occurrences

The company released its 2024 semi-annual report, and achieved revenue of 13.345 billion yuan in the first half of 2024, up 11.29% year on year; net profit to mother 0.658 billion yuan, down 28.32% year on year; net profit after deducting 0.659 billion yuan, down 26.65% year on year.

Deeply cultivate the South China market and strengthen the national layout

In the first half of 2024, the company's retail business achieved revenue of 11.065 billion yuan, an increase of 8.20% over the previous year; benefiting from the rapid growth of franchise stores, the franchise and distribution business achieved revenue of 1.973 billion yuan, an increase of 33.85% over the previous year. The company's development in various regions is basically balanced. South China maintains steady sales growth through mature brand market effects, while actively implementing an expansion strategy outside the province. In the first half of 2024, South China achieved revenue of 8.605 billion yuan, an increase of 5.30%; Central China achieved revenue of 1.199 billion yuan, an increase of 5.60%; East China achieved revenue of 1.009 billion yuan, an increase of 18.73%; other regions achieved revenue of 2.226 billion yuan, a year-on-year increase of 18.73%; other regions achieved revenue of 2.226 billion yuan, a year-on-year increase 44.16%

Continue to expand the number of stores

The company continues to expand the number of stores. By the end of June 2024, it had covered 21 provinces across the country, and the number of stores reached 16,151, including 10,772 direct-run stores and 5,379 franchise stores. In the first half of 2024, the company opened 797 new self-built stores, 1,214 franchised stores, acquired 284 stores, and closed 218 stores. The company actively undertakes the outflow of prescriptions. As of the end of June 2024, it had 248 pharmacies specializing in DTP, 9,914 designated stores with personal accounts, and 2,586 designated stores with various types of co-ordinated reimbursement, including 1,782 outpatient co-ordinated stores, 602 dual-channel designated stores, and 1,165 slow-door designated stores.

Profit Forecasts, Valuations, and Ratings

Considering the current industry sentiment, we expect the company's revenue for 2024-2026 to be 27.642/32.239/38.476 billion yuan, respectively, with corresponding growth rates of 12.68%/16.63%/19.35%, respectively; net profit to mother is 1.248/1.445/1.732 billion yuan, respectively, corresponding growth rates are 7.03%/15.72%/19.89%, EPS is 1.10/1.27/1.52 yuan/share, and 3-year CAGR At 14.08%, it is recommended to stay tuned.

Risk warning: prescription outflow falls short of expectations; risk of policy changes; increased market competition; declining profitability; store expansion falls short of expectations.