Main points of investment
Event: on July 27, the company announced that revenue in the six months to June 30, 2021 is expected to increase by 80% to 2.1 billion yuan +, while net profit will increase by 300% to 600 million yuan +.
Revenue, net profit growth are faster than we had expected, is expected to be mainly due to the smooth expansion of the medical sector and the rapid growth of traditional generic medicine business.
Letibao Botox went on the market smoothly in the first half of the year, with strong product power and fast delivery. 100U and 50U of Letibao botulinum toxin represented by the company were approved to go on the market in October 2020 and January 2021, respectively.
Among them, 100U Letibao was officially listed in China in February 2021, becoming the fourth type A botulinum toxin approved to be listed in China. Letibao has the characteristics of high quality, high performance-to-price ratio, high purity, effect and quality, and the terminal price is only about 40% discount for Botox. South Korea has the first market share, and strong products are actively purchased by terminal agencies after they are listed on the market. According to Meiye observation, by July 2021, it has covered 1800 + hospitals, of which Top 500 medical institutions have covered nearly 400. the leading delivery speed of the industry shows the strong confidence of the market in the products.
With the development of medicine and beauty, it is expected to build a golden combination of botulinum toxin and hyaluronic acid, covering a variety of injections, catgut embedding and instruments. Relying on the "beauty space" of the medical beauty platform, the company has built a product pipeline mainly for injection products, covering all categories of medical beauty products, including injections, catgut embedding and instruments. In addition to Botox products that are being released during the year, according to the company's performance report, Hugel's hyaluronic acid product is also expected to be approved for market in 2021, which is expected to build a gold injection combination of "Botox + hyaluronic acid". From the perspective of other injection products, in July 2021, the self-developed "Child face Needle" product has entered the clinical stage, and the "Young Girl Needle" is also in the animal trial stage. In addition, in June 2021, the company won the exclusive agency of Elasti facial embedding thread (line carving) and private thread under the Korean Oriental Medical Association, as well as the exclusive agency of Genesis Biosystems fat collection system LipiVage in Greater China, to further expand the field of line carving and medical instruments.
Medical and beauty business is the focus of future development, the adjustment of traditional generic drugs is relatively smooth, and the performance is expected to recover.
Medical and beauty business is not only the focus of future development, but also one of the main sources of profit increment. In terms of traditional generic drugs, category adjustment has been actively implemented since 2020, and the proportion of non-key monitoring has reached 70%. New products such as powder liquid double-chamber bags will soon be put on the market, and it is expected that the overall growth of imitation pharmaceuticals driven by non-key monitoring products will maintain rapid growth during the year. In terms of key monitoring, the new indication for the treatment of acute ischemic stroke has been approved by NMPA at the end of 2020, and is expected to gradually return through the health insurance negotiations at the end of this year. On the whole, the growth of the traditional business of generic drugs has stabilized and improved.
Profit forecast and valuation level: the company's medical and beauty product line is expanding rapidly, and the rapid release of Botox will significantly contribute to the performance. Due to the outstanding performance of both the medical beauty and pharmaceutical businesses, we adjusted the company's net profit in 2021-23 from RMB 7.9 billion to RMB 2.45 billion, with the current market capitalization corresponding to 2021-23 PE 15-10-7 times, maintaining the "buy" rating.
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.