Main points of investment

Event: we recently investigated Huashen Group and exchanged views on the strategic development and business situation of the company.

The overall strategic plan is clear, that is, "actively develop medicine, steadily develop steel structure". The company's performance growth point in 2014 is expected to be mainly from the pharmaceutical industry, and with modern traditional Chinese medicine as the main growth point. The company is expected to turn the main variety Sanqi Tongshu capsule into a large variety of 1 billion. The revenue of this variety has exceeded 200 million in 2013, with a compound growth rate of 36.73% from 2009 to 2013. We expect a higher growth rate in 2014 than in 2013. It may be made into a 1 billion-level large variety in the future.

Advocate the innovation of marketing mode and take the road of fine investment. The main results are as follows: 1) the advantage of academic promotion is obvious. The previous management team of the company is scholar-type, which mainly uses academic promotion in marketing, which is certainly beneficial to the sales of prescription drugs, and it is also its sales strength at present. 2) put forward the innovation of marketing mode and pay attention to the grass-roots market. The first is to set up a marketing center at the group level to make decision-making more on the front line. At present, the company's products are mainly sold in tertiary hospitals, communicate closely with big hospitals and experts, and radiate the periphery through the central city. In recent years, base drugs have been added in different provinces and cities, which may cover second-and third-tier cities in the future. 3) New fine investment promotion has been added in the sales model. The self-built sales force, which has about 240 people, is likely to expand to 290 this year. Although the development of the grass-roots market in 2013 did not have an immediate effect, it has made a zero breakthrough, and the later effect should come out slowly.

Vigorously develop modern traditional Chinese medicine and tap the potential of Sanqi Tongshu capsule. Sanqi Tongshu capsule is the company's current focus on building and tapping the potential of the variety: 1) the mechanism is clear, unlike traditional Chinese medicine can not say the material composition, action mechanism. At present, Sanqi Tongshu capsule is still in academic research, and its effect is similar to that of aspirin, which is expected to be made into botanical aspirin. 2) expand the indications of the product and do the secondary development of the product. For example, the recent project of Sanqi Tongshu capsule in the treatment of stroke, which is a comparative study, is set up in 2000 cases, which may be carried out in stages and gradually do clinical trials of 300,600,2000 cases. I hope to further study the mechanism of action thoroughly; 3) Innovation of research dosage forms. At present, the Sanqi Tongshu series has only capsule dosage form, the pellet dosage form is being made, and the sustained-release dosage form is being studied, which has better bioabsorbability; 4) apply for EU registration and strive to achieve internationalization. Its patent has been accepted, but according to the requirement, it must be effective in five countries in order to make the certificate, or it can become the first traditional Chinese medicine product registered in the form of medicine in the mainstream European medicine market in accordance with the EU new drug registration procedure; 5) Sanqi Tongshu capsule is an exclusive variety, in the context of the current price adjustment of major products, there may be the possibility of price reduction, but the rate of decline may be lower than expected.

In the field of biomedicine, the main push is "Likatin", and other backup products will be on the market soon. The main results are as follows: 1) Ricardine is still in the cultivation stage. There is still a gap between ricardine and market expectations from 2007 to the present, because its use conditions are very restrictive, and it is necessary to adopt order production (monoclonal antibodies can be mass produced and then used according to the order mark), and must have the qualification for the use of radionuclide drugs. the overall development level of nuclear medicine in China still needs to be improved, and some third-class hospitals do not have the qualification for the use of radionuclide drugs. 2) low dose of ricardine will break the restriction of drug use. This kind of products no longer need to be used in nuclear protection wards, but can be used in general wards or outpatients of hospitals qualified to use radionuclide drugs. at present, this clinical trial needs a larger sample of clinical data to be completed. 3) the kit for quantitative determination of oxidized low density lipoprotein (enzyme-linked immunosorbent assay) has entered the national charging catalogue at present, and there are no obstacles in policy, which can be promoted through investment, but the promotion of each province still takes time. Once the previous policy is over, we are still optimistic about the market prospect, which fills the domestic gap and can be used as an auxiliary detection method for coronary heart disease. 4) Recombinant human epidermal growth factor for freeze-dried eye drops can be used for corneal repair. This variety is currently in the clinical re-verification stage to verify the effectiveness and safety of "freeze-dried recombinant human epidermal growth factor for eye drops" under the new technological conditions, and clinical research is expected to be completed by the end of 2014.

Valuation analysis and investment strategy. We believe that the company's revenue and net profit in 2014 are expected to grow by 21% and 25% respectively, of which Sanqi Tongshu capsule is still the main source of performance, because it has laid the groundwork for the construction of the grass-roots market in 2013. 2014 should be able to do more smoothly in these places. In terms of valuation, it is estimated that from 2014 to 2016, the EPS will be 0.16,0.20,0.27 yuan respectively, with a price-to-earnings ratio of 48X, 38X and 29X.

Risk tips: 1) the progress of product marketing may be slower than expected; 2) the construction of marketing team may be slower than expected.