\u3000\u30 China Baoan Group Co.Ltd(000009) 15 Shandong Wit Dyne Health Co.Ltd(000915) )
Key points
Event:
The company released the annual report of 2021, and the operating revenue, net profit attributable to parent company and net profit deducted from non attributable to parent company were RMB 2.027/3.80/356 billion respectively, with a year-on-year increase of + 11.32% / 30.78% / 33.51%. Operating net cash flow was 756 million yuan, a year-on-year increase of + 2.76%; EPS1. 62 yuan. It is proposed to distribute a cash dividend of 8.0 yuan (including tax) for every 10 shares to all shareholders of the company, and the dividend payment rate is 49.30%. The performance is in line with market expectations.
Comments:
At the end of the year, goods control, new product investment and incentive expenses affect the performance of a single quarter, and the dynamic sales are in good condition after the price increase. In 2021q4, the company’s revenue, net profit attributable to the parent company and net profit deducted from non attributable to the parent company were RMB 455/0.62/053 million respectively, with a year-on-year increase of + 0.11% / – 2.70% / + 5.02%. The slowdown in growth is estimated to be related to the stripping of environmental protection assets, the withholding of incentive expenses, the investment of new products of dyne pharmaceutical and channel control. The core subsidiary, dyne pharmaceutical, grew strongly throughout the year. In 2021, its revenue and net profit were RMB 1473 / 663 million respectively, with a year-on-year increase of + 31.01% / 32.61% respectively. As a pillar subsidiary, dyne pharmaceutical’s revenue accounts for 72.65% of the company’s total revenue, and its profit accounts for 90.95% of the company’s net profit attributable to the parent company. In 2021h1 and H2, the revenue of dyne pharmaceutical was 749 million and 724 million respectively, and the net profit was 392 million and 271 million respectively. The net interest rate of dyne pharmaceutical in the second half of the year was 38.00%, which was significantly lower than 53.68% in the first half of the year. It is estimated that it is related to the promotion of e-commerce, the increase of new product development and the withholding of medium and long-term incentive expenses. According to the records of investor relations activities, the company began to control the goods since November last year. On January 1, the price of 50 and 60 ikoxin was raised slightly. At present, the goods and payment collection through channels are in good condition.
The improvement of governance structure and the continuous focus on the main business have significantly improved the profitability of the company. With the stripping of environmental protection assets and the expansion of product online channels, the gross profit margin and net profit margin of the company in 2021 were 68.90% / 34.74% respectively, an increase of 8.05pp/5.49pp compared with 2020, realizing leapfrog development. With the increased investment in new products (idxin) and the provision of incentive costs, the cost rate during the period increased by only 1.75pp to 29.19% compared with 2020, and the cost control is in good condition. The company actively promotes the three-year action plan for the reform of state-owned enterprises, and has fully implemented the contractual management of the tenure system of management members. The listed company employs Ms. Yang Jie as a professional manager and serves as the general manager of the company for a term of three years until the end of 2024. As a core executive, President Yang is familiar with the R & D, production, marketing and brand management of children’s drugs, and will lead the company to a new journey of rapid growth. In 2021, dyne pharmaceutical was approved as a medium and long-term incentive pilot enterprise, and has launched an excess profit sharing plan internally. The actual performance evaluation period is 20212025. In 2020 and 2021, the company has successively stripped Zhixin chemical and Huate environmental protection, and will continue to focus on the main pharmaceutical industry in the future.
Channel expansion and category marketing contribute to the growth momentum, and idxin is expected to become the next billion level single product. The company has been developing the market for many years, and has formed a strong brand force. In recent years, the company has paid attention to the development and operation of online channels, and has continuously increased the penetration of products by means of the new media, such as the mother tiktok website, the jitter, and the little red book. According to interactive easy disclosure, Dayin pharmaceutical and Alibaba health pharmacy signed a strategic cooperation agreement on November 25, 2021, with a Gmv target of 150 million yuan in 2022. In 2022, the company is expected to conduct in-depth cooperation with more platforms. In 2022, the company launched a new strategy, and ikxin was promoted from 0-3 years old to 6 years old. With the company’s past experience in academic promotion and professional category education, we expect that the ceiling of ikxin’s industry will be further opened. The company is optimistic about the new development prospect of yikexin, and it is expected that vitamin D3 is expected to surpass yikexin and become the next billion level single product in the future.
Profit forecast, valuation and rating: Shandong Wit Dyne Health Co.Ltd(000915) as a leading enterprise of children’s medicine, relying on the advantages of brand and channel, the core large single products have grown steadily, the channels and new products have been expanded rapidly, and the governance structure has been continuously improved. We basically maintain the forecast of net profit attributable to parent company in 20222023 to be RMB 495 / 600 million respectively (0% / – 1% compared with the previous forecast), introduce the forecast of net profit attributable to parent company in 2024 to be RMB 716 million, and the current share price corresponds to 16 / 13 / 11 times of PE in 20222024, maintaining the “buy” rating.
Risk warning: ikxin’s sales do not meet expectations; Intensified market competition; Risk of failure in new drug research and development.
