Zhejiang Jolly Pharmaceutical Co.Ltd(300181) ( Zhejiang Jolly Pharmaceutical Co.Ltd(300181) ) event: Zhejiang Jolly Pharmaceutical Co.Ltd(300181) released the annual report of 2021 and the first quarterly report of 2022. In 2021, the company realized an operating revenue of 1.457 billion yuan (+ 33.60%), a net profit attributable to the parent company of 179 million yuan (+ 102.03%), and a net profit attributable to the parent company of 173 million yuan (+ 106.37%) after deduction; In 2022q1, the company realized an operating revenue of 439 million yuan (+ 29.18%), a net profit attributable to the parent company of 69 million yuan (+ 56.97%), and a net profit attributable to the parent company of 67 million yuan (+ 55.77%).
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Comprehensive focus on marketing, with rapid performance growth. Based on the biological fermentation technology of medicinal fungi, the company produces modern biological traditional Chinese medicine products, mainly including medicinal fungi Wuling and bailing series products, traditional Chinese medicine decoction pieces and traditional Chinese medicine formula particles. Keji pharmaceutical, a joint-stock company, focuses on the innovative cell therapy of solid tumors and blood malignant tumors. In 2021, the company achieved a revenue of 1.457 billion yuan (+ 33.60%), a net profit attributable to the parent of 179 million yuan (+ 102.03%), and a revenue of 439 million yuan (+ 29.18%) and a net profit attributable to the parent of 69 million yuan (+ 56.97%) in 2022q1. The high performance growth was mainly due to the company’s strengthening of academic promotion and brand publicity, promoting the concept of combined medication for chronic diseases, accelerating the terminal coverage of hospitals at all levels, and strengthening the Internet sales layout at the retail end. The profitability of the company has been improved. The gross profit margin of the company in 2020 / 2021 / 2022q1 is 67.89% / 71.43% / 72.01% respectively, and the net profit margin is 8.74% / 13.17% / 16.56% respectively, showing an upward trend.
Deepen innovative research and development, fine management and achieve cost reduction and efficiency increase. During the reporting period, the company strengthened the academic research and evidence accumulation of core products, promoted the phase IV clinical research of Lingze tablets, launched the preliminary research of Wuling capsule for Alzheimer’s disease, promoted the preclinical research of Lingxiang tablets and other new products, successfully obtained the drug registration certificate of polycarbofelcium tablets, the first generic drug, and obtained the production approval of esmeprazole sodium for injection. In addition, the company implemented refined management, launched the upgrading and transformation of the production line with an annual output of 450 million Wuling Capsules, the upgrading and transformation of the production capacity of Bailing tablets and the optimization of the production line of Lingze tablets, and completed the project acceptance of Yingke ERP system and the three-year plan for the company’s digital construction.
The volume of ACE single product Wuling capsule increased rapidly, with a leading market share. Wuling capsule is an exclusive variety. It is a new class of national traditional Chinese medicine and a protected variety of traditional Chinese medicine. It has a good market development foundation. It is also the first traditional Chinese medicine product in China to treat psychological disorders and improve mood. In 2021, the revenue of Wuling series was 850 million yuan (+ 40.22%), and the gross profit margin was 87.48% (an increase of 4.48 PCT over the same period of the previous year). According to the annual report, Wuling capsule ranked 2nd / 7th / 3rd / 8th in the market share of Chinese patent medicine in urban public hospitals / urban physical pharmacies / county-level public hospitals / township health centers in the field of nervous system diseases in 2021; The company’s bailing tablet products, as drugs for urinary diseases, ranked 620th in the market share of urban community health centers (stations) in 2021, with a revenue of 265 million yuan (+ 24.28%). The company’s strategy is to build Wuling series into 2 billion, Bering tablets into 1 billion, traditional Chinese medicine decoction pieces and formula particles into a large variety of 1 billion, and focus on cultivating polycarbofel calcium tablets as new potential varieties.
After the pilot, the industry has several times the capacity expansion potential, and the company’s formula particle business is actively expanding. According to the annual report, the holding subsidiary of the company, zolibacao traditional Chinese medicine, has more than 1500 product specifications of traditional Chinese medicine decoction pieces series. Since the company obtained the special scientific research enterprise of traditional Chinese medicine formula granules in Zhejiang Province, it has more than 600 varieties for filing, and is actively promoting the key technology research and filing of national and provincial standards. The company’s traditional Chinese medicine decoction pieces and formula granules business continued to promote terminal development, actively participated in the bidding of medical institutions, and intensively cultivated the market in Zhejiang Province. In 2021, the revenue of the company’s traditional Chinese medicine decoction piece business was 289 million yuan (+ 25.53%), and the revenue of traditional Chinese medicine formula granule business was 435381 million yuan (+ 31.79%). We believe that the pilot industry has ended, the production and sales restrictions have been liberalized, and there is several times the expansion potential. The company’s formula granule business is in the stage of rapid expansion.
Profit forecast: Zhejiang Jolly Pharmaceutical Co.Ltd(300181) is the leader of Wuling Series in China, with high performance growth in 2021 and 2022q1. Driven by the company’s strengthening marketing promotion and innovative R & D, it is driven by the expansion of the business of ACE single product Wuling capsule, bailing tablet and traditional Chinese medicine formula granules. The company strengthened refined management, reduced costs and increased efficiency, and the gross profit margin and net profit margin showed an upward trend. We estimate that the operating revenue of the company from 2022 to 2024 will be RMB 1.857/2.379/3.048 billion respectively, with a year-on-year increase of 27.4% / 28.1% / 28.2%, and the net profit attributable to the parent company will be RMB 307 / 4.20/574 million, with a year-on-year increase of 71.4% / 36.5% / 36.9%, corresponding to a P / E ratio of 16.41/12.02/8.78 times from 2022 to 2024.
Risk factors: drug R & D risk, M & A integration and goodwill impairment risk, and policy change risk of the pharmaceutical industry.
