China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999)
Investment logic
The company focuses on the field of medicine and health, and aims to become the “leader of mass medicine and health industry”. The company has formed a business system with self diagnosis and treatment (i.e. CHC) and prescription drugs as the core, striving to be the leading enterprise in China Meheco Group Co.Ltd(600056) health industry. In 2021, CHC business realized an operating revenue of 9.3 billion yuan, with a year-on-year increase of 18%; The operating revenue of prescription drug business was 5.4 billion yuan, a year-on-year increase of 3.2%. In February 2022, the company announced the restricted stock incentive plan (Draft), which set up a comprehensive assessment system from the aspects of shareholder return level, profitability growth level and asset operation ability level, adding new impetus to the development of the company. In 2021, the company’s revenue was 15.3 billion yuan (+ 12.3%); The net profit attributable to the parent company was 2.05 billion yuan (+ 28.1%).
CHC business is gradually restored, and the development of the whole category can be expected in the future. The gradual release of the demand for health management of the elderly and chronic diseases has brought greater growth space to the self diagnosis and treatment market. The CHC business of the company has increased for three consecutive years, and the business proportion has increased year by year. Relying on 999 brand strength, the company has expanded its advantages in all fields: 1) M & A of Aonuo pharmaceutical to supplement pediatric calcium supplement products, ranking first in the sales volume of similar items in the double 11 in 2020. 2) The joint venture mode introduces easy recovery products with excellent product quality and academic foundation to reserve advantages in the field of liver and gallbladder. 3) Cooperate to introduce a new respiratory product Longjiao powder to supplement the vacancy of throat medicine in the company’s respiratory field.
Specialty line + formula particles, prescription drug business, two wheel drive. The specialty line and formula particle segment of prescription drug business grew rapidly. On the one hand, the company’s specialty line adheres to the clinical demand orientation, deeply excavates the product value, and the new and old products grow together to drive the development of the company’s prescription drug business; On the other hand, continue to promote traditional Chinese medicine formula granules. With the release of the announcement on ending the pilot work of traditional Chinese medicine formula granules, the industrial policies have been gradually liberalized, the scene of traditional Chinese medicine formula granules has been improved, and there is a large room for improvement. The layout of the whole industrial chain of the company can store energy for future development.
Investment advice
China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) will continue to benefit from the development of traditional Chinese medicine. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be 2.38 billion yuan, 2.77 billion yuan and 3.21 billion yuan respectively, with growth rates of 16.5%, 16% and 15.8% respectively. We use the relative valuation method (P / E ratio) to value the company. With reference to the situation of comparable companies of Listed Companies in the same industry, we give the company a valuation of 21 times in 2022, a target price of 47 yuan / share, and a “buy” rating for the first time.
Risk tips
Product centralized purchase risk; Risk of increased competition; Product promotion is not as expected; Risk of price limit of Medicare drugs; Risk of brand value change; Price fluctuation risk of raw materials; Goodwill impairment risk
