It is proposed to launch a pre-REITs project for pharmaceutical logistics warehousing assets to lay the foundation for the subsequent expansion of the company's public REITs

The company issued an announcement on “Launching the Pharmaceutical Logistics Warehouse Asset Pre-REITs Project”:

It is proposed to launch a pre-REITs project for pharmaceutical logistics warehousing assets to incubate and cultivate high-quality pharmaceutical logistics warehousing assets in advance for the subsequent expansion of the company's public offering REITs, and promote the rapid transformation of the company's real estate securitization strategy.

The initial pre-REITs project's pooled assets are proposed to be the three pharmaceutical logistics storage assets and supporting facilities in Shanghai, Hangzhou and Chongqing owned by the company's subsidiaries. The total construction area is about 240,000 square meters, with a net book value of about 440 million yuan. After preliminary assessments, it is estimated that the amount of capital raised will not exceed 2 billion yuan. If the issuance is successful, it is expected to increase the company's net profit by no more than 1.1 billion yuan in 2024 (based on the final results after the audit by the accounting firm).

This pre-REITs project will screen the company's underlying assets such as pharmaceutical logistics storage assets and supporting facilities in accordance with the requirements of infrastructure public offering REITs, and intervene in the operation and cultivation process of the target assets in advance, with a view to forming a seamless virtuous cycle of rolling reinvestment in pharmaceutical logistics storage facilities to build a “public REITs+pre-REITs” multi-level real estate equity capital operation platform.

Public REITs projects are progressing in an orderly manner, and the implementation of the real estate securitization strategy continues to be deepened

In terms of public funding REITs projects, the company selected pharmaceutical logistics storage assets and supporting facilities headquartered in Dongxihu District of Wuhan City. The asset has a construction area of about 172,000 square meters, an assessed value of about 1.2 billion yuan, and a book value of about 300 million yuan. Up to now, the company's public REITs project has been reviewed by the National Development and Reform Commission. If approved, it is expected to become the first public REITs for domestic pharmaceutical logistics warehousing facilities and the first public offering REITs for private enterprises in Hubei Province.

Profit forecasts and investment advice

While the company's fundamentals are improving positively and wholesale is growing steadily, the new product strategy creates a “second growth curve”. The proposed issuance of REITs will accelerate capital turnover, and the company is expected to usher in valuation reshaping.

The company's 2024-2026 revenue is estimated to be 1652.70/1851.95/209.438 billion yuan, respectively, and net profit to mother will be 26.18/30.15/3.491 billion yuan, respectively. The PE corresponding to the current stock price is 9.4/8.2/7.1 times, respectively, maintaining a “buy” rating.

Risk warning:

The implementation of digital transformation falls short of the expected risks; the operation of REITs funds falls short of the anticipated risks.