Traditional generic drug companies seek new business growth points through in vitro mergers and acquisitions: Since its establishment in 2005, the company has obtained major varieties through continuous in vitro mergers and acquisitions, including Sansheng Pharmaceutical and Wichida Pharmaceutical Division, and has expanded into businesses other than chemical pharmaceuticals by acquiring shares in companies such as Hailison and Enshi Genes. In 2020, the company's joint investors held Jiangsu Jiayi, then Chairman Jiayi joined Qianyuan as the company's chairman. After going through many collections and internal business adjustments since listing, while continuing to deepen the chemical formulation industry, the company has completed the renewal and iteration of its own product matrix.
Management plans to achieve joint control of MBO and enhance incentives: In July 2023, the company issued a fixed increase plan to raise 185 million yuan in targeted additional capital from the chairman and president. After completion, the chairman and president will become the co-controllers of Qianyuan through this management acquisition. It is expected that the total shareholding ratio of the two will increase to 19.41% after the additional issuance is completed. After the fixed increase is completed, the interest relationship between the actual operators of the company and the company and shareholders is expected to further deepen, forming an effective incentive for future management.
The negative impact of the mining impact on the company's stock business profit was basically clear: at the beginning of listing, the company's main varieties were injectable meloxicillin sodium, sulbactam sodium, injectable amoxicillin sodium, and sulbactam sodium. After going through the transfer of core varieties to the medical insurance catalogue and the collection of major varieties, the company currently mainly sells core varieties such as ebastine tablets, tamsulosin hydrochloride sustained-release capsules, fosfomycin triol, etc., and it is expected that there is no risk of price reduction in entering the country in the future.
The smoking cessation drug varenicline may be the biggest highlight of the company's future growth: in February 2023, the subsidiary Jiangsu Jiayi Vareniclan was approved for listing, becoming the 3rd domestic manufacturer with full specifications approved. Varenicline is a specific drug for smoking cessation. The original research Pfizer initiated a global recall in 2021 due to production impurities. According to data from the Health and Health Commission and related policy targets, there are currently more than 300 million smokers in China, and the smoking rate of people aged 15 and above needs to be reduced to 20% by 2030. Combining comparable countries/regions, we expect the domestic Varenicline market space to grow to 2 billion yuan in 2030. Qianyuan is expected to use Vareniclan to achieve a significant increase in revenue and profit.
Profit forecast and valuation: The company is a traditional chemical pharmaceutical company, and the products on sale are mainly anti-infective drugs and anti-allergic drugs. In 2020, the company further expanded its product pipeline through the acquisition of Jiangsu Jiayi. The potential product Vareniclan was approved in February 2023, and is expected to become the main product contributing to the company's revenue and profit. In July of the same year, the company announced the signing of an equity repurchase agreement to end investment cooperation with financial investors. It is estimated that it will save 32 million yuan in financial expenses every year from now on. Given that the company is still in a state of loss, we expect the company to achieve operating income of 826/10.18/1,175 billion yuan in 2023-2025, -0.4%/+23.3%/15.4% over the same period last year, and expect to achieve net profit of 0.12/0.66/145 million yuan, and a year-on-year reversal of loss/ +464.5%/+117.8%. Using the FCFF absolute valuation method, we obtained that the company's value per share is 11.98 yuan, and the corresponding market value is 2.89 billion yuan. There is still room for growth of 22.2% compared to the current market value, covering and giving it a “buy” rating for the first time.
Risk warning: risk of price reduction in collection, risk of Varenicline not being released as expected, risk of impairment of goodwill.