\u3000\u3 Shengda Resources Co.Ltd(000603) 439 Guizhou Sanli Pharmaceutical Co.Ltd(603439) )
Matters:
The company released its 2021 annual report, realizing a revenue of 939 million yuan, a year-on-year increase of 48.99%; The net profit attributable to the parent company was 152 million yuan, a year-on-year increase of 62.08%; The net profit attributable to the parent company after deduction was 136 million yuan, an increase of 45.25% year-on-year; EPS is 0.37 yuan / share. The company’s performance is in line with expectations. There will be no profit distribution in 2021. At the same time, the company released the first quarterly report of 2022, realizing a revenue of 159 million yuan, a year-on-year increase of 22.86%; The net profit attributable to the parent company was 23.73 million yuan, a year-on-year increase of 1.23%; The net profit attributable to the parent company after non deduction was 21.15 million yuan, a year-on-year decrease of 4.54%.
Ping An View:
Performance maintained rapid growth and profitability continued to improve. In 2021, the company achieved a revenue of 939 million yuan (+ 49%), a net profit attributable to the parent company of 152 million yuan (+ 62%), and a net profit attributable to the parent company of 136 million yuan (+ 45%) after deducting non profits, maintaining a rapid growth. The company’s overall gross profit margin is 70.50% (+ 3.66pp) and net profit margin is 15.83% (+ 0.92pp), and its profitability continues to improve. In terms of expense rate, the sales expense increased significantly, from 4.1pp to 48.01%, mainly due to the company’s further strengthening of the construction of direct sales team and academic marketing. From 2019 to 2021, the company has 123, 668 and 741 sales personnel respectively. In 2022q1, the company achieved a revenue of 159 million yuan (+ 23%), and a net profit attributable to the parent company of 23.73 million yuan (+ 1%). It is expected that the decline in the growth rate of the revenue side is mainly affected by the epidemic.
The core variety Kai throat spray has the potential to become the 2 billion largest variety. In 2021, the revenue of Kai throat spray was 879 million yuan (+47%), accounting for 94% of the total income, and the core variety of the company. Currently, the main product of Kai Yan Jian spray is mainly children’s type. It is the only mainstream product in the market of Chinese throat medicine for children with throat diseases. It has exclusive varieties and has been included in the national medical insurance, and has the advantage of dosage form. We believe that with full channel development and adult health insurance, Kai throat spray is expected to grow into a 2 billion level variety. In 2021, the revenue of Qiangli Tianma Eucommia capsule was 35.29 million yuan (+ 21%), accounting for 4%.
Extensive mergers and acquisitions continue to enrich pipelines. In 2021, the company announced that it planned to participate in the bankruptcy and reorganization of dechangxiang pharmaceutical. Previously, it had participated in 25.64% equity of Hanfang pharmaceutical through cash contribution. Hanfang Pharmaceutical Co., Ltd. and dechangxiang Pharmaceutical Co., Ltd. are old brand pharmaceutical enterprises in Guizhou Province, with rich drug approvals. Qijiao Shengbai capsule, fufu zaizao capsule, Eucommia butiansu pill and Zhisou Huatan pill are potential varieties. