零售业务保持平稳。受政策及消费影响，零售业务收入增速放缓。分业务看，1~3Q24 零售业务收入133.1 亿元（+1.7% yoy），加盟、联盟及分销业务收入28.0 亿元（-0.4% yoy），其他业务收入1.2 亿元（-11.1% yoy），各业务分别占收入比例为82.0%、17.2%、0.8%。分产品看，1~3Q24 中西成药129.7 亿元（+5.0% yoy），中药收入12.0 亿元（-8.3% yoy），非药品收入20.6 亿元（-13.2%yoy），各产品分别占收入比例为79.9%、7.4%、12.7%。Matters:
The company released its 2024 three-quarter report. The company's revenue was 16.23 billion yuan (+1.2%), net profit due to mother was 0.63 billion yuan (-12.1%), after deducting non-net profit of 0.61 billion yuan (-5.9%). In the third quarter of a single quarter, the company's revenue was 5.29 billion yuan (+1.2%), net profit due to mother was 0.13 billion yuan (-37.3%), and 0.13 billion yuan (-19.1%) after deducting non-net profit.
Commentary:
The retail business remained stable. Due to policy and consumption, retail revenue growth is slowing down. By business, retail revenue from 1-3Q24 was 13.31 billion yuan (+1.7% yoy), revenue from franchise, alliance and distribution business was 2.8 billion yuan (-0.4% yoy), and revenue from other businesses was 0.12 billion yuan (-11.1% yoy). Each business accounted for 82.0%, 17.2%, and 0.8% of revenue, respectively. By product, from 1-3Q24, Chinese and Western proprietary medicines were 12.97 billion yuan (+5.0% yoy), Chinese medicine revenue 1.2 billion yuan (-8.3% yoy), and non-drug revenue was 2.06 billion yuan (-13.2% yoy). Each product accounted for 79.9%, 7.4%, and 12.7% of revenue, respectively.
The share of franchisees continues to rise, and the quality of the sinking market and outpatient coordination fund continues to expand. 1) The number of stores continued to grow, and the proportion of franchisees increased: the total number of 3Q24 stores increased to 15,591, of which 10,300 were directly operated and 5,291, a significant increase from 13,574 at the end of 2023, and the share of franchise stores increased to 33.9% (32.4% in 4Q23); 2) Accelerated decline and expansion: Among the new stores added from 1 to 3Q24, prefecture-level markets and below accounted for 80%; (3) Coordinated stores continued to increase: as of 3Q24, the company's 5,347 stores received consolidated outpatient funding Quality, proportion of direct sales 40.5%; 4191 stores achieve integrated outpatient medical insurance management and support Internet prescriptions (interchangeable). Direct management accounts for 32.9%, and the number of co-ordinated stores continues to grow.
The Torch Project has been vigorously promoted, and gross margin has increased steadily. 1) 3Q24 gross margin increased 0.9 pct to 32.9% year on year, mainly due to vigorous promotion of the torch project and continuous optimization of the entire sales process. From 1 to 3Q24, the company's own brand revenue was 2.53 billion yuan, accounting for 21.9% of sales, accounting for 71.3% of total sales; 3Q24 net profit margin 3.0% (-1.7 pct year on year); 2) 3Q24 sales rate increased 0.7 pct to 22.5% year on year, management rate increased 1.1 pct to 5.5% year on year, and financial rate decreased year on year 0.1 pct to 0.9%.
Investment advice: Stable restoration of core products and maintenance of the “recommended” rating. We expect the company's net profit to be 0.82/0.92/1.06 billion yuan in 24-26, with a year-on-year change of -12%/+12%/+15%. Refer to industry comparable company valuations, and give the company a 25-year 20x target PE, corresponding to a target price of 24.2 yuan, maintaining the “recommended” rating.
Risk warning: Risk of business development falling short of expectations and policy fluctuations.
