Henan Lingrui Pharmaceutical Co.Ltd(600285) (600285)
Thirty three years of leapfrog development to build a leading brand of Chinese plaster
Henan Lingrui Pharmaceutical Co.Ltd(600285) formerly known as Henan Xinyang lingyangshan pharmaceutical factory established in 1988, after 33 years of development, it has gradually grown into a national leader in ointment. The company has built a multi-level product pipeline covering orthopedics, pediatrics, cardio cerebrovascular, dermatology, anesthesiology and other departments. The products have built a product matrix with clear levels, rich structure and covering clinical and OTC terminals around exclusive varieties such as Tongluo Qutong ointment, Huoxue Xiaotong tincture and Danlu Tongdu tablets. With the improvement of the company’s brand strength, channel optimization and production capacity, the operating revenue in the first three quarters of 2021 was RMB 2.053 billion, a year-on-year increase of 17.36%, and the net profit attributable to the parent was RMB 327 million, a year-on-year increase of 21.20%.
The aging population and younger patients promote the growth of pain demand, and patch products have great prospects
The number of patients with chronic pain is large. There are at least 100 million patients with chronic pain in China, but less than 30% are treated. There is a broad drug market. It is reported that the overall prevalence of primary osteoarthritis in Chinese people over 40 years old is 46.3%, which increases with age. With the accelerated aging process of the population, the group of patients with cervical spondylosis is becoming younger, and the demand for pain treatment continues to increase. The patch has the advantages of high transdermal absorption rate and good clinical effect, and is widely recognized by doctors and patients. According to the data of Intranet, there are five products in Henan Lingrui Pharmaceutical Co.Ltd(600285) of the top 20 Chinese patent medicine patch brands in physical pharmacies in key cities in 2020e, which is the enterprise with the most products on the list, and the market share continues to increase.
Old brands radiate new vitality, structural optimization, superimposed scene expansion, and help the second take-off
Patches and capsules are the main revenue of the company, accounting for 60.8% and 24.7% of the revenue respectively in 2020. Tongluo Qutong ointment, an exclusive product, is a dual cross product of OTC and prescription drugs. Its market share in physical pharmacies in key cities has increased most significantly, with market shares of 3.50%, 4.80% and 5.26% from 2018 to 2020 respectively. Zhuanggu musk analgesic ointment Shangshi Zhitong ointment and joint Zhitong ointment have ordinary (general medicine) and hardcover (boutique) there are two specifications. The comfort and convenience of the boutique are improved, and the price is higher than that of general medicine. The product upgrading promotes the continuous and large-scale sales. In September 2021, the company started to raise the price of some ointment products, which is expected to significantly increase the company’s performance. In terms of sales, the company carried out the reform of sales channels in 2019 and completed the establishment of OTC, grass-roots medical and clinical business departments. In 2021, the company The restricted stock incentive plan was granted on July 12, 2021, which is expected to continue to stimulate employees’ enthusiasm.
Profit forecast and investment rating
Through the comprehensive layout of the company in the fields of patches, tablets and capsules and further optimization of product structure, we expect the company’s operating revenue to be 2.780 billion yuan, 3.299 billion yuan and 3.864 billion yuan respectively from 2021 to 2023, with a year-on-year increase of 19%, 19% and 17%; The net profit attributable to the parent company was 395 million yuan, 478 million yuan and 570 million yuan respectively (equity incentive and employee stock ownership expenses are not taken into account), with a year-on-year increase of 21%, 21% and 19%. The company is the leader of plaster and has advantages in brand strength. Equity incentive stimulates employees’ enthusiasm and has good growth potential. According to the PE valuation method of comparable companies, the current valuation level of the company is lower than that of similar traditional Chinese medicine companies. The target valuation for 2022 is 25xpe, corresponding to the target price of 21.51 yuan “Buy” rating.
Risk tips: 1 Product sales were lower than expected 2 The price increase effect or boutique promotion is less than expected 3 Risk of price fluctuation of traditional Chinese Medicine
