\u3000\u30 China Baoan Group Co.Ltd(000009) 99 China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) )
Matters:
The company released its 2021 annual report, realizing a revenue of 15.320 billion yuan, a year-on-year increase of 12.34%; The net profit attributable to the parent company was 2.047 billion yuan, a year-on-year increase of 28.13%; The net profit attributable to the parent company after non deduction was 1.853 billion yuan, a year-on-year increase of 38.81%; EPS is 2.09 yuan. The company’s performance is in line with expectations. The profit distribution plan for 2021 is to distribute RMB 8.60 (including tax) for every 10 shares.
In 2021q4, the revenue in a single quarter was 4.221 billion yuan, a year-on-year increase of – 2.38%; The net profit attributable to the parent company was 306 million yuan, a year-on-year increase of + 175194%; The net profit attributable to the parent company after non deduction was 233 million yuan, a year-on-year increase of + 742.27%.
Ping An View:
The revenue structure continued to be adjusted, and the gross profit margin of over-the-counter drug business further increased. In 2021, the company realized a revenue of 15.32 billion yuan (+ 12.34%), a net profit attributable to the parent company of 2.047 billion yuan (+ 28.13%), and a net profit attributable to the parent company of 1.853 billion yuan (+ 38.81%) after deduction. The company’s performance met expectations. The overall gross profit margin was 59.72% (- 2.74pp), which was mainly due to the adjustment of the company’s revenue structure. The proportion of prescription drug business revenue with high gross profit margin continued to decline, and the proportion decreased to 34.92% (- 3.08pp) in 2021. By product, the gross profit margin of over-the-counter drug business reached 59.34% (+ 2.21pp) and that of prescription drug business was 65.45% (-9.06pp). The net interest rate was 13.58% (+ 1.72pp), which was mainly due to the obvious decline in the sales expense rate to 32.78% (- 4.00pp).
CHC business strengthens brand and channel construction to achieve rapid growth. CHC Kwai has already covered over 40 pharmaceutical stores nationwide. The company attaches importance to the expansion of the business channel, actively layout the tiktok, fast hands and other social business providers, expand the marketing scenario and improve the brand communication efficiency. In 2021, CHC business realized revenue of 9.276 billion (+ 17.72%). Among them, 1) cold medicine, constantly strengthen the brand and expand online channels. 999 Ganmaoling / Ganmao granule and 999 Qiangli loquat dew increased rapidly; 2) Good performance of skin medication, rapid growth of 999 dermatitis flat green clothes, perfect Wuxi Online Offline Communication Information Technology Co.Ltd(300959) layout of Shunfeng baby children’s skin barrier repair series products, and realized an income of more than 30 million yuan; 3) Gastrointestinal drugs, through the variety upgrading strategy, consolidate the leading position of Sanjiu Weitai Yangweishu granule in the subdivision field. In terms of chronic disease rehabilitation business, the revenue and profit have achieved good growth, laying the foundation for continuously building the capacity in the field of chronic disease rehabilitation.
The prescription drug business adjusted the product structure, accelerated innovation and transformation, and achieved stable growth in performance. The revenue of prescription drug business was 5.35 billion yuan, a year-on-year increase of + 2.76%. Among them, the business of specialty and traditional Chinese medicine formula granules has achieved rapid growth. 1) in the field of cardio cerebrovascular and severe diseases, Shenfu Injection continues to carry out clinical research and academic promotion around acute and severe diseases such as sepsis / septic shock and cardiac arrest, so as to improve clinical recognition; 2) Conduct academic research on bufon and its products in the field of cancer and digestive tract; 3) In the field of Pediatrics, imported recombinant human growth hormone nozer established a marketing and customer service system around the needs of patients, and successfully completed the sales target of the first contract year with Novo Nordisk. The anti infection business is limited, and the impact of policies such as anti infection and centralized purchase has declined significantly. However, after continuous business optimization, the proportion of the company’s traditional Chinese medicine injection and anti infection business in the total revenue has decreased to 4% and 6% respectively. It is expected that the follow-up business will show restorative growth driven by the new product fortasol and cefpirome sodium for injection.
Actively promote the “brand + innovation” two wheel drive growth model and maintain the “recommended” rating. The company is a leading OTC enterprise of Chinese traditional medicine, constantly strengthening the core CHC business and 999 brand influence, mining the clinical value of the existing quality of Rx prescription drugs and creating the second life curve of products. R & D investment continued to increase, reaching 631 million yuan in 2021 (accounting for 4.12%). We maintain the prediction that the net profit of the company from 2022 to 2023 will be 2.347 billion yuan and 2.689 billion yuan respectively. At the same time, we predict that the net profit in 2024 will be 3.078 billion yuan. The current share price corresponds to 16 times of PE in 2022, maintaining the “recommended” rating.
Risk tips: 1) market and policy risks: centralized drug procurement and payment reform may affect the profitability of some varieties; 2) Risk of drug price reduction: under the background of centralized purchase, the varieties occupying a large amount of medical insurance funds in the medical insurance catalogue may face the risk of price reduction. 3) Risk of price fluctuation of raw materials: the price of traditional Chinese medicine has been affected by many factors such as macro-economy, monetary policy, natural disasters and so on. It is easy to fluctuate greatly, which will have an impact on the production cost of traditional Chinese medicine pharmaceutical enterprises.
