\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 085 Beijing Tongrentang Co.Ltd(600085) )
Event: the company released its annual report for 2021, and realized operating revenue, net profit attributable to parent company and net profit deducted from non attributable to parent company of RMB 14.603/12.27/1.209 billion respectively, with a year-on-year increase of + 13.86% / 19.00% / 19.52%; Net operating cash flow was 3.426 billion yuan, a year-on-year increase of 57.56%; EPS0. 895 yuan. It is proposed to distribute a cash dividend of 2.9 yuan (including tax) for every 10 shares to all shareholders of the company, and the dividend payment rate is 32.40%. The performance is in line with market expectations.
Comments:
Large variety strategy + marketing channel reform promoted the start of the 14th five year plan: the 2021q4 revenue, net profit attributable to the parent and net profit deducted from non attributable to the parent were RMB 3.920/3.07/300 billion respectively, with a year-on-year increase of + 3.90% / – 2.86% / – 2.35%. The slowdown in growth is estimated to be related to the high base of 2020q4 and the price increase of goods at the end of the year. The annual revenue and net profit performed well. In terms of business, the pharmaceutical industry and Commerce achieved revenue of 8.876 billion yuan (year-on-year + 15.99%) and 8.241 billion yuan (year-on-year + 12.64%) respectively in 2021. The accelerated growth was due to the company’s continuous deepening of marketing reform, comprehensively promoting unsaturated marketing, optimizing channel layout and increasing market control. The company thoroughly implemented the large variety strategy. In 2021, the revenue of the first five products totaled 4.116 billion yuan, a year-on-year increase of 15.41%, accounting for 46.37% of the revenue of the pharmaceutical industry.
The operation of subsidiaries recovered steadily and the performance of commercial retail sector was brilliant: in 2021, the revenue and net profit of Beijing Tongrentang Co.Ltd(600085) technology were + 17.21% / 10.21% year-on-year, and the operation continued to recover. Despite the severe situation of overseas epidemic, Beijing Tongrentang Co.Ltd(600085) Sinopharm still achieved a contrarian rise in performance through Wuxi Online Offline Communication Information Technology Co.Ltd(300959) parallel efforts, deepening the reform of marketing system and optimizing management system. In 2021, its revenue and net profit were + 10.37% / 7.06% year-on-year respectively. The performance of Beijing Tongrentang Co.Ltd(600085) business is particularly outstanding. By the end of 2021, it had 920 stores, with a year-on-year increase of 4.5%, and achieved operating revenue and net profit of RMB 8.325309 billion respectively, with a year-on-year increase of 12.59% / 16.17%. In addition to the low base of the epidemic in 2020, the company optimized the incentive mechanism, promoted the transformation and upgrading and innovative operation of traditional pharmacies, and ushered in a comprehensive recovery of business quality. The net interest rate of Beijing Tongrentang Co.Ltd(600085) business increased by 0.11pp to 3.71% year-on-year.
We will continue to deepen reform, improve quality and efficiency, and have full momentum in the future. In 2021, the company’s gross profit margin was + 0.58pp to 47.62% year-on-year, and the net profit margin was + 0.35pp to 12.95% year-on-year. The rate of sales and management expenses decreased for two consecutive years. Since 2019, the company has promoted fine management, improved the internal control system and organizational structure, and improved its operating efficiency year by year. Focusing on the large variety strategy, the company deepened the reform of marketing channels, improved the coverage and control of product terminals, and consolidated the core competitiveness of brand varieties. At the same time, we also strengthened product R & D and process quality upgrading, and the R & D expense rate increased by 0.12pp to 1.2% in 2021. On December 1, 2021, the company raised the terminal retail price of Angong Niuhuang Pill from 780 yuan to 860 yuan. Since then, the prices of many varieties have increased one after another, which is expected to increase the company’s performance. At the end of 2021, the board of directors determined the candidates for chairman and general manager, and the century old traditional Chinese medicine started a new journey of development.
Profit forecast, valuation and rating: considering the profound moat of the company’s brands and varieties and remarkable achievements in deepening reform, the EPS forecast for 2022 is raised to 1.06 yuan (up 1.9%), the EPS forecast for 2023 is maintained at 1.20 yuan, the EPS forecast for 2024 is newly increased to 1.33 yuan, and the current price corresponding to PE is 41 / 36 / 33 times respectively, maintaining the “overweight” rating.
Repeated epidemic risk: more than expected; The risk of intensified market competition.
