\u3000\u3 Bohai Water Industry Co.Ltd(000605) 266 Yunnan Jianzhijia Health-Chain Co.Ltd(605266) )
Event: the company plans to acquire 80% – 100% equity of Hebei Tangren Pharmaceutical Co., Ltd. after reorganization by paying cash, so as to achieve the purpose of controlling or wholly controlling Tangren pharmaceutical, so as to realize the M & A of the operating rights and interests of Tangren pharmaceutical chain pharmacy brands and direct stores, and promote the business expansion of the company in the Bohai Rim region with Beijing, Tianjin and Hebei as the core. The proportion of equity to be finally acquired, the counterparty and the transaction price shall be determined by the parties to the transaction through negotiation.
Hebei Tangren is a leading local enterprise, which is conducive to the establishment of the company’s scale effect. The business scope of Hebei Tangren mainly focuses on Tangshan and Qinhuangdao. It is the chain drugstore with the largest business scale in the two regions. According to the list of top 100 direct sales of Chinese chain drugstores released by Zhongkang information, Tangren medicine ranked 34th in the industry in 20202021. In addition, according to the data of Chinese pharmacies, by the end of 2018, there were 541 pharmaceutical stores in Hebei Tangren, with a sales scale of more than 1.4 billion yuan. Based on this calculation, the output of a single store reached 2.59 million yuan, and the operation quality of the stores was excellent. We believe that with the merger and acquisition of Hebei Tangren, the ability of drug management and pharmaceutical service will be mutually promoted, And further increase the scale effect and synergy effect of the company at the level of supply chain and brand.
Go out of the southwest and expand in different places, pointing to the Beijing Tianjin Hebei region Yunnan Jianzhijia Health-Chain Co.Ltd(605266) since its establishment, most of its business scope is located in Southwest China. In addition to considering the relatively slow economic development and relatively limited personal consumption level in Southwest China, the retail pharmacy industry pattern is also fierce in Southwest China, with more established local enterprises competing with enterprises expanding in other places. This time, the company actively expands outward from south to north. On the one hand, it breaks the inherent impression that the company is limited to the operation in the southwest and has a low ceiling. On the other hand, the company will expand its business in the Bohai Rim region with Beijing, Tianjin and Hebei as the core and expand its competitive advantage.
In the past 23 years, the growth rate of stores has accelerated, and the performance growth is worth looking forward to. As of September 2021, the number of retail drugstores of the company has totaled 2407, and the acquisition project is large-scale, involving about 660 stores in Tangren, Hebei. According to the data of September 2021, the increase of stores can reach 27.42%. Considering the self construction of the company and small mergers and acquisitions in Southwest China, the number of stores of the company is expected to grow greatly in 22 years, With the consolidation of Hebei Tangren, we believe that it will promote the operation and performance growth of the company to a certain extent
Profit forecast and investment suggestions
Due to the slight adjustment of the net profit due to the change of share capital, we expect the net profit attributable to the parent company of the company from 2021 to 2023 to be RMB 305 / 374 / 458 / million respectively (the original value is RMB 305 / 373 / 457 million). According to the comparable company, the company is given a valuation of 20 times in 2021, the corresponding target price is RMB 87.8, and the buy rating is maintained.
Risk tips
Covid-19 epidemic exceeded expectations, integrated management was less than expected, and goodwill impairment risk
