\u3000\u3 Shengda Resources Co.Ltd(000603) 883 Lbx Pharmacy Chain Joint Stock Company(603883) )
Events
The company announced its intention to acquire 71.96% equity of Hunan Huairen dahealth
On the evening of March 6, the company announced that it planned to purchase 71.96% of the equity of Hunan Huairen Great Health Industry Development Co., Ltd. with its own funds of 1.637 billion yuan. After the transaction is completed, the company will control it.
Announcement on the termination of the company’s acquisition of 51% equity of Huatuo pharmacy
On the evening of March 6, the company terminated the equity acquisition transaction because Huatuo pharmacy failed to carry out asset stripping and delivery within the specified time as agreed.
Brief comment
Holding Huairen great health and deepening the market layout in the province
The company plans to acquire 71.96% of the equity of Hunan Huairen Health Industry Development Co., Ltd. with its own capital of 1.637 billion yuan. After the transaction is completed, the company will control the target company.
Focusing on the Hunan market, Huairen health has gradually established a solid business layout in the Western Hunan region and expanded to the surrounding Guizhou region after more than 20 years of intensive work with a deep understanding of the pharmaceutical market, customer needs and consumption habits in the Western Hunan region, such as Huaihua, Shaoyang, Western Hunan Tujia and Miao Autonomous Prefecture, Zhang Jia Jie Tourism Group Co.Ltd(000430) and so on.
Before this acquisition, the company held 4.16% equity of Huairen dahealth and acquired 71.96% equity of 14 sellers including Lin Chengxiong, Chen Jianping and Huaihua Renxin in cash. After the acquisition, the company held 76.12% equity of Huairen dahealth.
The terms of this M & a transaction are good: 1) the founder retains part of the equity and promises to bet on the performance, which is another benchmark transaction of Lbx Pharmacy Chain Joint Stock Company(603883) ‘s “spark” acquisition model. After the acquisition, Lin Chengxiong, founder of Huairen health, and the other three major shareholders will retain a total of 20% of the equity, continue to play an important role in management and operation, and make commitments to the future performance of Huairen health in the terms of the agreement, which shows that the management of Huairen health and the company focus on the future, long-term Determination for common development: the net profit attributable to the parent company from 2022 to 2024 shall not be less than 110 million yuan, 131 million yuan and 152 million yuan respectively, with an average annual compound growth rate of about 20.17%. 2) The synergy effect is significant, and the pricing of this transaction is reasonable. According to the calculation of Huairen health’s annual net profit of 999919 million yuan in 2020, the overall valuation of the transaction is 2.275 billion yuan, and the trading price earnings ratio is 22.75 times. Due to the characteristics of the industry, the P / E ratio and premium ratio of the acquisition target of comparable companies depend on the scale of the acquisition target assets. Huairen health has a large volume, has a strong brand effect and scale effect in its main business in Western Hunan, and has a significant synergistic effect with the company’s business operating in Hunan. It can be expected in the future. The P / E ratio of this transaction is 22.75 times, which is lower than the P / E ratio of emerging pharmacy transaction, which is the same acquisition case of over 1 billion level, and the P / E ratio of Chengda Fangyuan transaction is 28.34 times. Considering the significant synergy effect, the pricing of this transaction is in a very reasonable range.
This M & a transaction is of great strategic significance: 1) the company will realize all-round coverage of the main regions of Hunan Province, which is conducive to further expand its competitive advantage. As of September 30, 2021, the company’s national marketing network covers 22 provincial markets and more than 140 cities above prefecture level, with a total of 8163 stores, including 6055 Direct stores and 2108 franchise stores. In Hunan, the company’s stores are mainly located in eastern Hunan, southern Hunan and central Hunan, such as Changsha, Chenzhou, Hengyang, Loudi, Xiangtan and Zhuzhou. Huairen health has more than 660 self operated pharmacies in Hunan and Guizhou, ranking first in the number of stores in Huaihua City, Shaoyang City and Xiangxi Autonomous Prefecture. Huairen health ranks first in the total market share of the above-mentioned Western Hunan region, with outstanding brand effect and good store operation quality. It is deeply recognized by local consumers and has a good market reputation and reputation in the local area. After the completion of this transaction, Huairen great health store will be included in the scope of the company’s management, which will effectively fill the company’s market in Western Hunan and significantly improve the regional market share and competitive advantage; 2) Consolidate the leading position of Hunan Province. The number of stores of the company and Huairen dahealth in Hunan Province ranks second and third respectively, accounting for 6.0% and 2.4% respectively. After the merger, it is expected to establish the leading position of 7 prefecture level cities (Changsha, Chenzhou, Loudi, Xiangtan, Huaihua, Shaoyang and Xiangxi) among the 14 prefectures and cities in Hunan Province, and the number of stores ranks first locally to expand their competitive advantage. After the acquisition, the number of stores of the company in Hunan Province is expected to reach 1900 (about 1300 stores of the company and about 600 stores of Huairen health before the acquisition). 3) Effectively improve the scale effect and comply with the development trend of the industry. After this transaction, the number of stores, regional coverage and market penetration of the company will be improved, and the business scale will be significantly expanded. It is conducive to giving full play to the economies of scale and cost synergy, strengthening the bargaining power of upstream suppliers, reducing product procurement costs and improving the overall profitability, which is in line with the national policy guidance.
Profit forecast and investment rating
We estimate that the company’s operating revenue from 2021 to 2023 will be 15.782 billion yuan, 20.130 billion yuan and 27.001 billion yuan respectively, with year-on-year growth of 13.0%, 27.6% and 34.2% respectively. The net profit attributable to the parent company will be 693 million yuan, 785 million yuan and 997 million yuan respectively, with year-on-year growth of 5.3%, 20.0% and 27.1% respectively. The equivalent EPS will be 1.60 yuan / share, 1.92 yuan / share and 2.44 yuan / share respectively, corresponding to PE of 26.2x, 21.8x and 17.1x, Maintain buy rating.
Risk analysis
Risk of changes in industrial policies; Intensified market competition; The expansion progress is not up to the expected scale; The integration of M & A stores did not meet expectations; Provision for goodwill impairment.
