\u3000\u30 Shenzhen Fountain Corporation(000005) 38 Yunnan Baiyao Group Co.Ltd(000538) )
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 36.374/28.04/3.339 billion respectively, with a year-on-year increase of + 11.09% / - 49.17% / + 15.17%; The net operating cash flow was 5.223 billion yuan, a year-on-year increase of 36.42%; EPS2. 21 yuan. It is proposed to distribute cash dividends of 16 yuan (including tax) and 4 bonus shares (including tax) to all shareholders of the company for every 10 shares. The performance is in line with market expectations. The return on net assets of the company in 2021 did not reach 10.5%, which did not meet the performance assessment indicators of the second exercise period of equity incentive, and the management estimated that the performance indicators of the third exercise period could not be met.
Comments:
The main business grew steadily, and investment losses and incentive expenses dragged down the apparent performance: the net profit attributable to the parent decreased sharply in 2021, mainly due to the recognition of 1.346 billion investment losses and 784 million share based payment expenses, while 2.618 billion investment income and 105 million share based payment expenses were recognized in the same period of last year. The company took the initiative to reduce the investment scale. By the end of 2021, the trading financial assets decreased by 58% year-on-year to 4.72 billion yuan, which greatly resolved the risks outside the main business. In terms of business divisions, the revenue of drugs, health products, traditional Chinese medicine resources and provincial medicine reached RMB 6.01/59.0/9.5/23.34 billion respectively, with a year-on-year increase of + 19% / + 7% / - 25% / + 12%. The performance of drugs and commercial sections was brilliant. The pharmaceutical business department has built an ecological chain of devices and embraced new channels through deep exploration of the pharmaceutical market and global marketing, with the fastest growth rate in recent five years. The health products division has comprehensively expanded its product matrix and transformed into personalized and digital intelligence. The growth rate of the toothpaste industry slowed down, and the company gained 23% + market share, ranking first. The provincial pharmaceutical company implemented the "one hospital, one policy", strengthened the refined management of channels, expanded new categories and new markets, and successfully made up for the sales pressure caused by volume procurement.
Develop industrial layout externally and optimize salary incentives internally: the company has further defined the strategic positioning of cross regional layout. Shanghai will be an international operation center and R & D center, and the construction of Shanghai International Center project with a total investment of about 1.55 billion yuan is being comprehensively promoted. At the same time, the company participates in Shanghai Pharmaceuticals Holding Co.Ltd(601607) non-public offering and plans to become its second largest shareholder. It will integrate and coordinate in regional complementarity and logistics warehousing, procurement and price negotiation, variety agency, brand promotion, new drug development and other aspects to improve the main business scale and operation efficiency. Beijing as a school enterprise cooperative medical research center, Hainan as an international operation platform and Hong Kong as an industrial marijuana industry platform will form a joint force through linkage and cooperation in the future. After 2020h1 Company granted equity incentive for the first time, it launched an employee stock ownership plan covering 1312 people in May 2021, and implemented a new salary scheme from September to stimulate the vitality of employees.
New business forces the second growth curve, and digitalization helps the transformation of operation and management: the company continues to promote the implementation of the "1 + 4" second growth curve strategy, focusing on traditional Chinese medicine, oral intelligent care, dermatology, orthopedics and traumatology, female care and other courses. We will actively promote the medical beauty track. At the end of 2021, the company will increase the capital of Shanghai Yunzhen by 5 billion yuan, and CEO Dong will be the legal person of the company. In 2022, eight medical beauty clinics will be opened in Beijing and Shanghai. In addition, the company cut into the field of traditional Chinese medicine services, and the urban health center project was completed as scheduled in 2021. Bandung holdings completed the tender offer in January 2022, and the first batch of CBD products have been officially listed in Hong Kong, which will form a systematic operation in the future. The company is determined to focus on customers and actively seek digital transformation, involving all fields such as marketing, process management, raw materials and production. It will lead organizational change and help long-term growth.
Profit forecast, valuation and rating: the company's long-term strategic objectives are ambitious. After the incentive mechanism is improved, we will accelerate endogenous potential tapping + extension exploration, and have broad prospects in the future. Considering that the company has taken the initiative to reduce the investment scale and will continue to increase investment in scientific and technological innovation and organizational change in the future, we lowered the company's EPS forecast for 22-23 years to 3.15/3.61 yuan (30.6% / 30.3% lower than the previous forecast), increased the EPS forecast for 2024 to 4.12 yuan, and the current share price corresponding to PE is 26 / 22 / 20 times, which is lowered to the "overweight" rating.
Risk tip: digital transformation does not meet expectations; Risk of new business development; Risk of R & D failure.
