Event: Renhe Pharmaceutical plans to acquire seven target companies at a price of 720 million yuan, covering cosmetics, small medical devices, health products and so on. The final amount of the acquisition is 719 million yuan, and the PE valuation of the net profit of the target company in 2021 (96.93 million yuan) is 7.4 times, and the acquisition price is better than market expectations.
Business income and net profit from January to April in 2020 and 2021: according to the company announcement, the total income of the seven target companies this acquisition totaled 690 million yuan in 2020, and the net profit totaled 67.33 million yuan.
The total income from January to April in 2021 is 280 million yuan and the net profit is 36.83 million yuan.
Operating income and profit forecast from 2021 to 2023: according to the company announcement, the target company is expected to achieve a net profit of 72.38 million yuan from May to December 2021, and the consolidated Q1 has disclosed net profit. The net profit for the whole year of 2021 is 96.93 million yuan, an increase of 117% over the same period last year. The net profit of the company from May to December, that is, 72.38 million yuan, is only marked by the company in 2021. The company in 2022 is expected to achieve a net profit of 128 million yuan, an increase of 32.5% over the same period last year. The company in 2023 is expected to achieve a net profit of 161 million yuan, an increase of 25.4% over the same period last year. The profit forecast growth rate is relatively conservative than we had expected.
After the completion of this acquisition, the big health business with make-up as the core is expected to develop rapidly. Renhe brand advantage in the drug makeup this scarce track is fully highlighted, after the launch of cosmetics quickly seize the minds of consumers, superimposed company to low-and medium-priced functional skin care products as the core individual products, cosmetic business has been rapid development. The original OTC business of listed companies is developing steadily. After the completion of this acquisition, the big health business with pharmaceutical makeup as the core is expected to develop rapidly.
Profit forecast and investment advice: the expected results in 21-23 are 0.50,0.57 and 0.66 yuan per share respectively, corresponding to PE valuation 20.05x/17.45x/15.19x. For the time being, the consolidation of the subject matter of the acquisition will not be taken into account in the profit forecast in this report. With reference to the comparable company valuation, we think it is appropriate to give the company a 21-year PE valuation of 23 times, with a "buy" rating corresponding to a reasonable value of 11.50 yuan per share.
Risk tips. Policy risks such as collection and acquisition; intensified competition in the industry led to product sales falling short of expectations.