With the approaching of the expectation of the Federal Reserve's interest rate cut and the increase in policy support, the pharmaceutical sector, with its low valuation and high cost-effectiveness, has become the focus of the market's attention. Several brokerages predict that after the mid-year report is released, negative factors in the pharmaceutical industry will be effectively digested, indicating that the second half of the year will be a golden opportunity to layout in this sector.

Of particular note is the recent announcement of the performance in the first half of 2024 by Kingworld Pharmaceutical Group Co., Ltd. (referred to as "Kingworld Pharmaceutical"), which demonstrates strong resilience and stabilizes the company's fundamentals in the overall industry downturn. The company has long been committed to the pharmaceutical market, and has numerous well-known brand products, including the "National Treasure" Kingworld Niuhuang Chuanbei Pear Syrup, and continues to innovate and create new performance growth drivers to cope with industry cyclicality.

So, how should we view this report card?

Cultivating new product categories and creating new engines

From a performance perspective, Kingworld Pharmaceutical has shown resilience in the first half of 2024.

Overall, with many well-known national brands, Kingworld Pharmaceutical continues to play a role in stabilizing the company's performance foundation, and each brand achieves new growth through different marketing strategies. Among them, the company's various business sectors achieved effective development in the first half of the year, allowing multiple sectors to contribute more effectively to the company's performance.

According to WIND data, Kingworld Pharmaceutical achieved a revenue of 0.526 billion yuan (RMB) in the first half of 2024. During the same period, the company reduced costs and increased efficiency, with a gross profit of 0.137 billion yuan and a net profit attributable to owners of 30.716 million yuan.

Behind Kingworld Pharmaceutical lies a wealth of strategic and execution wisdom.

As the traditional pillar of the company, the sales revenue of the pharmaceutical distribution division in the first half of 2024 reached RMB 0.356 billion, which is achieved thanks to its deep industry accumulation and forward-looking layout.

In 2024, the overall performance of the pharmaceutical retail industry was not ideal. According to the statistics of Zhongkang CMH, the scale of China's pharmaceutical retail market from January to May 2024 was approximately RMB 217.8 billion, a year-on-year decrease of 3.7%; the average sales per store decreased by 10.6%, and the unit price decreased by 8.9%, indicating that consumers have become more cautious in their spending.

However, in the context of the overall decline in industry revenue, Kingworld Pharmaceuticals has sensitively identified market signals through its long-term deep interaction with the market, and has proactively expanded its extensive and in-depth sales network. It has added 9,128 new outlets, covering a total of approximately 162,719 chain pharmacies, 23,165 grassroots medical institutions, 12,570 hospitals and clinics, as well as 39 convenience stores and supermarkets.

Relying on the advanced SMART market sales traceability management system, the company accurately positions market demand, flexibly adjusts distribution strategies, ensures that products quickly reach consumers, and meets diverse health needs. Based on the data results, although Kingworld Pharmaceuticals has slightly decreased its revenue, it is only half of the industry average decline, demonstrating its resilience.

Facing the ever-changing market, Kingworld Pharmaceuticals has demonstrated strong adaptability and innovation by using its sales network layout to hedge against the short-term market contraction and expand its presence in the long-term market. Against the backdrop of the flourishing O2O pharmaceutical market, the company has keenly captured market trends. In the first half of 2024, the sales volume of O2O channels has increased significantly, especially the direct delivery store model, which has increased its share to 4.3%. By increasing the promotion and standardized management of the O2O market, the company empowers its partners through digital means such as search keywords and banner ads, and collaboratively promotes performance growth.

In addition, continuous brand cultivation and marketing innovation are also the key to Kingworld Pharmaceuticals' continued leadership.

Taking Jin Tainci'an as an example, in the first half of 2024, the product adopted a very proactive market promotion strategy and conducted brand promotion through multiple popular TV programs. In addition to sponsoring iQiyi's "The Furious", Hunan TV's "I Want to Sing with You" variety show, and placing advertisements in the phenomenal urban drama "Flowers Blossom", the product achieved a peak daily online playback volume of 0.145 billion. By deepening consumer awareness and recognition through multi-channel coverage, it has effectively expanded market influence and brand value.

