Baiyang Pharmaceutical: A mature brand commercialization platform, continuous optimization of operating efficiency. The company has many years of experience in brand operation, and has successfully incubated leading brands in various categories such as DiQiao and Pitech. The product matrix covers the four major categories of OTC and prescription drugs such as OTX, heavy medicines such as cancer, and high-end medical devices. It has formed a mature marketing model and leading promotion capabilities in retail channels and medical terminals. In recent years, the company's profits have grown rapidly and operating efficiency has continued to improve. We believe that the company's fundamentals are interesting in the short, medium and long term. The core product Diqiao ranks first in the imported calcium supplement market. The leading position is stable, and there is still room to increase its market share in the future; the company is increasing its promotion efforts through online and new media channels and gradually covering people of all ages through category expansion. We believe that Diqiao still has great potential for growth. The company has rich operating experience in outpatient marketing. With differentiated promotion strategies and product advantages, Hailu eye drops are expected to continue to grow rapidly. In terms of other varieties, Newtschuma is expected to maintain rapid growth due to its unique market brand positioning, and many brand products that have been in business for many years, such as the Piter and Astellas series, are also expected to maintain steady growth. Over the long term, the company has carried out multiple layouts around innovative pharmaceutical devices and obtained commercialization rights for various innovative pharmaceutical devices. We believe that the company's share of revenue from innovative pharmaceutical devices will increase year by year, becoming a new driving force for performance growth.
It is proposed to acquire Baiyang Pharmaceutical to improve the layout of the upstream industrial sector. In May 2024, the company announced its intention to acquire 60.199% of Baiyang Pharmaceutical's shares. Baiyang Pharmaceuticals' core products include Fuzheng Huayu series and Nida. Fuzheng Huaxia series products are used to treat liver fibrosis. They have accumulated rich evidence-based medical evidence and have outstanding clinical value. We believe that with good clinical efficacy and the company's rich brand operation experience after the merger and acquisition is completed, there is still plenty of room for future growth in Fuzheng Anti-Stasis series products. Metformin hydrochloride extended-release tablets (III) (trade name: Nida) is a nationally negotiated variety. Compared with traditional skeletal extended-release tablets, metformin is in high demand as a basic medication for diabetics. With its outstanding clinical value advantages, we believe that Nida is expected to gradually replace the original dosage form and has sufficient potential for future growth. In addition to complementing the product line, the company's business will also be extended from brand operation to the upstream pharmaceutical manufacturing field, helping the company upgrade from a health brand commercialization platform to a pharmaceutical industrialization platform that supports innovation at the source, providing solutions for the entire industry chain from production to marketing, and laying a good foundation for the subsequent undertaking of innovative drug CXO business (CDMO+CSO).
Profit forecasting and valuation. Excluding mergers and acquisitions, we expect the company's revenue to be 8.69 billion yuan, 9.118 billion yuan and 10.165 billion yuan respectively from 2023 to 2025, with year-on-year growth rates of 8.0%, 11.7%, and 11.4%, respectively; net profit to mother will be 887 million yuan, 1,136 million yuan, and 1,437 billion yuan, respectively, with year-on-year growth rates of 33.8%, 29.3% and 26.6%. Based on the closing price on June 14, the corresponding PE is 17.2, 13.3, and 10.5 times, respectively. The first coverage gives a “buy” rating.
Risk warning: Sales revenue for stock products fell short of expectations due to factors such as intense market competition and declining consumption capacity; the marketing progress of innovative pharmaceutical devices fell short of expectations, and the sales amount fell short of expectations after listing; progress of mergers and acquisitions fell short of expectations; and product agency sales and promotion agreements underwent adverse changes.