Key points of investment:
Scarce innovative commercialization platforms, and high-quality business models continue to be replicated.
Mature brand operation experience: The company was founded in 2005, has been deeply involved in brand operation for more than ten years, built a mature commercial platform, cooperated with more than 14,000 large and medium-sized hospitals and 400,000 pharmacies, and continued to expand its operating categories. Cooperative pharmaceutical companies include large pharmaceutical companies such as Astellas, Roche, AstraZeneca, and Novartis. Innovative commercialization platform: Listed companies rely on Baiyang Pharmaceutical Group. The group level empowers research and development of innovative pharmaceutical devices through equity cooperation, while listed companies are responsible for commercial promotion, linking the two major high-value-added businesses of R&D, design and marketing brands to create an integrated commercialization platform for self-development+BD.
Policies are getting stricter and new drugs are being launched intensively, and the pharmaceutical commercialization market can exceed 100 billion dollars.
Different life cycle drugs all have commercialization needs: the collection of original research drugs in the generic period is out of the standard, and retail channel transformation is sought; innovative drugs are difficult to administer, biotech commercialization risk is high; traditional pharmaceutical companies have limited retail channel resources; compliance commercialization requirements are increasing: China's new drug marketing has entered an intensive approval period, and the number of innovative pharmaceutical companies that completed the first new drug IND in 2021 has reached 129, spawning broad drug commercialization needs; pharmaceutical regulatory policies are becoming stricter, the industry is reshaped, and the value of compliance commercialization platforms is expected to be reshaped.
Large mature products+newly introduced potential varieties+subsequent potential product pool, creating a trifecta of growth.
Large mature products: Take Diqiao as an example. In the context of the continuous expansion of the calcium products industry, the company still achieved Diqiao's operating revenue of 1.63 billion yuan in 2022, an increase of 18% over the previous year, bringing a steady contribution to the company's performance. Following competitor Landi's recall + online release, the growth rate can still be expected; newly introduced potential varieties: dry eye syndrome had a market size of over 6.7 billion US dollars in 30 years, and the sales revenue of the company's operating seaweed exceeded 400 million in '22, an increase of more than 40% over the previous year. It is still in a period of rapid scale-up, continuing to inject momentum into the company's rapid growth in performance. Subsequent potential product pool: In the period of intensive approval of innovative pharmaceutical devices, the Group's endogenous+epitaxial BD will continue to provide the company with a rich pool of potential commercial products, further opening up the company's growth ceiling.
Profit forecasting and investment advice
We expect the company's revenue for 2024-2026 to be 86/98/11.2 billion yuan, up 14%/14% year on year, and net profit to mother of 9.0/11.7/1.53 billion yuan respectively, up 37%/30%/30% year on year. Using the comparable company valuation method, we selected 6 comparable companies with pharmaceutical commercialization businesses and calculated that the average PE ratio after 24 years of adjustment was 11.3 times. We believe that as the company continues to expand into new categories, the future growth trilogy is expected to establish certainty in performance growth. Considering that the company's brand distribution business is different from the traditional pharmaceutical distributor business model, empowering pharmaceutical companies to commercialize can occupy a higher value space in the industrial chain and have relatively higher potential for growth. The company's gross profit margin and future net profit CAGR are significantly higher than those of similar pharmaceutical distribution listed companies. Therefore, a certain valuation premium was given to the company, which covered the “buy” rating for the first time.
Risk warning
The expansion of new categories fell short of expectations; the risk of worsening competition in the Diqiao market; and the expansion of the new product market fell short of expectations.