For the Kingworld Yima Dahonghua Oil, the company has adopted a strategy of simultaneous online and offline promotion. Online, Kingworld Pharmaceuticals uses short video platforms such as Douyin and Kuaishou to create a communication and interaction platform for Kingworld Yima Dahonghua Oil and other pharmaceutical products with young consumers, allowing consumers to lead product promotion. Offline, the company actively participates in various events, with Kingworld Yima Dahonghua Oil as the designated external-use oil for sports events, and the red flower oil massage service in the relaxation and stretching area of the events has been highly praised by runners. Through these innovative marketing methods, consumers have transformed from passive receivers to active participants and promoters of the brand, garnering support from many consumers for the products.

It is worth noting that the company is also actively promoting the research and development and listing of new products, injecting strong momentum for future development. Currently, the new product category, Foci Kingworld An Gong Niuhuang Pills, has completed the design of the outer packaging, product filing public announcement, and procurement of raw and auxiliary materials, and will be launched in the second half of the year. With Foci's long history and exquisite manufacturing technology, the cultivation of niuhuang and the unique Kingworld marketing model empowered by modern technology, Foci Kingworld An Gong Niuhuang Pills is expected to become the next explosive product.

As the second largest business sector of Kingworld Pharmaceuticals, in the environment of increasing demand for health, the company's health and daily chemical business continued to innovate and achieve sales of RMB 558.76 million in the first half of 2024.

For hot-selling products such as Culturelle Probiotics, the earliest Life's DHA series of algae oil, Carmex, and the INNOPHARM Yinnuofan series, Kingworld Pharmaceuticals focused on accurate investment and improving conversion rates in the first half of 2024, aiming to create explosive products.

To create the explosive product INNOPHARM Yinnuofan Fish Oil, the company has conducted comprehensive planning and layout in the distribution channels, forming a full-chain distribution layout both domestically and overseas, online and offline, injecting new growth engines for future development. For example, the company has opened brand flagship stores on platforms such as Tmall, JD.com, Douyin, and Xiaohongshu, and has utilized the hotspot of the 2024 Olympic Games to increase marketing and promotion efforts, focusing on promoting on social media platforms with a large population of young and high-end individuals, from different angles, highlighting the features, selling points, and effects of the product to boost sales. In addition, the company will also launch INNOPHARM Yinnuofan Fish Oil on platforms such as Mannings and HKTVMALL in Hong Kong, China.

Finally, in the field of medical equipment and devices, with the increasing global aging trend, Kingworld Pharmaceuticals closely follows market demand, and the demand for medical supplies continues to grow, with overall sales performance being ideal. During the reporting period, sales from the medical device division amounted to RMB 11.4 million, a year-on-year increase of 4.53%.

Summary

In the current context of the increasingly severe trend of population aging, the medical and health industry still presents itself as a blue ocean track with a long-term growth engine. The top-level planning and design at the national level provide a solid backing for enterprises in this field.

Recently, the State Council officially issued the "Opinions on Promoting the High-Quality Development of Service Consumption" on August 7th. In the "Health Consumption" section, it explicitly put forward multiple supportive policies, aiming to help the vigorous development of traditional Chinese medicine old-brand enterprises and further improve the level of health, rehabilitation, and other services. It is particularly noteworthy that the opinions also emphasize the need to strengthen the functional expansion of retail pharmacies in health promotion, nutrition and health care, and other aspects, to provide the public with more comprehensive and convenient health services.

As a medical company that has been deeply involved in the healthcare industry for 30 years, Kingworld Medicine is seizing the opportunity of the times to create a "National Pride". And from the latest performance report, the company's strategic goals go beyond this. The two natural high-end nutrition brands INNOPHARM Innofish Oil Series introduced by the company in the first half of this year, and the heavyweight single product Foci Kingworld An Gong Niuhuang Wan to be launched in the second half of the year, are expected to become important growth drivers for future development, and the future development is worth looking forward to.