China Resources joined the market to become a leader in silver hair health. In 2023, Kunming Pharmaceutical merged into China Resources 39 and successfully completed the 100-day integration and one-year integration: 1) the core management, directors, and supervisory board were successfully restructured; 2) connected with 39 commercial channels to enable channel construction. 3) Establish three major divisions, “KPC · 1951,” “Kunming Traditional Chinese Medicine 1381,” and “777,” establish new strategic goals of “Yinfa Health Industry Leader, Premium Chinese Medicine Leader, and Aging Health - Chronic Disease Management Leader”, and strive to double revenue and reach 10 billion yuan in industrial revenue by 2028.
Focus on the 37 industrial chain, resolve competition in the industry, and form development synergy. As aging continues to deepen, demand for cardiovascular drugs continues to grow. 37 is one of the most characteristic superior biological resources in Yunnan. It is widely used in the prevention and treatment of cardiovascular and cerebrovascular diseases. 1) The injections benefited from medical insurance payment relief restrictions and collection volume, showing restorative growth; 2) The company's 37 product, Blood Saengtong Oral Series, gave full play to the combined advantages of multiple dosage forms and multiple product regulations, and continued to strengthen brand building and academic construction. Currently, only Kunyao Group and China Resources Torch have approval for the production of Xuesaitong softgels. After KPC acquires 51% of China Resources Torch's shares, the two sides will form development partnerships in terms of channels, evidence-based medical research, etc., and “academic+brand” two-wheel drive will comprehensively improve marketing efficiency.
Build the “Kunming Traditional Chinese Medicine 1381” premium Chinese medicine platform. The Kunming Chinese Medicine Factory has a history of more than 600 years and is one of the top five traditional Chinese medicine brands in China. Large single products such as Shenling Spleen and Stomach Granules and Liver Soothing Granules are gradually showing results. At the same time, integrating the construction of Kunming Pharmaceutical sales channels and using the 39 Jiu Commercial Road to launch the “Iron Shelf Project”, the profit margin level of Kunming Traditional Chinese Medicine is expected to increase further.
Give it a “buy” rating. The company's revenue for 2024-2026 is estimated to be 85.09/94.51/10.501 billion yuan, +10.5%/11.1%; net profit to mother of 5.80/7.39/921 million yuan, +30.5%/27.4%/24.6%; corresponding EPS is 0.77/0.98/1.22 yuan, respectively. Considering the power of China Resources 39, the company will improve quality and efficiency, and the product channel coverage rate will gradually increase. The first coverage gave it a “buy” rating.
Risk warning: asset impairment risk, market and policy risk, drug price reduction risk, etc.