50%, and 8.95%, respectively, and the net profit growth rates will be 9.91%, 10.71%, and 10.30%, respectively; for the first time, the 6-month target price is 40.64 yuan, which is equivalent to 13 times the dynamic price-earnings ratio of 2024.
Risk warning: The risk of increased competition in the specialty anesthetic drug business, the risk of policy changes in the pharmaceutical industry, and the risk that diversified business layouts such as industry, retail, and dentistry will fall short of expectations.