Yifeng Pharmacy Co., Ltd. announced that 2024H1 achieved operating income of 11.762 billion yuan, an increase of 9.86% over the previous year; net profit attributable to shareholders of listed companies was 0.798 billion yuan, an increase of 13.13% over the same period last year.
Key points of investment
Balanced development, priority on efficiency
In the first half of 2024, the company added 1,575 stores, including 842 self-built stores, 293 mergers and acquisitions, and 440 new affiliate stores. Compared with the first half of 2023, the company maintained a relatively rapid growth pace of construction and mergers and acquisitions, and the number of franchised stores slowed down due to changes in the industry environment. Also, during the reporting period, 17 stores were relocated, 72 stores were closed, there was no significant change in the number of closed stores, and the overall number of stores maintained a net increase. The company faced competitive pressure in the industry, mainly reflected in the decline in floor efficiency. The average daily floor efficiency of small community stores, which accounted for the bulk in the first half of 2024, was 49.66 yuan/square meter, compared to 54.70 yuan/square meter in the same period in 2023. In order to cope with changes in the industry and prioritize efficiency, the company will further improve management efficiency, and the pace of building new stores and closing stores in the second half of the year may be adjusted.
Maintain stable gross margins and strengthen brands and services
The gross margin of the company's retail business in the first half of 2024 was 40.94%, an increase of 0.06 percentage points over the same period in 2023. By product, the gross margin of pharmaceuticals was 36.46%, down 0.12 percentage points from the previous year, and the gross margin of non-pharmaceuticals was 51.1%, up 0.03 percentage points from the previous year. The company's dominant regions are Central South and East China, which are also regions where the implementation of the overall health insurance policy is progressing rapidly. Currently, co-ordinated pharmaceuticals still account for a low share of the company's overall revenue, and their impact on the company's profits is small. The company continues to improve and build a product boutique group including its own brands, exclusive varieties, and products jointly built by manufacturers. On the one hand, it forms a differentiated competitive advantage, and on the other hand, it is stable and profitable.
Profit forecasting
The company's revenue for 2024-2026 is 24.786, 26.483, and 29.171 billion yuan, respectively; net profit to mother is 1.614, 1.894, and 2.121 billion yuan, respectively; EPS is 1.33, 1.56, and 1.75 yuan respectively. The PE corresponding to the current stock price is 13.9, 11.8, and 10.5 times, respectively. By the end of June 2024, the company had 14,736 pharmacy chains (including 3,426 franchisees), which is the largest number of directly-managed stores in China The advantages of private pharmacy chains, efficient operation and replication chains were effectively verified in an environment where competition in the industry intensified in the first half of the year. Driven by a series of policies such as outpatient coordination, the concentration of the retail pharmacy industry will accelerate, and the company's advantages as a leader will gradually expand, be covered for the first time, and given a “buy” investment rating.
Risk warning
Risks such as increased competition, risk of policy changes, and store expansion falling short of expectations.