\u3000\u30 China Baoan Group Co.Ltd(000009) 89 Jiuzhitang Co.Ltd(000989) )
Inheriting the brand with a history of 100 years and stimulating the power of employee stock ownership plan
Jiuzhitang Co.Ltd(000989) predecessor “Lao Jiuzhitang Co.Ltd(000989) medicine shop” originated in 1650 AD and has a history of 372 years. The moat of “brand + variety” has been built, with 339 national drug registration approvals, including 35 exclusive varieties and 1 national protected variety of traditional Chinese medicine, covering many fields such as cardio cerebrovascular, kidney tonifying, blood tonifying, women and children, facial features and so on.
In 2020, the company implemented the employee stock ownership plan, with the target of directors, supervisors, senior managers, core technology, business backbone and outstanding contributors, and the transfer price is 5 yuan / share. In recent years, the revenue side has returned to stability, the profit side has been gradually reduced by the stem cell business, and the company’s main business income has gradually covered the investment in innovative drugs. After deducting the impact of losses, the company’s actual main business operating profit in 2020 was 430 million yuan, an increase of 30% year-on-year.
There are six categories of traditional Chinese medicine with more than 100 million yuan, and the echelon products are rich in reserves
At present, the company has established a “three Echelon” product matrix. The first echelon has more than six billion core single products. Shuxuetong in the field of cardiovascular and cerebrovascular drugs increased by 14.54% year-on-year in 2020, with a market share of about 8%. The re evaluation work is progressing steadily, and the products are expected to enter the basic drug catalogue. Five OTC varieties (Liuwei Dihuang pill, Angong Niuhuang Pill, donkey hide gelatin, lvjiao Buxue granule and Zuguang powder, all of which are leading in the market). In January 2022, the company raised the price of some OTC products by 6% – 30%, which is expected to increase the profit of the company. The sales revenue of the second and third tier products increased by more than 20% year-on-year, with the potential to become more than 100 million varieties.
Pay equal attention to “tradition” and “frontier”, and extend the brand value of ” Jiuzhitang Co.Ltd(000989) ” in multiple dimensions
The company extends Jiuzhitang Co.Ltd(000989) brand value from three directions.
Chain drugstores consolidate brand value: Centered on the commercial layout of regional chain drugstores in Hunan, there are 514 stores with an operating revenue of 1 billion yuan. And inherit the company’s history, provide traditional Chinese medicine and health management services, and enhance the company’s brand awareness.
Lay out big healthy consumer goods and respond to the consumption trend of e-commerce: with the production and supply system of “independent research and development + OEM”, build medicine and food homology + FMCG daily chemical with the help of brand advantages, open e-commerce sales channels and transform to digital marketing.
From a long-term strategic perspective, invest in China’s leading stem cell R & D technology: take a stake in the world-renowned stem cell research and development enterprise Sidi Meike, set up Jiuzhitang Co.Ltd(000989) Meike (Beijing), a Chinese stem cell research and development subsidiary, and prospectively layout the stem cell innovation Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) company. Ind has been approved. It is the first clinical trial using imported stem cells approved by CDE. The 10 billion blue ocean of cell therapy industry is developing rapidly in the world, and the development of stem cells in China has passed the confused period. It is expected that after the official commercialization of the company’s stem cell products, the subsidiaries will turn losses into profits, and even significantly increase the profits of listed companies, breaking through the valuation ceiling.
Investment advice
We expect that the company’s revenue from 2021 to 2023 will be RMB 4.01/45.4/5.13 billion respectively, with a year-on-year increase of 12.8% / 13.0% / 13.0%, the net profit attributable to the parent company will be RMB 270 / 3.6/460 million respectively, with a year-on-year increase of 0.3% / 30.4% / 29.9%, the corresponding EPS will be RMB 0.31/0.41/0.53, and the corresponding valuation will be 32x / 25X / 19x. If the loss part is excluded, the net profit of the company’s main business from 2021 to 2022 is expected to be RMB 434 / 516 million respectively, and the corresponding PE is 20 / 17x. For the first time, the “buy” investment rating is given.
Risk tips
The market sales of OTC products are less than expected, the policy risks are less than expected, and the progress of R & D projects is less than expected.
