Key points of investment:
Established state-owned enterprises have been fresh for a long time, and the entry of Sinopharm stimulates new opportunities
As an established Chinese medicine state-owned enterprise in China, Taiji Group is rich in assets. It has a complete pharmaceutical industry chain with pharmaceutical industry, pharmaceutical commerce, herbal medicine cultivation, and pharmaceutical research and development. It has 1,240 approved Chinese and Western medicines, including well-known products such as Agastache Zhengqi and Juji Syrup. In 2020, Sinopharm Group officially entered the market and released the 14th Five-Year Strategic Plan in December 2021, clearly showing the strategic goal of becoming a world-class Chinese medicine company. Under the leadership of the new leadership led by General Manager Yu, it once again gained new opportunities. In 2022, it turned a loss into a profit. Net profit to the mother increased 132% year-on-year in 2023. Many financial indicators were clearly improved, and the reform results were remarkable.
Strong dosage of core single products represented by Agastache Zhengqi Oral Liquid and Emergency Syrup.
After Sinopharm entered the market, it clearly focused on the core single product strategy, innovatively established brand marketing forms, implemented sales reforms, and achieved breakthrough growth in the company's core single products. As the company's core single product, Agastache Zhengqi Oral Liquid achieved strong growth of 70%/45% respectively in 2022 and 2023, and has become a major single product of over 2 billion. Currently, it is still continuing to deepen its business strategy and broaden application scenarios, and is expected to continue to reach new highs in the future. As a brand of traditional Chinese medicine for cough relief, emergency syrup is well known. After the company's replanning and layout, it achieved a year-on-year increase of 90%/67% in 2022 and 2023, respectively, with sales of nearly 900 million, and is expected to exceed 1 billion in 2024.
Second-tier varieties are gradually gaining strength, actively laying out artificial Cordyceps, and have sufficient potential for medium- to long-term growth.
After improving in the short term, the company still has great potential for growth in the medium to long term. 1) Second-tier varieties are well stocked, and some varieties have already begun to gain strength. The company is in the process of approving thousands of products, and some of the second-tier varieties are already making initial efforts. After initial operation, Tongtian Oral Liquid and Sinusitis Oral Liquid have gone through initial operation. Sales have reached 320 million and 260 million yuan respectively in 23 years, and there is still plenty of room for growth in the future. 2) Chinese herbal medicine resource layout, artificial Cordyceps is expected to become a large variety. The company's Chinese herbal medicine sector expanded rapidly. In 2023, it achieved more than 1 billion dollars in revenue, which more than doubled over the previous year. New varieties of artificial Cordyceps continue to be implemented, and it is expected to become the company's next generation of large-scale varieties in the future.
Profit forecasting and investment advice
We forecast that the company's revenue for 2024/2025/2026 will be RMB 181.88/205.73/23.118 billion, respectively, with growth rates of 16%/13%/12%. The company's net profit for 2024/2025/2026 was RMB 1,105/14.09/1,765 billion, respectively, with a growth rate of 34%/27%/25%. Taiji Group has achieved remarkable results since the entry of Sinopharm into the reform. It continues to release large single products and second-tier varieties of traditional Chinese medicine with sufficient medium- to long-term growth potential. It has been given 30 times PE in 24 years, with a market value of 33.2 billion yuan. First coverage, giving a “buy” rating.
Risk warning
Product sales and promotion fall short of expectations, industry competition increases risks, and industry policy risks.