Key points:
The company's core products continue to maintain steady growth
The company achieved operating income of 1.428 billion yuan in 2024H1, up 41.21% year on year; achieved total profit of 0.344 billion yuan, up 50.53% year on year; net profit attributable to shareholders of listed companies was 0.296 billion yuan, up 49.78% year on year; gross profit margin of 62.62%, net profit margin of 20.99%, and impressive performance. The 2024H1 sales expense ratio was 34.19%, down 7.4 pct from the previous year. The main reason was that the sales revenue of traditional Chinese medicine drinks increased dramatically, which led to a certain change in the company's product structure and cost reduction; second, the sales expenses rate declined due to the implementation of the collection of Wuling capsules.
By product, the core products of the Wuling series (Wuling capsules, Lingze tablets, and Linglian granules) are all exclusive varieties and have continued to grow steadily. 2024H1 Wuling series products achieved revenue of 0.836 billion yuan, up 29.15% year on year, accounting for 58.56% of the company's total revenue, accounting for 81.14% of the company's gross profit, contributing nearly 60% of revenue and more than 80% of gross profit. Revenue of the Wuling series products maintained an average growth rate of 26% in 2020-2023.
Among the Wuling series products, Wuling capsules are the company's exclusive product and a new type of national traditional Chinese medicine. It is a pure Wuling bacteria powder preparation, which mainly contains adenosine, polysaccharides, sterols, amino acids, and rich vitamins and trace elements. It has been on the market for more than 20 years. The application departments cover psychiatry, neurology, traditional Chinese medicine, dermatology, gastroenterology, cardiology, oncology, and endocrinology, etc., and is mainly used to treat clinical symptoms such as insomnia, amnesia, palpitations, fatigue, fatigue, and soft back and knee pain Good safety. Judging from sales revenue, Wuling capsules are mainly level-II and level-III hospitals, but after years of channel decline, more than 50% of the more than 13,000 hospitals currently covered are first-level hospitals and community health centers, and it is expected that they will be further distributed in primary care institutions in the future. 2024H1 Wuling capsules have been added to 7 clinical guidelines and expert consensus. Currently, 69 clinical guidelines, clinical pathways, expert consensus, and textbook monographs have been recommended. Lingze tablets are classified as a national second-level protected traditional Chinese medicine variety, and have been recommended by 12 clinical guidelines, expert consensus, and textbook monographs. Linglianhua granules were recommended by 2 clinical guidelines. 2024H1 changed from a prescription drug to an over-the-counter drug, which is expected to usher in OTC doses.
The Bering series is recovering. The dual-core drive is expected to continue to drive 2024H1's Bailing series products to achieve revenue of 0.082 billion yuan, a year-on-year decrease of 16.59%, and the decline has narrowed somewhat. The Bering series mainly includes Bering tablets, Bering capsules, etc. Bering capsules obtained the “Drug Registration Certificate” issued by the State Drug Administration on December 29, 2023, and became the first homologous drug of the same name approved in the country. Currently, it has completed the online work of 28 provinces, autonomous regions, and municipalities directly under the Central Government, and three more provinces are following up. In the future, the company will adopt an all-model, omni-channel sales model, using a combination of self-operation and investment promotion to sell at the hospital, OTC, and the Internet. The dual-core drive of the Wuling Series+Bering Series is still effective, which is expected to help improve the company's performance.
The rapid growth of Chinese medicine tablets has become a new growth pole for the company's performance. In recent years, Chinese medicine tablets have grown rapidly, with revenue growth rates of 25.53%, 30.51%, and 22.01% respectively in 2021-2023. 2024H1's revenue growth rate was 57.11%, accounting for 27.22% of revenue, 9.27% of gross profit, and stable gross margin of around 20%. Currently, the company has three production lines: ordinary tablets, toxic tablets, and direct oral soft tablets. It has more than 1,000 product specifications for the Chinese medicine tablet series, has more than 100 cooperative Chinese herbal medicine cultivation bases in many places, and has been able to scan and trace more than 100 varieties. After years of cultivation, Chinese herbal medicine tablets have become a new growth pole for the company's performance.
Investment advice
We are optimistic about the company mainly because: First, the company's core products have a clear competitive advantage. The main product, Wuling capsules, is one of the traditional Chinese medicines with a clear mechanism of action. The three products brought hospital-side increases, sales models combining self-management, investment, and OTC sales models, and the layout of new channels such as Internet+ medical care and e-commerce, which have seized the development opportunities brought by the company; second, the upgrading of the company's marketing strategy has brought benefits to the company's core products, and the traditional Chinese medicine tablets and Chinese medicine tablets that the company has already laid out in advance particles The business brings a lot of room for growth. The company's revenue for 2024-2026 is estimated to be 2.388 billion yuan, 2,926 billion yuan and 3.53 billion yuan, respectively, with net profit attributable to mother of 0.498 billion yuan, 0.643 billion yuan and 794 million yuan, respectively, and EPS of 0.71, 0.92 and 1.13 billion yuan, respectively. Maintain the company's “buy” rating.
Risk warning
1. The company's marketing strategy fell short of expectations;
2. Risk of price reduction in collection.