Jinling Pharmaceutical: Building an integrated service model for medicine and health care Jinling Pharmaceutical is a state-owned listed company that combines production, academia and research, and integrates science, industry and trade. After more than 20 years of development, the company has created a service model integrating pharmaceuticals, medical device manufacturing, and medical care services, with differentiated competitive advantages. In the first three quarters of 2023, the company achieved revenue of 2.104 billion yuan, an increase of 2.45% over the previous year, and net profit of 97.61 million yuan, an increase of 5.02% over the previous year. The recovery in demand for in-hospital medical treatment resonated with production and sales in the pharmaceutical industry. Revenue was stable, and net profit from the mother rose steadily.

Health care sector: Lay out the field of rehabilitation and old-age care, strive to improve and strengthen the company's three hospitals and one social welfare center to provide medical care services. Among them, Suqian Hospital is a top three general hospital, Anqing Hospital is a level 3 general hospital, Yizheng Hospital is a grade 2 A general hospital; and Huzhou Social Welfare Center is a four-star nursing institution. Suqian Hospital focuses on the fields of stroke and chest pain. The hospital's revenue has remained stable in recent years. In 2023, H1 Suqian Hospital achieved revenue of 687 million yuan and profit of 175.183 million yuan. Yizheng Hospital includes 16 key clinical specialties at the municipal level in Yangzhou. Affected by the general environment, the hospital achieved revenue of 219 million yuan and profit of 4.1921 million yuan in 2023. Anqing Hospital has a long history. The burn department is a key dominant discipline. In 2023, H1 Hospital achieved revenue of 137 million yuan, net profit - 152,100 yuan, and losses narrowed sharply. In the first half of 2023, the welfare center achieved revenue of 40 million yuan and net profit of 2,511,200 yuan.

Pharmaceutical sector: “Production capacity+product advantage” creates the company's market competitiveness The pharmaceutical sector has the production capacity of Chinese and Western pharmaceuticals with nearly 100 product specifications, including well-known products such as choronin injection and sulfide. The products cover treatment fields such as cardiovascular and cerebrovascular, iron supplements, gastric medicine, and tumor adjuvant drugs. In the market segment, the key products, ferrous succinate tablets (sulfide) and shiitake mushroom polysaccharide injections, have obvious competitive advantages. In 2022, the company's revenue for Maifenin injection, Sulifei series products, and shiitake mushroom polysaccharide injection was 200 million yuan, 220 million yuan, and 84 million yuan respectively.

Investment advice

We expect the company's revenue from 2023 to 2025 to be 28.25/31.53/3,561 billion yuan, with a year-on-year growth rate of 5.8%/11.6%/12.9%; net profit of 1.322/1.63/2.09 billion yuan, year-on-year growth rate of 25.1%/23.6%/28.2%; corresponding EPS for 2023-2025 is 0.26/0.32/0.41 yuan/share; corresponding PE is 32x/26x/20x. Considering the continued strength of the company's pharmaceutical board and health care sector, and the continued improvement in fundamentals, coverage for the first time, we gave it a “buy” rating.

Risk warning

Drug volume procurement risks; risk of shiitake mushroom polysaccharide injections withdrawing from the provincial medical insurance catalogue and not winning bids in regional collection; risk of fluctuations in raw material prices; risk of market competition.