The company plans to acquire 51% of China Resources Torch's shares. The integration is about to accelerate. Maintaining the “buy” rating. On June 7, 2024, the company announced that it plans to acquire 51% of China Resources Torch's shares with its own or self-raised capital of 1,791 billion yuan (the original China Resources 39 holds 100% of the shares). After the transaction is completed, China Resources Torch will become a holding subsidiary of the company and will be included in the scope of the consolidated statement. If the acquisition is successfully implemented, the company is expected to significantly enhance its competitiveness in the 37 industrial chain, while also solving the competitive problems of Xuesetong Softgel in the industry and consolidating its market position. Maintaining the original profit forecast, net profit due to mother for 2024-2026 is expected to be 6.11/7.43/899 million yuan, EPS is 0.81/0.98/1.19 yuan/share, respectively. The current stock price corresponds to PE 25.3/20.8/17.2 times, respectively, maintaining the “buy” rating.
China Resources Torch lays out a chronic disease track with steady business performance
China Resources Torch was founded in 1995 and became a wholly-owned subsidiary of China Resources 39 in 2016. It is a modern pharmaceutical company integrating research, production and marketing, and is deeply involved in the chronic disease circuit with “King Liyuan” Xuesetong softgels as the core product. In addition, it has a total of 3 holding subsidiaries: (1) Kunming Shenghuo Pharmaceutical mainly provides pharmaceutical marketing services; (2) Yunnan Shenghuo Sanqi Pharmaceutical mainly carries out oral 37 total saponins extraction, blood clotting preparations and GSP logistics; (3) China Resources 39 (Yunnan) 37 Industry Development mainly engages in 37 industry chain-related businesses. Overall, China Resources Torch 37 has a mature industrial chain, high product popularity, and steady business performance. In 2023, it achieved revenue of 751 million yuan, an increase of 1.61% over the previous year; net profit of 203 million yuan, an increase of 0.88% over the previous year.
Integrate and optimize the layout of the 37 industry chain, and collaborate to help the development of the Yinfa Health industry based on the company's deep accumulation in the 37 industry. After the successful acquisition and integration in the future, it is expected to promote the standardized development of the “37” industry and further establish the company as a benchmark enterprise in the 37 industry chain; at the same time, give full play to the synergetic advantages of the two in terms of products, channels, brands and supply chains to help the company to continuously expand its business scale in the field of “Aging Health - Chronic Disease Management”, and enhance the company's performance in the field of “Aging Health - Chronic Disease Management” old The strategic goal of “Age Health - Chronic Disease Management Leader” is to promote the long-term sustainable and steady development of the company.
Risk warning: risk of changes in the market environment, risk of increased market competition, risk of acquisition failure.