Main points of investment
"Medical beauty + bio-pharmaceutical" two-wheel drive, broad prospects. Sihuan Pharmaceutical was founded in 2006, at the beginning of its establishment focused on the field of cardio-cerebrovascular, and signed an exclusive agency agreement with South Korea's Hugel company in 2014, formally laying out the field of medical beauty. At present, the business segment covers medical beauty, generic drugs, innovative drugs and APIs, etc., implementing the two-wheel drive strategy of medical beauty and biopharmaceuticals. In the medical and beauty sector, the company will take Botox as the starting point to promote the continuous enrichment of medical beauty matrices such as hyaluronic acid, Tong Yan water coagulation, Tong Yan needle and so on.
The medical and beauty market is booming, and the demand for Botox is exuberant and the pattern is good. In 2014, China's medical and beauty market was nearly 200 billion yuan, and the growth rate of CAGR in 2020-2019 was about 30%, of which the proportion of light medicine continued to increase. Botulinum toxin has the functions of wrinkle removal, shaping and promotion, so it is one of the most popular light medical beauty projects among Chinese consumers. (1) demand side: China's botulinum toxin market has coexisted with parallel imports for a long time. According to Frost&Sullivan statistics, the regular scale of botulinum toxin in 2015 is about 3.6 billion yuan, and the growth rate of CAGR from 2019 to 2019 is 31.2%. The per capita consumption level is more than five times lower than that of the United States, Japan and South Korea. We expect that in the future, with the increase of penetration and the replacement of the parallel import market, the formal botulinum toxin market is expected to maintain high growth, and the scale is expected to reach more than 14 billion yuan by 2030.
(2) supply side: the entry threshold is relatively high, only 4 products have been approved at present, and the pattern is relatively good.
Medical and beauty business: botulinum toxin is expected to be put on the market quickly, and the medical and beauty pipeline is rich. There are three main reasons for being optimistic about the development of medical and beauty business: (1) Letibao botulinum toxin has high quality, high performance-to-price ratio, differential positioning, light extravagant price and face-slimming effect, and has a strong product power. it has great advantages in improving the customer conversion efficiency of B-end organizations and the awareness of C-end consumers. (2) the core sales team is experienced, flexible and good at content marketing, and is expected to quickly complete the laying of channels. (3) the medical and beauty pipeline is rich and the layout is relatively early, and a number of "self-research + agent" products are expected to be on the market within three years.
Biopharmaceutical business: both imitation and innovation, innovation-driven growth. (1) generics: actively develop varieties of high-barrier generic drugs, in the development of 53 + products, the approval of the core product Klinaoxin indication is expected to promote its return to health insurance through evidence-based medicine, and the academic marketing team is professional and efficient; (2) create new drugs:
Covers tumor, metabolism, infection, diabetes and other fields, R & D investment has increased rapidly, a number of core products have entered the clinical stage; (3) API, CDMO, industrial marijuana: invigorate the existing API assets, implement the integration strategy of "API + CDMO+ preparation", it is expected to gradually contribute certain profits in the future, in addition, through Jilin Aokang layout of industrial marijuana planting and processing.
Profit forecast and valuation level: the company is a "medical beauty + bio-pharmaceutical" two-wheel drive enterprise, Botox is expected to release this year, in the bio-pharmaceutical aspects of imitation and innovation, broad prospects for future development. We expect the company to achieve a net profit of RMB 7.9 million in 2021-23, respectively, an increase of 67%, 38% and 42% respectively. The current market capitalization corresponds to a multiple of 2021-23 PE in 35-26-18, giving a "Buy" rating for the first time.
Risk tips: the promotion of medical beauty is not as expected, drug research and development is not as expected, the impact of medical policy, the impact of intensified market competition.