\u3000\u3 Shengda Resources Co.Ltd(000603) 439 Guizhou Sanli Pharmaceutical Co.Ltd(603439) )
Ping An View:
Adhere to the development of proprietary Chinese medicine, and promote the classic Name: Guizhou Sanli Pharmaceutical Co.Ltd(603439) ‘s main business is the research, production and sale of drugs. The product line mainly focuses on Pediatrics, respiratory system, cardio cerebral vascular diseases, Gastroenterology and other fields. The core products are throat spray (child type, adult type) and strong Tianma Eucommia capsules have entered the national health insurance directory. The company’s operation was stable and its performance resumed growth. The performance express in 2021 showed that the company achieved an operating revenue of 944 million yuan, a year-on-year increase of 49.77%, and the net profit attributable to the parent company was 153 million yuan, a year-on-year increase of 62.54%. With the opening of throat sprout sprays (including children’s type), we believe that the market scale is expected to reach 2 billion yuan.
The policy supports the research and development of children’s drugs, and the market has a high development momentum: there is a lack of types of pediatric drugs in China, the types of children’s drugs account for only about 5% of the total drugs, and there are few enterprises producing children’s drugs, and the gap between supply and demand is obvious. In order to alleviate the shortage of children’s drugs, the state has continuously issued relevant support policies since 2011 to encourage the research, development and production of children’s drugs. In 2021, the measures for the administration of the national catalogue of essential drugs (Revised Draft) was issued, and “children’s drugs” were added to the scope of basic drugs for the first time to further ensure the drug demand of children. At present, the proportion of children’s drug market in China’s drug terminal market is less than 5%, the market is far from saturation, and there is a broad space for development in the future.
Carry out strategic mergers and acquisitions to promote the diversified development of varieties: the company participated in Hanfang pharmaceutical in 2020 and now holds 25.64% equity. Hanfang pharmaceutical has many exclusive varieties. Through Hanfang, the company can expand its business to many subdivided fields such as tumor blood, gynecology and chronic disease conditioning, and has obtained potential exclusive products such as Qijiao Shengbai capsule and Gynecology reconstruction capsule. The company is now participating in the bankruptcy reorganization of dechangxiang pharmaceutical and plans to obtain 95% equity of dechangxiang. As a century old brand, dechangxiang has excellent processing technology, as well as many products such as fufu zaizao pill, Kunbao pill, compound pear ointment and so on. Through strategic mergers and acquisitions, the company continues to enrich product varieties, disperse the risk of product concentration, and further enhance the competitiveness of the industry.
First coverage and “recommended” rating: it is estimated that the net profit attributable to the parent company from 2021 to 2023 will be 153 million yuan, 206 million yuan and 260 million yuan respectively, and the current share price corresponds to 32x PE in 2022. Considering that as the leader of Miao medicine, the company’s main business continues to grow rapidly, and strategic mergers and acquisitions are expected to further thicken the company’s performance, we give the company a 40x valuation in 2022, with a target market value of 8.24 billion yuan. For the first coverage, give a “recommended” rating.
Risk tips: 1) risk of continuous impact of covid-19 epidemic: at present, there is a certain uncertainty about the spread of covid-19 epidemic outside China and when the development situation of covid-19 epidemic will be effectively controlled in the future. The company may continue to face difficulties such as limited transportation and logistics and unable to receive regular outpatient services in the hospital, which will have a certain negative impact on the company’s performance. 2) the risk of product concentration: the sales revenue of the company’s main products, including throat sprays (including children’s type), accounts for more than 95% of the main business income, with a high degree of concentration. The production and sales of the above products determine the company’s income and profitability to a large extent. Once there are major adverse changes in the price of API, production and sales status and market competition pattern, it will have an adverse impact on the company’s future business performance. 3) Risk of product price reduction: with the gradual deepening of the national medical reform system, the cost control of medical insurance is becoming more and more strict. With the implementation of medical insurance payment standards, the establishment of medical insurance bureau and the implementation of volume procurement, the decline of drug prices will become an inevitable trend in the future.
