“Wuling+Bailing” dual-core growth model to create leading domestic medicinal fungal pharmaceuticals
The predecessor of Zoli Pharmaceutical was founded in October 1995, and successfully listed on GEM in February 2011 after the stock reform in 2000. The company produces traditional Chinese medicine products based on medicinal fungal biofermentation technology. It is mainly engaged in R&D, production and sales of medicinal fungi Wuling and Bering series products, traditional Chinese medicine tablets and traditional Chinese medicine formula granules. We are optimistic about the growth model of the company's “Wuling+Bailing” dual-core formulation and the steady development of the Chinese herbal medicine tablet and formula granule business. The net profit for 2024-2026 was 0.505/0.632/0.785 billion yuan, and EPS was 0.72/0.90/1.12 yuan, respectively. The current stock price corresponds to PE of 20.6/16.4/13.2 times, giving it a “buy” rating for the first time.
Empower core traditional Chinese medicine products in multiple dimensions and promote development through innovation
The company's vertical and horizontal layout empowers the development of core products, (1) deepening the barriers to the advantages of Wuling bacteria powder vertically: the company extends the development of the Wuling series of products around Wuling bacteria powder as the first pillar of growth, covering Wuling capsules, Lingze tablets, and Linglian granules. Among them, Wuling capsules are the core exclusive class 1 new traditional Chinese medicine. They are mostly used in treatment fields such as insomnia, depression and anxiety, and are gradually expanding clinical evidence for Alzheimer's disease. They are expected to enter the field of AD indications in the future, and the market demand is broad. In addition, Wuling Capsule has won multiple rounds of collection, such as the Guangdong Union and the Beijing-Tianjin-Hebei “3+N”. The price reduction rate is moderate and pricing is basically uniform throughout the country. Under the “basic drug+medical insurance” dual catalog status, it is expected that the growth logic of “price reduction and increase” will be achieved through collection through large-scale package replacement, promoting further improvement in performance. (2) Horizontal expansion of the layout of fermented Cordyceps sinensis powder formulations: Through its holding subsidiary Everest Pharmaceutical, the company lays out the second class of medicinal fungus products, that is, fermented Cordyceps sinensis powder formulations mainly based on Bering tablets and Bering capsules, as the second pillar of growth, and the market space is broad to be developed.
The Chinese medicine tablet business is growing steadily, and the volume of traditional Chinese medicine formula granules is an important part of the “one, two wings” strategic layout. The company has established three production lines of “ordinary tablets,” “toxic tablets,” and “direct oral tablets,” using the wholly-owned subsidiary Zoli Baicao Traditional Chinese Medicine as a starting point, and has produced more than 1,000 Chinese medicine tablets. In terms of the traditional Chinese medicine formula granule business, the company continues to step up research and development efforts and actively participate in the research and formulation of national and provincial standards. By the end of 2023, it has completed 208 and 127 national and provincial standard filings, while rapidly expanding its coverage in the national market to help future expansion.
Risk warning: Market competition intensifies, product sales fall short of expectations, and new product development speed falls short of expectations.