\u3000\u30 China Baoan Group Co.Ltd(000009) 99 China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) )
Main points:
Events
The company released its annual report for 2021. In 2021, the company realized an operating revenue of 15.32 billion yuan, a year-on-year increase of 12.34%; The net profit was 2.047 billion yuan, a year-on-year increase of 28.13%; The basic earnings per share is 2.09 yuan. The company plans to distribute a cash dividend of 8.60 yuan (including tax) to all shareholders for every 10 shares.
Event comments
CHC grew rapidly. Under prudent assessment, the provision for inventory depreciation and goodwill impairment was withdrawn. CHC’s health consumer goods business achieved an operating revenue of 9.276 billion yuan, a year-on-year increase of 17.72%. As the company’s core business, health consumer goods business achieved rapid growth.
The operating revenue of prescription drug business was 5.35 billion yuan, with a year-on-year increase of 2.76%. After several years of business optimization, the proportion of traditional Chinese medicine injection and anti infection business in the operating revenue has decreased to about 4% and 6% respectively. In 2021, the company made provision for inventory falling price of 210 million yuan and goodwill impairment of 44.236 million yuan.
The provision for inventory falling price mainly refers to the formal implementation of the new standard from November 1, 2021 after the completion of the pilot work of traditional Chinese medicine formula granules. Traditional Chinese medicine formula granules without national standards or standards formulated by provincial drug regulatory departments shall not be sold on the market, and the provision for inventory falling price is 134 million yuan.
The provision for impairment of goodwill is 44.236 million yuan for the goodwill formed by Jilin heshantang. Jilin heshantang mainly provides red ginseng raw materials for the traditional Chinese medicine injection of the company’s subsidiary Ya’an Sanjiu. Due to the low price of ginseng and the decline in sales of traditional Chinese medicine injection in recent years, the operating performance of Jilin heshantang did not meet expectations.
The adjustment of revenue structure reduced the gross profit margin, which was affected by the epidemic in the third and fourth quarters
The overall gross profit margin of the company was 59.72%, a year-on-year increase of -2.74 percentage points; The expense rate during the period was 42.35%, with a year-on-year increase of – 4.21 percentage points; Among them, the sales expense rate was 32.78%, with a year-on-year increase of -4.00 percentage points; The rate of administrative expenses was 9.83%, with a year-on-year increase of -0.38 percentage points; The financial expense rate was – 0.25%, year-on-year + 0.17 percentage points; The net operating cash flow was RMB 1.871 billion, a year-on-year increase of – 15.89%.
Quarterly, the company’s Q1-Q4 single quarter revenue was RMB 4.080 billion, RMB 3.677 billion, RMB 3.343 billion and RMB 4.221 billion respectively, with year-on-year growth rates of + 29.05, + 35.32, – 2.70 and – 2.38% respectively; The net profit attributable to the parent company in Q1-Q4 in a single quarter was 643 million yuan, 722 million yuan, 376 million yuan and 306 million yuan respectively, with a year-on-year growth rate of + 22.95, + 35.83, -28.57 and + 175194% respectively; Q1-Q4 single quarter net profit deducted from non parent company was RMB 623 million, RMB 642 million, RMB 355 million and RMB 233 million respectively, with year-on-year growth rates of + 39.92, + 34.45, -20.93 and + 742.27% respectively.
The advantages of big brands are obvious, with 23 varieties with annual sales of more than 100 million yuan. The research and development of CHC: health consumer goods business, as the company’s core business, has achieved rapid growth. Cold medicine continues to strengthen the brand and expand online channels. 999 Ganmaoling, 999 Qiangli loquat dew and 999 Ganmaoqingre granules grow rapidly and are in a leading position in new retail channels such as o2o. The operating revenue of skin drugs exceeded 30 million yuan in 2021. In terms of channel and terminal construction, by the end of December 2021, the “999 perfect Drugstore” project has covered 26 cities and served more than 5000 core chain terminals, which has been highly praised by the majority of chain customers.
It is expected that the business of anti infective medicine will continue to grow rapidly under the influence of the policy of anti infective prescription and centralized collection of traditional Chinese medicine, and the business of anti infective medicine will continue to grow rapidly. It has covered thousands of grade hospitals and tens of thousands of grass-roots medical institutions across the country, and actively explored the internet medical market.
In terms of R & D, the R & D cost was 560 million yuan, a year-on-year increase of 21.82%, accounting for 3.7% of the operating revenue. The company has 71 projects under research, mainly focusing on the strategic fields of cancer, orthopedics, skin, respiration, anti infection and so on. In terms of inheritance and innovation of traditional Chinese medicine, the company focuses on the research of classical famous prescriptions of traditional Chinese medicine, formula particle standards and medicinal materials resources. At present, more than 20 classical famous prescriptions are under research.
Investment advice
Due to the update of the company’s annual report, the previous profit forecast was adjusted. We expect that the company’s revenue from 2022 to 2024 will be 17.83/207.2/24.15 billion yuan respectively, with a year-on-year increase of 16.4% / 16.2% / 16.6% respectively, and the net profit attributable to the parent company will be 23.5/26.0/2.9 billion yuan respectively, with a year-on-year increase of 14.6% / 10.8% / 11.4% respectively, with a corresponding EPS of 2.40/2.66/2.96 yuan and a corresponding valuation of 16x / 14x / 13X. Maintain the “buy” investment rating.
Risk tips
Industry policy risk is lower than expected; The promotion of new varieties is not as expected; The promotion of equity incentive scheme was less than expected.
