Event

According to the company's 2021 annual report, the company's operating income in 2021 was 854 million yuan, a decrease of 23.0% compared with the same period last year; the net profit attributable to the owner of the parent company was 316 million yuan, compared with 32.003 million yuan in the same period last year, from profit to loss; basic earnings per share-0.64 yuan.

On the same day, the company released a report for the first quarter of 2022, with operating income of 238 million yuan during the reporting period, an increase of 25.16% over the same period last year, and net profit belonging to shareholders of listed companies was 7.7578 million yuan, up 50.06% from the same period last year.

Event comment

2021 is a milestone in the history of the company, a number of short-term factors lead to losses.

In 2021, Guanyuyuan completed the change of controlling shareholder and the registered address was moved back to the roots of Shanxi Province. The net profit loss of the company in 2021 is 316 million yuan, which is affected by many factors:

The domestic epidemic situation continues sporadically, and the passenger flow of terminal drugstores declines. in order to accelerate the collection of accounts receivable and reduce channel inventory, the company properly controls delivery according to the objective market situation and the actual sales of products in various regions. as a result, the company's sales revenue decreased by 23% compared with the same period last year.

Due to the impact of rising prices of major raw materials and changes in the sales structure of different gross profit products, Angong Niuhuang Pill, Niuhuang Qingxin Pill and Dingkundan Da Honey Pill with low gross margin accounted for 50.76%. As a result, the gross profit margin of the company's pharmaceutical industry products decreased by 8.57% compared with the same period last year, and the overall gross profit margin decreased by 10.05% compared with the same period last year.

The company carried out a comprehensive clean-up and rectification of the market and adopted an active marketing policy around the short-term goal of controlling accounts receivable and comprehensively digesting channel inventory, resulting in an increase of 233 million yuan in market promotion fees over the same period last year. The rate of sales expenses increased to 91.57%, an increase of 38.92% over the same period last year.

However, the company increased the collection of accounts receivable in 2021, and the sales rebate reached 1.107 billion yuan in 2021, an increase of 26% over the same period last year. This also increased the cash received by the company from selling goods. in 2021, the net operating cash flow became positive to 81.37 million yuan, an increase of 157 million yuan over the same period last year-75.52 million yuan.

The quarterly report exceeded expectations, and the business indicators gradually improved.

22Q1 operating income and return net profit increased by 25.16% and 50.06% respectively compared with the same period last year. Under the influence of the epidemic in Shanxi, the performance exceeded expectations, and the operating indicators were also gradually improving. 1. Gross profit margin began to recover. 22Q1's overall gross profit margin was 67.14%, down 2.28% from the same period last year, but it was the first rise since 21Q2. two。 The expense rate decreased significantly. The expense rate during the 22Q2 period is 59.97%,-5.48% compared with the same period last year, of which the sales expense rate is 46.62%,-2.02% year-on-year, and the management expense rate is 9.91%,-2.98% year-on-year. Each expense rate is the lowest since 2021. 3. Accounts receivable is the lowest since 2019. Since 2021, the company has strengthened the management of accounts receivable. Accounts receivable decreased quarter by quarter in 2021, to 1.168 billion yuan in 22Q1, 390 million yuan less than the maximum of 1.56 billion yuan in 2020.

All lines of product production and marketing adjustment, promotion + R & D synchronous promotion.

The company's main business mainly includes three parts: traditional Chinese medicine, fine traditional Chinese medicine and health wine.

Traditional Chinese medicine: the income of traditional Chinese medicine in 2021 was 566 million yuan, down 25.8% from the same period last year. Among them, the sales of Guilingji, Dingkundan oral liquid and Niuhuang Qingxin pills declined, and the production also decreased accordingly. And in order to meet the needs of consumers at different levels, the company enriches its products and optimizes its sales structure by adding two series of products: Angong Niuhuang pills (bezoar cultivated in vitro) and Niuhuang Qingxin pills (bezoar in vitro). In marketing, the OTC Department has effectively managed more than 60000 terminal stores, and terminal construction has been effectively increased. At the same time, we will strengthen Internet marketing and strengthen cooperation with the two core platforms of BABA and JD.com. During the reporting period, the performance of the Ministry of Electronic Commerce increased by 35% compared with the same period last year.

High-quality traditional Chinese medicine: the income of high-quality traditional Chinese medicine in 2021 was 161 million yuan, down 30% from the same period last year, but the gross profit margin increased to 78.5%. During this period, the company actively laid out various sales models such as circle marketing and community interaction, and provided professional services for consumers. as a result, the sales volume of Niuhuang Qingxin Pill (boutique), Guilingji (boutique) and modified Guilingji Liquor increased by 194.19%, 158.51% and 178.70% respectively compared with the same period last year. There are 47 new agents in the channel throughout the year, including 381 terminal stores, 29 Chinese medical centers, 352 Chinese medicine halls, stores and exhibition stores.

Health wine: the income of health wine in 2021 was 24.95 million yuan, down 25% from the same period last year. The average unit price of flavored Guilingji liquor decreased by 12.74% compared with the same period last year, resulting in a 10.36% drop in gross profit margin. Among them, the sales volume of Guilingji liquor decreased by 59.54% compared with the same period last year, but the sales of flavored Guilingji liquor increased by 178.7% compared with the same period last year. Guiling Jijiu focuses on two key provinces and regions of Shanxi and Jiangsu, covering 12 provinces and regions, 74 strategic cooperation chains and 6518 core stores.

In R & D, the company closely follows up R & D projects, focusing on infertility, cardio-cerebrovascular (hypertension, hyperlipidemia), elderly dysfunction (disability), etc. Continue to promote the basic and clinical research projects of Guanyuan Dingkundan on DOR (ovarian dysfunction) infertility, Dingkundan on PCOS (polycystic ovary syndrome), Guilingji on senile weakness syndrome (low internal ability of the elderly), Guilingji on oligoasthenospermia, Angong Niuhuang pills on disturbance of consciousness, etc. Completed the record of Shanxi Drug Administration involving 81 products; formed 2 research reports on the basic pharmacodynamics of Dingkundan oral liquid and the pharmacological effect evaluation of Guilinglu wine on the prevention of hyperuricemia; continued to carry out multi-level cooperation with domestic famous medical experts and scientific research institutes, 40 domestic R & D projects were under way, 26 related papers were published, and 16 SCI papers were collected.

Investment suggestion

Due to the update of the company's annual report, we update the company's profit forecast accordingly. We estimate that the company's revenue in 2022-2024 will be 1.66 billion yuan (1.64 billion yuan) in 2022 to 2024 (the forecast will remain unchanged in 2023), an increase of 48.0%, 29.8%, 30.0%, respectively, and a year-on-year increase of 114.1%, 287.3%, 61.7%, corresponding to EPS of 0.09, 0.35 and 0.57 yuan, respectively. The corresponding valuation is 288X/74X/46X. Maintain the "overweight" investment rating.

Risk hint

Raw material supply and price fluctuation risk; governance improvement is not as good as expected risk.