\u3000\u3000 China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) (000999)
Key investment points
Investment logic: 1) in 2021, the company issued equity incentive and multi-dimensional equity incentive assessment scheme to stimulate growth momentum; 2) The company’s Sanjiu brand awareness is high, and there is still room for price increase in the future. At the same time, CHC business continues to expand the market boundary, and the compound growth rate has remained above 10% in recent years, with broad long-term space; 3) Explore the transformation of prescription drug business, in which the revenue of traditional Chinese medicine formula particles has reached 3 billion, which is expected to continue to accelerate growth and become a new growth point.
The multi-dimensional equity incentive assessment scheme stimulates growth momentum. On December 2, 2021, the company announced the 2021 restricted stock incentive plan (Draft), which plans to grant 9789000 shares to the target, accounting for 1.0% of the total share capital of the company at the time of the plan announcement. The performance assessment objectives of this equity incentive are as follows: 1) from 2022 to 2024, the return on non net assets deducted by the parent company shall not be less than 10.15% / 10.16% / 10.17%, and shall not be lower than the 75th percentile level of the benchmarking enterprise; 2) Based on 2020, the compound annual growth rate of non net profit attributable to parent deduction from 2022 to 2024 shall not be less than 10.0%, and shall not be lower than the average level of the same industry or the 75th percentile level of benchmarking enterprises; 3) From 2022 to 2024, the total asset turnover rate shall not be less than 0.69/0.70/0.72, and the multi-dimensional equity incentive assessment scheme will stimulate the growth momentum.
Sanjiu has high brand awareness, and CHC business continues to expand market boundaries. The company’s CHC business products cover a wide range of fields, including cold medicine, gastrointestinal medicine, skin disease medicine, cough and phlegm relieving medicine, etc. the company’s “999” series brand value is scarce and has high market recognition. In the future, with the continuous expansion of product line, the accelerated improvement of terminal layout and the innovation of marketing model, the “999” series star brand still has the potential to raise prices, The rapid growth of profits has great certainty. Unlike the limitations of traditional OTC on drugs, CHC covers a broader business scope. At present, the company continues to expand into the field of health and has broad growth space in the future.
With the exploration and transformation of prescription drug business, traditional Chinese medicine formula particles are expected to become a new growth point. The company’s prescription drug business has continuously adjusted the product structure, the proportion of traditional Chinese medicine injections has decreased year by year, and the proportion of anti infection and other specialized drugs has also continued to decline. The company vigorously develops the business of traditional Chinese medicine formula granules, and has become a leading enterprise of traditional Chinese medicine formula granules. In 2020, it accounted for more than 10% of the market of traditional Chinese medicine formula granules, and can produce more than 600 varieties of single flavor formula granules. The market space of formula particle business is large. The formula particle business needs the ability of the whole industry chain, strict industry supervision and high entry barriers. As a first mover, the company has great advantages in product layout and product quality, and is expected to lead the industry in the future.
Profit forecast. It is estimated that the compound growth rate of the company’s net profit attributable to the parent company is expected to reach 22% from 2021 to 2023. In 2021, the company issued equity incentive, and the growth rate of future performance is highly uncertain. The company’s CHC business products cover a wide range and have strong brand power, which is expected to maintain rapid growth. At the same time, traditional Chinese medicine formula particles are expected to become a new growth point and have broad long-term growth space.
Risk warning: the price of raw materials may fluctuate sharply, the price increase is less than expected, and the risk of R & D is less than expected.
