Public REITs issuance application materials have been officially submitted to the Securities Regulatory Commission and the Shanghai Stock Exchange, and the project is progressing smoothly

On September 22, the company issued an announcement stating that the application and issuance of pharmaceutical warehousing and logistics infrastructure public REITs is progressing smoothly. The company officially submitted application materials to the China Securities Regulatory Commission and the Shanghai Stock Exchange on September 20, 2024.

The company has about 3 million square meters of pharmaceutical logistics storage assets and supporting facilities that can be accessed; the current pharmaceutical warehousing and logistics infrastructure public REITs pool assets are pharmaceutical logistics storage assets in Dongxihu District of Wuhan City. The total construction area is about 0.172 million square meters, the estimated value is about 1.2 billion yuan, and the book value is about 0.3 billion yuan. If approved, this project is expected to become the first public REITs for domestic pharmaceutical logistics warehousing facilities and the first public REITs for private enterprises in Hubei Province, with strong demonstration effects and positive effects.

Public REITs are expected to boost performance, revitalize the company's assets, and restructure the company's asset-light business model

If the issuance of this public REITs is completed, it is expected to increase the company's net profit by no more than 0.7 billion yuan. Empowering companies with public REITs can help companies enhance their corporate image and brand value, effectively boost their influence in the capital market, show the fair value of the company's high-quality pharmaceutical logistics storage assets, and thus enhance the company's market value. By building an asset-light operation platform, we will accelerate the restructuring of the company's asset-light operation business model, revitalize the company's pharmaceutical warehousing and logistics assets and supporting facilities, accelerate asset liquidity, raise more operating capital for the company, and promote the rapid development of the company's main business. Broaden diversified equity financing channels, establish a virtuous cycle model for asset development, and reduce the company's dependence on traditional debt financing methods. Enhance the company's ability to operate assets, achieve diversified benefits, and bring rich non-recurring equity benefits to the company.

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

On June 30, 2024, the company issued an announcement on “Launching the Pharmaceutical Logistics Warehouse Asset Pre-REITs Project”: it is intended to launch a pre-REITS project for pharmaceutical logistics warehousing assets to incubate and cultivate high-quality pharmaceutical logistics storage assets in advance for the subsequent expansion of the company's public REITs, and promote the rapid transformation of the company's real estate securitization strategy. The 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 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.

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 165.27/185.195/209.438 billion yuan, respectively, and net profit to mother is 2.618/3.015/3.491 billion yuan, respectively. The PE corresponding to the current stock price is 8.8/7.7/6.6 times, respectively, maintaining a “buy” rating.

Risk warning:

The pace of approval falls short of the expected risk, and the operation of REITs funds after issuance falls short of the expected risk.