Matters:
The company released its 2023 annual report: achieved revenue of 22.437 billion yuan (+11.21%), net profit to mother of 929 million yuan (+18.35%), and deducted non-net profit of 844 million yuan (+14.68%).
In the fourth quarter, revenue of 6.396 billion yuan (-0.05%) was achieved, net profit attributable to mother was 212 million yuan (+21.17%), and non-net profit of 198 million yuan (+17.89%) was deducted.
Company distribution plan: The company plans to distribute cash dividends of RMB 6.6 million (tax included) for every 10 shares based on 585 million shares, for a total of 386 million yuan (tax included). The company will not give bonus shares. At the same time, it will transfer 3 shares for every 10 shares to all shareholders by transferring capital reserves to increase the share capital. In total, it is planned to increase the share capital by 175 million shares.
The company released its 2024 quarterly report: achieved revenue of 55.39 yuan (+1.81%), net profit to mother of 321 million yuan (+10.27%), and deducted non-net profit of 311 million yuan (+10.35%).
Ping An's point of view:
The company is steadily expanding and actively exploring the sinking market: At the end of 2023, the company chain network (excluding alliances) covered 18 provincial markets and more than 150 prefecture-level cities across the country, and opened a total of 13,574 stores nationwide, including 9180 direct-run stores and 4,394 franchise stores. In 2023, the company added 3,388 stores, including 1802 direct-run stores (1,471 self-built, 331 mergers and acquisitions) and 1,586 new franchised stores. Among the new stores, 2,913 new stores were added in dominant provinces and key cities, accounting for 86%, and the proportion of stores in prefecture-level cities and below was 78%. As of March 31, 2024, the company's chain layout network (excluding alliances) covered 18 provincial markets and more than 150 prefecture-level cities across the country. A total of 14,109 stores were opened nationwide, including 9470 direct-run stores and 4,639 franchise stores. In the first quarter of 2024, 642 new stores were added, including 357 direct-run stores (351 self-built and 6 acquired) and 285 additional franchised stores. Among the new stores, prefecture-level cities and prefecture-level cities accounted for 85%, and stores in prefecture-level cities and below accounted for 77%.
Actively embracing the outpatient coordination policy, the number of co-ordinated stores is growing rapidly: the company is actively responding to the policy of liberalizing outpatient co-ordinated health insurance to retail pharmacies. In 2023, 4262 stores landed consolidated outpatient funding, accounting for 31.40%. The number of stores that include outpatient co-ordinated medical insurance management and can use Internet prescriptions (interchangeable) reached 3059, of which 2,756 directly managed stores are interoperable. Interchangeable stores have seen significant increases in both the number of visitors and sales. As of the end of the first quarter of 2024, the company had 4,673 outpatient co-ordinated stores, of which direct-managed stores accounted for 39.78% of outpatient co-ordinated outpatient clinics; the number of stores where the company was interoperable (included in outpatient co-ordinated medical insurance management and can use Internet prescriptions) reached 3,338, of which 30.67% were directly managed stores. Interchangeable stores have seen significant increases in both the number of visitors and sales.
The Torch Project enhances the company's gross profit margin: The company implements the Torch Project to transform the commercial procurement system and key business processes. Control the entire process of product selection, new product evaluation and elimination, marketing incentives, increase the proportion of total procurement, and optimize the commercial procurement management system to raise the company's gross profit level. In the first quarter of 2024, the company's comprehensive gross profit margin was 35.2%, up 2.2 percentage points from the previous year, and consolidated sales accounted for 69.5%, up 1.4 percentage points from the same period last year. The company's own brand focuses on product advantages and enhances product competitiveness. In the reporting period, sales of private brand stores reached 830 million yuan, accounting for 20.8% of sales, an increase of 1.3 percentage points over the same period last year.
Maintaining the “Recommended” rating: Leading pharmacy chains are expected to maintain impressive growth for 5-10 years as industry concentration continues to increase and prescription outflows increase. Considering the company's mergers and acquisitions situation, we adjusted the company's profit forecast. The company's net profit for 2024-2026 is expected to be 1,091 billion yuan, 1,296 billion yuan, and 1,537 billion yuan (the original forecast net profit for 24-25 years was 1,128 billion yuan and 1,369 billion yuan). As a leading pharmacy enterprise in the country, the company had excellent performance in the past, and there is plenty of room for future growth. The region-focused strategy helps to further cultivate the provinces already laid out and enhance the company's profitability. Maintain a “Recommended” rating.
Risk warning: 1. Industry policy changes Risk: Health reform policies may advance or affect the company's performance. 2. Risk that the merger and acquisition progress falls short of expectations: If an unexpected situation occurs in the merger and acquisition integration of the company, the performance of the acquired store may fall short of expectations. 3. Drug safety risks: Pharmaceutical circulation, such as negligence in some part of quality control, may bring about drug safety risks