\u3000\u3000 Shandong Pharmaceutical Glass Co.Ltd(600529) (600529)
The company is the leader in the national pharmaceutical glass industry. Since its listing, the revenue and profit have increased steadily. The company’s molded bottle market accounts for more than 70%. The capacity layout and technology of China boron silicon are leading. The policy promotes the improvement of China boron silicon permeability, and the company is expected to fully benefit. The controlling shareholder intends to change, and the interaction between the company and Kaisheng group is worth looking forward to.
Key points supporting rating
Revenue and profits continued to grow steadily, and profitability continued to improve: in 2020, the company’s revenue increased by 14.53% and the ten-year compound average growth rate was 10.5%; The net profit attributable to the parent company increased by 23.06% and the ten-year compound average growth rate was 17.5%. The company has stable financial data and stable growth.
The layout of China borosilicate is advanced, and the gross profit margin of products is expected to increase: at present, the company has a production capacity of China borosilicate molded bottles of about 500 million pieces / year, which is the first Chinese enterprise to overcome the production technology of China borosilicate molded bottles; The company began to lay out the tube drawing technology of medium borosilicate glass tube in 2020, and realized self-produced medium borosilicate glass tube in H1 in 2021; The company plans to invest 1.2 billion yuan to build 4 billion first-class water-resistant medicinal glass bottles, and the product layout of medium borosilicate glass tubes is accelerated. At present, there are few manufacturers with stable and independent production of borosilicate glass bottle technology in China. The company is expected to achieve technological breakthrough and consolidate its leading position. The performance of medium borosilicate is better than that of low borosilicate and sodium calcium glass, and its cost and added value are usually about 5-10 times that of low borosilicate and sodium calcium glass. According to the data of pharma.com, at present, the penetration rate of China borosilicate glass bottles is only 7-8%. In the next 5-10 years, the consistency evaluation and related approval policies of generic drugs are expected to promote the penetration rate of China borosilicate products to about 30%, and the company is expected to fully benefit.
The controlling shareholder intends to change, and further interaction is worth looking forward to: according to the strategic cooperation framework agreement announced by the company in September, Kaisheng group will become the largest shareholder of the company. Kaisheng group owns high-quality pharmaceutical glass enterprises such as Kaisheng Junheng, and has technology and production capacity advantages such as medium borosilicate pull tube bottles. The medium and long-term plan is clear, Shandong Pharmaceutical Glass Co.Ltd(600529) and Kaisheng group deserve to look forward to further cooperation.
Valuation
We estimate that the company’s revenue from 2021 to 2023 will be RMB 3.96 billion, RMB 4.65 billion and RMB 5.4 billion respectively, and the net profit attributable to the parent company will be RMB 650 million, RMB 850 million and RMB 1.03 billion respectively; EPS is 1.09, 1.42 and 1.74 yuan respectively. The first coverage gives a buy rating.
Main risks of rating
The penetration rate of medium borosilicate was lower than expected, the market development was lower than expected, the capacity construction was lower than expected, and the sea freight rose again, dragging down exports.
