Event: on August 31, the company released a semi-annual report that 2021H1 realized operating income of 1.355 billion yuan, an increase of 15.41% over the same period last year, and a net profit of 220 million yuan, an increase of 23.84% over the same period last year.
The results recovered significantly in the first half of the year, with continuous growth. The company's 2021H1 realized operating income of 1.355 billion yuan, an increase of 15.41% over the same period last year, and a net profit of 220 million yuan, an increase of 23.84% over the same period last year, of which Q2 realized revenue and net profit of 123 million yuan respectively, with year-on-year growth rates of 12.09% and 22.05% respectively. From the company's results in the first half of the year, it can be seen that the operation has come out of the impact of the epidemic, and the superimposed marketing reform has come into effect. From a product point of view, the revenue growth rates of plaster, tablet, capsule and ointment are 17.98%, 39.50%, 1.11% and 22.68%, respectively, and the proportion of revenue is 57.42%, 7.64%, 22.80% and 3.55%, respectively. Plaster as the main source of income still maintains a steady growth rate, capsule growth is affected by a high base, tablets and ointment grow brightly under marketing efforts.
The effectiveness of internal governance is highlighted, and cost optimization drives the net interest rate to rise. 2021H1's sales expenses and management expenses increased by 12.96% and-3.76% respectively compared with the same period last year, and the sales expense rate and management expense rate were 48.88% and 4.95% respectively, reducing 1.06pct and 0.98pct respectively. In addition to the scale effect brought about by rapid income growth, the main reason is that the management actively optimizes internal governance and strengthens fine assessment.
2021H1 achieved a net interest rate of 16.21%, an increase in 1.11pct over the same period last year, and the improvement of management efficiency further enhanced the company's profitability.
Focus on the core variety, marketing reform, brand blessing, optimistic about the product structure to enhance the release of income elasticity. Lingrui Pharmaceutical is a leading manufacturer of plaster in China. "Lingrui" is recognized as a well-known trademark in China, and the core product Tongluo Qutong Ointment is a national variety protected by traditional Chinese medicine. In addition, Zhuanggu Shexiang analgesic Ointment, dampness analgesic Ointment and Joint analgesic Ointment are among the top 20 in the OTC orthopedic orthopedic products list, and the brand power has influence in the industry. The company actively promotes the improvement of product structure and takes more measures to cultivate new growth points: 1) renovate the brand concept and integrate the marketing platform. Strive to promote the brand "younger", "fashionable", "sports", actively expand the new marketing scene, expand the end consumer groups. Set up OTC, primary health care and clinical departments, classify and implement the general idea of product sales specialization; 2) at the product level, focus on the core varieties, constantly optimize the product value chain, through Tongluo Qutong ointment + Huoxue Xiaotong tincture product combination, and Zhuanggu musk pain ointment boutique paste, provide high quality and differentiated products, and be optimistic about product structure and release income elasticity in the future. 3) improve the efficiency of internal governance, optimize the cost, strengthen the target assessment, and actively promote the digital transformation of the company and enhance the ability of business coordination. In addition, the implementation of equity incentive is conducive to fully stimulate the vitality of the organization and promote the improvement of marginal management efficiency.
Investment suggestion: Lingrui is the leader of traditional Chinese medicine plaster, the brand value is precipitated, and the variety of products continues to be rich.
Make efforts in marketing, focus on the core varieties, and be optimistic about the elastic release of income under the promotion of product structure. From 2021 to 2023, we expect the company to achieve EPS 0.74,0.92,1.08 yuan, corresponding to PE 14x, 11x, 9x, to maintain the "overweight" rating.
Risk tips: regulatory policy changes, increased competition in the industry, new product promotion is not as expected, management improvement is not as expected, raw material fluctuation risk.