\u3000\u30 China Baoan Group Co.Ltd(000009) 99 China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) )
Event:
China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) released annual report: in 2021, the company achieved operating revenue of 15.32 billion yuan (+ 12.34%), net profit attributable to parent company of 2.047 billion yuan (+ 28.13%), net profit not attributable to parent company of 1.853 billion yuan (+ 38.81%).
Key investment points:
The overall revenue growth was steady, and the inflection point of deducting non parent net profit was clear. In 2021, the company achieved an operating revenue of 15.320 billion yuan (+ 12.34%), exceeding 15 billion yuan for the first time in history. In 2021, the company deducted 1.853 billion yuan of net profit not attributable to the parent company, with a year-on-year increase of 38.81%, which achieved a significant increase and released the inflection point signal of the operating performance of important companies.
CHC’s health consumer goods business is growing rapidly, with three forces of brand, category and channel. In 021, CHC health consumer goods business realized an operating revenue of 9.276 billion yuan, a year-on-year increase of 17.72%. Cold medicine has continuously strengthened its brand and is in a leading position in new retail channels such as o2o; Combined with the health management needs of consumers, we have successively launched 999 golden Ganmaoling, 999 Huoxiang Zhengqi mixture, 999 Xiongqi tadalafil tablets and other products; Tiktok, on the one hand, through the “999 perfect pharmacy” service, more than 5000 core chain terminals, on the other hand, the company formally established a digital operation center, and actively expand B2C, O2O and Kwai, jitter and other new channels. In addition, benefiting from the continuous slight price increase of products, the gross profit margin of the company’s CHC business reached 59.34% in 2021, an increase of 2.21 percentage points compared with 2021. Looking forward to the future, with the company’s core brand products continuing the strategy of slight price increase and superposition, the current price index of traditional Chinese medicine has reached a high level, we believe that the gross profit margin of the company’s CHC business will continue to rise.
The prescription drug business presents an inflection point, and the growth is expected to further accelerate from 2022. In 2021, the operating revenue of prescription drug business reached 5.35 billion yuan, a year-on-year increase of 2.76%. The overall preliminary reversal of the early decline. Among them, the anti infection business continued the downward trend, but the business of traditional Chinese medicine formula granules and traditional Chinese medicine prescription drugs achieved good growth. Looking forward to the future, we expect that the anti infection business will show a restorative growth driven by new products such as the fifth generation cephalosporin. At the same time, after the implementation of the new national standard, the market of traditional Chinese medicine formula granules is significantly expanded and is expected to achieve rapid growth, and the growth of the company’s prescription drug business is expected to further accelerate.
In 2021, asset impairment was withdrawn more, contract liabilities increased significantly, and the actual profitability of the company in 2021 may be underestimated. In 2021, the company made provision for inventory falling price of 210 million (including 134 million for formula particles due to the implementation of the new national standard), and 44 million for goodwill impairment of Shantang. Superimposed with other small amounts, the impairment of various assets of the company affected the net profit of the company in 2021 by 269 million yuan. In addition, the company’s contractual liabilities reached 1.475 billion at the end of 2021 (697 million, 798 million and 980 million at the end of 20182020 respectively), a significant increase of 51% year-on-year. Overall, the company’s profit release in 2021 is relatively stable, and its actual profitability may be underestimated, laying a good foundation for steady and rapid growth of performance in the next 2-3 years.
The company operates steadily with good cash flow quality. In 2021, the company’s total asset turnover rate was 0.66, slightly higher than that in 2020. Accounts receivable in 2021 were 3.05 billion yuan, a slight increase from 2.98 billion yuan in 2020. The net cash flow from operating activities in 2021 was RMB 1.871 billion, a decrease of 15.89% compared with RMB 2.224 billion in 2020. It is speculated that it is mainly due to the significant increase in inventories.
According to the profit forecast and investment rating, the revenue in 2022 / 2023 / 2024 is expected to be 17.687 billion yuan / 20.172 billion yuan / 22.918 billion yuan, corresponding to the net profit attributable to the parent company of 2.380 billion yuan / 2.820 billion yuan / 3.285 billion yuan, corresponding to PE of 15.59/13.15/11.29. Maintain the “buy” rating.
The risk prompt policy leads to the risk that the product price drops or the medical insurance payment level drops more than expected, the risk that the product sales promotion is less than expected, the risk that the R & D progress is less than expected, the risk that the M & A integration effect does not reach the expected, and the risk that the price of upstream raw materials rises more than expected
