As the concept of “prevention of disease” and health care has been deeply rooted in the hearts of the people, people have a deeper understanding of traditional Chinese medicine. As one of the three pillars of China’s traditional Chinese medicine industry, traditional Chinese medicine decoction pieces have been strongly supported by national policies. For example, traditional Chinese medicine decoction pieces can not be included in the centralized drug purchase catalogue, not in the scope of drug price reduction, and hospitals are allowed to retain a 25% retail price bonus. Recently, the general office of the State Council issued the “14th five year plan” for the development of traditional Chinese medicine, which also clearly pointed out that we should comprehensively promote the revitalization and development of traditional Chinese medicine. Under the policy support, the traditional Chinese medicine industry has ushered in unprecedented development opportunities. Some enterprises have stepped on the rhythm of the times, and the century old brand – Zhejiang Shouxiangu Pharmaceutical Co.Ltd(603896) ( Zhejiang Shouxiangu Pharmaceutical Co.Ltd(603896) . SH) is one of them.
On the evening of March 31, Zhejiang Shouxiangu Pharmaceutical Co.Ltd(603896) released the 2021 annual report. In 2021, the company achieved a total revenue of 767 million yuan, a year-on-year increase of 20.61%, a net profit of 200 million yuan, a year-on-year increase of 32.37%, and a deduction of non net profit of 200 million yuan, a year-on-year increase of 45.19%. In addition, the company plans to distribute a cash dividend of 4.05 yuan (including tax) for every 10 shares to all shareholders and increase 3 shares for every 10 shares.
the whole industry chain helps the steady growth of core products
the net profit margin of sales in recent five years has remained at 21% – 26%
Zhejiang Shouxiangu Pharmaceutical Co.Ltd(603896) product business focuses on the breeding, cultivation, processing and sales of precious and rare Chinese herbal medicines such as “one Ganoderma lucidum, one Dendrobium candidum and one flower” (Ganoderma lucidum, Dendrobium candidum and saffron). At present, a “whole industry chain” development model of Ganoderma lucidum, Dendrobium candidum and other series products has been formed. The company forms a closed loop of the whole industrial chain from the source breeding selection, to the planting and processing of traditional Chinese medicine, to the processing and intensive processing, to the control of drug circulation channels, so as to ensure the safety and reliability of products.
According to the annual report, the revenue of Ganoderma lucidum spore powder products, the company’s core product, was 536 million yuan in 2021, with a year-on-year increase of 18.24%, accounting for 70.51% of the total revenue and a gross profit margin of 88.17%. The revenue of Dendrobium candidum, another main product, was 120 million yuan, a year-on-year increase of 20.97%, accounting for 16.15% of the total revenue and 77.5% of the gross profit margin. The performance of core products was relatively stable. In addition, according to wind data, in the past five years, the company’s net sales interest rate has remained at 21% – 26%, reflecting excellent profitability.
based on Zhejiang, the national expansion is advancing steadily
online channels accelerate the development into multi-point force
At the beginning of its establishment, the company established the development strategy of intensive cultivation of Zhejiang market. After years of efforts, it has formed brand advantages in Zhejiang. From 2019 to 2021, the proportion of sales revenue in Zhejiang Province in revenue was 63.92%, 64.28% and 63.45% respectively, which was relatively stable. Moreover, the company is also expanding nationwide through the urban agent model. It is reported that by the end of 2021, the company has vigorously developed channels outside the province, mainly in Beijing, Shanghai and other cities, focusing on the promotion of high-end new dosage forms of spore powder tablets. In addition, the company plans to add 20 urban agents in 2022. With the gradual implementation of expansion, the market revenue outside the province is expected to increase rapidly.
While gradually promoting the national layout, Zhejiang Shouxiangu Pharmaceutical Co.Ltd(603896) accelerates the development of Internet sales, mainly relying on online channels such as tmall’s official flagship store and jd.com’s official flagship store, and runs Zhejiang Shouxiangu Pharmaceutical Co.Ltd(603896) small programs such as “shouxianyun”, so as to make a breakthrough in community communication. With the rise of brand awareness, the company’s online sales have increased rapidly, accounting for 24.40% in 2021 from 20.22% in 2019, becoming a rapid growth point in recent years. The company has formed a multi-point force trend with tablet distribution outside the province, powder distribution in traditional channels and granules distribution online.
In addition, by the end of 2021, the company has completed the repurchase of 3585000 shares, and the shares are expected to be used for equity incentives related to regional markets, which will further promote the growth of the company’s overall sales.
R & D capability and advantages of casting processing technology
capacity expansion highlights the national layout ambition
The steady growth of performance and the orderly promotion of national expansion are inseparable from the R & D support behind it. From 2019 to 2021, the R & D investment of the company was 39 million yuan, 48 million yuan and 51 million yuan respectively, of which the R & D investment accounted for 6.63% of the revenue in 2021, far exceeding that of comparable companies in the industry. Excellent R & D ability has created rich scientific research achievements. The company has applied for 20 patents, authorized 6 patents, organized and published 23 papers, completed the publication of zhihanlingrui and Chinese materia medica – Ganoderma lucidum, and won the title of “specialized and special new” small giant enterprise in Zhejiang Province.
With the support of R & D, Zhejiang Shouxiangu Pharmaceutical Co.Ltd(603896) processing technology has outstanding advantages. Taking spore powder as an example, the current wall breaking technology is mainly physical wall breaking method. Although this method has a high wall breaking rate, it is very easy to cause heavy metal pollution and oxidation due to the direct contact between materials and vibrating mill. The company adopts the original “four low and one high” supersonic low-temperature air flow wall breaking technology to break the wall through the collision of materials, which not only improves the wall breaking rate, but also avoids heavy metal pollution and oxidation, and significantly improves the product safety. On this basis, the company invented the spore powder wall removal technology to separate the residual wall shell after wall breaking from the effective components, greatly improve the content of effective components such as Ganoderma lucidum polysaccharide and Ganoderma lucidum triterpene, and strengthen the activity and efficacy of the product. With this technology, the company developed Zhejiang Shouxiangu Pharmaceutical Co.Ltd(603896) brand wall breaking Ganoderma lucidum spore powder, wall breaking Ganoderma lucidum spore powder particles, wall breaking Ganoderma lucidum spore powder tablets and other core health food.
Recently, the company plans to publicly issue convertible bonds with a total amount of no more than 398 million yuan, which is mainly used for the phase II construction project of health food in Zhejiang Shouxiangu Pharmaceutical Co.Ltd(603896) Health Industrial Park, including capital construction and production line construction. It can be seen that this measure of the company aims to strengthen capacity expansion to ensure the increasing sales volume under the national expansion. In addition, the company will strengthen contact with national mainstream media and further increase the layout of national media such as China Central Television and high-speed railway. It can be seen that the company has a plan for the future national strategic expansion.
