occurrences
The company discloses its 2022 semi-annual report. The company achieved operating income of 525 million yuan in the first half of 2022, an increase of 15.53% over the previous year, and net profit attributable to shareholders of listed companies was 57 million yuan, an increase of 22.65% over the previous year. Net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was 55 million yuan, an increase of 19.06% over the previous year. Basic earnings per share were $0.35 per share. The company achieved operating income of 275 million yuan in Q2 2022 in a single quarter, an increase of 15.02% over the previous year, and net profit attributable to shareholders of listed companies was 27 million yuan, an increase of 23.74% over the previous year. Net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was $26 million, an increase of 18.51% over the previous year.
Incident reviews
The product echelon layout is reasonable, and the field of multiple diseases is working together
Currently, the company has 32 drug production approvals, including 10 varieties on the national medical insurance catalogue, 1 variety on the national essential drug catalogue, 12 over-the-counter (OTC) varieties, and 12 exclusive varieties; the products produced are mainly gynecological, urological, antipyretic, and other categories. 2022 H1 gynaecology revenue was 370 million yuan (+14.39%), gross profit margin of 78.03%; urological revenue was 109 million yuan (+15.50%), gross profit margin of 85.86%; heat purification and detoxification revenue was 38 million yuan (+19.11%); other types of revenue were 0.08 million yuan (+74.42%). The leading products are all domestically patented varieties. They are exclusive high-quality proprietary Chinese medicines that have been clinically proven over many years and have unique curative effects. Kuntai capsules are the only proprietary Chinese medicine that improves ovarian function; Nimbitai capsules are the basic proprietary Chinese medicine that comprehensively relieves urinary system pain and directly affects frequent urination; bitter ginseng gel is the only high-purity phytogel that restores the balance of vaginal microbiota in three steps; and Xia Baicao Oral Liquid is the preferred proprietary medicine to reduce dispersion. The second tier is rich in varieties, including meningococcal capsules, angelica blood booster oral solution, Xinlikang capsules, Longzhang mouth extract, and lipid-lowering capsules. Most of them are exclusive varieties and OTC varieties.
Continued promotion of product development and reserves, innovative traditional Chinese medicine has been fruitful
The company attaches importance to the future development layout of the traditional Chinese medicine industry, and continues to develop and reserve products such as new traditional Chinese medicine, traditional Chinese medicine formula granules, and classic famous recipes in accordance with the R&D requirements of “production generation, reserve generation, development generation”. As of the first half of 2022, the company had 3 new traditional Chinese medicine products (Longcen Pelvic Acid Granules, Bacgor Detergent Gel, and Shuyuutong Granules) and completed phase III clinical trials; it had 445 varieties of traditional Chinese medicine formula granules and completed 133 national standard filings; the development of classic prescription products was beginning to bear fruit. The company mainly focuses on independent research and development and has achieved fruitful results. As of the first half of 2022, it has 36 invention patents, 2 utility model patents, 13 design patents, 11 national new drug certificates, and 32 drug approval numbers.
Continuously promoting high-quality product promotion strategies with clinical efficacy as a starting point. As of the first half of 2022, the company had its own professional marketing team of nearly 300 people and nearly 90 long-term cooperative product sales and promotion service companies. It carried out academic promotion activities in 30 provinces, autonomous regions and municipalities directly under the Central Government. Prescription drug products covered more than 1,100 hospitals at the county (district) level, including more than 1,400 tertiary hospitals, and established long-term stable business relationships with more than 1,400 domestic medical commercial enterprises; OTC products covered more than 800 drug chain companies, More than 85,000 stores have established long-term stable business relationships with the headquarters of nearly 500 domestic pharmaceutical chain companies. The company insists on “clinical efficacy” as the basic starting point to drive the OTC channel market. The company's main varieties already have a market of a corresponding scale in terms of clinical use, and the annual sales scale of leading varieties has reached 200 to 500 million yuan, expanding the “out-of-hospital” OTC channel on the basis of clinical efficacy
Retail market sales have a strong clinical market base and “bonding strength” with the patient population. The company strengthens pharmaceutical commercial brand building and continuously enhances the brand influence of its products among consumers. The “Heyan” brand promotion, the company's traditional Chinese medicine commercial brand for female youth and reproductive health management, is being piloted in four provinces. Currently, the Heian Kuntai capsule “Ovarian Health and Yan Kuntai” brand advertisement has been posted on various provincial and municipal media platforms.
Investment advice
We expect the company's revenue for 2022-2024 to be 1,322/16.90/2,095 billion yuan respectively, up 36.3%/27.8%/24.0%, respectively. The net profit of Guimu was 135/187/243 million yuan respectively, up 34.6%/37.7%/30.3%, respectively. The corresponding PE was 19.30/14.02/10.76X.
Considering the company's stable product structure, good competitive pattern, rich R&D pipelines, and continuous penetration of OTC channels, we keep our performance forecasts unchanged and maintain the “buy” investment rating.
Risk warning
Industry policy risks; product development risks; drug sales uncertainty, etc.