Incidents:
The company recently released its 2023 annual report and 2024 quarterly report. In 2023, it achieved operating income of 15.140 million yuan (+6.92%), net profit after deduction of 2.174 billion yuan (+4.27%), net profit after deduction of 1.96 billion yuan (-13.06%), net profit to mother of 350 million (+1.19%), and net profit after non-return to mother of 232 million (+6.41%) in a single quarter of 2023. In Q1 2024, we achieved operating income of $40.472 billion (-3.95%), net profit attributable to mother of $538 million (-4.19%), and net profit of 522 million (-9.01%) after deducting non-return to mother.
Comment:
The high-margin business led to both revenue and profit growth in 2023, and 2024Q1 performance declined due to the high base during the same period. While achieving continuous steady growth in the pharmaceutical distribution business, the company is accelerating the expansion of high-margin businesses such as general brand promotion and new pharmaceutical retail. In the high-margin business, there was a significant increase in the general generation brand promotion business, achieving sales revenue of 19.584 billion yuan (+46.01%), gross profit of 2,789 billion yuan (+52.45%); revenue from the new pharmaceutical retail business was 2,815 billion yuan (+10.95%).
The high-margin business increased significantly, creating a “second curve” of profit growth.
Using the “three new and two modernizations” strategy as a starting point, we will continue to promote the transformation and upgrading of the company's business. In terms of new products, the company has continuously explored the construction of the CSO architecture, created a “second curve” of profit growth, established a new brand management company “Quanqing Health”, and built a professional team of brand management professionals in the field of health; in addition, the scale of Good Pharmacist's “10,000 Stores Join” business continues to expand. In addition, the company has formed a B2B e-commerce terminal sales channel; in terms of new medicine, the company has built the “Jiuxin Clinic” brand; in terms of digitalization, the company has achieved numbers through the upgrading of cloud-based ERP systems and the construction of a digital trading service platform Logistics technology and supply chain solution business revenue and gross profit have increased dramatically; in terms of real estate securitization, public REITs are being actively promoted to revitalize capital. With the in-depth application of digitalization and intelligence, the comprehensive health service system built by Kyushu Express will further improve operational efficiency, broaden revenue sources, and bring the company potential for performance growth in the future.
Profit forecast and investment advice: The company is expected to achieve revenue of 1654.54/1806.92/195.365 billion yuan in 2024-2026 and net profit to mother of 24.63/28.12/3.185 billion yuan, corresponding earnings per share of 0.63/0.72/0.81 yuan/share, corresponding PE is 13/12/10 times. Refer to the same industry valuation and give a “gain” rating.
Risk warning: Market competition increases risk, profit falls short of forecast risk, and risk of policy changes.