Investment summary
Excellent cost control ability and accelerated performance growth
Since 2012, the price of diosgenin has continued to rise, and the rise in product costs has put some pressure on the company's profitability. In the face of rising cost pressure, the company adopts internal technology upgrading, strengthening production control, energy saving and emission reduction to create benefits; external measures such as reducing procurement costs and increasing market development efforts to ensure stable growth of performance. Due to its good cost control ability, the company achieved a 42% increase in net profit in the first quarter of 2013.
The rising price of diosgenin is beneficial for enterprises to control the voice of the industry.
The company believes that the rise in diosgenin prices is mainly due to the shortage of land resources, rising labor costs, environmental protection costs and other factors. The measures taken by the company to deal with the rise in diosgenin prices are: 1) technology upgrading; 2) further expansion of production capacity; 3) adjustment of marketing strategy. We believe that with the continuous high consolidation of raw material prices, and the company through the establishment of a price alliance to curb the rise in product prices and rapidly worsen the living environment of small and medium-sized enterprises. As more and more enterprises withdraw from the corticosteroid API industry, the company's control over the industry will be further strengthened.
Preparation business to enhance the added value of products
On the basis of the advantages of APIs, the company has gradually implemented the strategic deployment of developing preparation products. The company's current strategy for developing preparation products is, on the one hand, to continuously increase the output of existing preparation varieties and expand market share; on the other hand, to actively carry out the development of all kinds of preparation products and gradually move towards the international market. As the company begins to strengthen the sales of preparation products, the growth of preparation products will accelerate. We believe that the sales revenue of the company's preparation products is expected to reach a growth rate of 40-50% in the future.
Give a rating of "increase your holdings in the next six months"
The company has realized EPS0.10 yuan in 12 years, and it is expected that the EPS will be 0.17 yuan in 13 years. Based on the closing price of 4.35 yuan on July 16th, the static and dynamic PE will be 42.29 times and 25.40 times respectively. The 12-year and 13-year price-to-earnings ratios of listed companies of raw materials are 27.46 times and 17.76 times respectively. The company's current valuation is slightly higher than the industry average. Due to the unilateral rise in the price of diosgenin in the early stage, a large number of small enterprises withdrew from the corticosteroid industry, and the company gradually mastered the voice of the industry. In the technological advantages of raw materials, the company began to implement the strategy of "raw materials + preparations", and the preparation business is expected to become a new profit growth point of the company in the future. With the completion of the IPO and the implementation of an attractive executive reward system, the problem of insufficient motivation for the performance of state-owned enterprises has been solved, and the company's future performance is more likely to exceed expectations. We are optimistic about the company's future development prospects and maintain the "overweight" rating.
Main risk
The risk of price fluctuation of API, the risk of product export, the risk of increasing environmental protection cost, and so on.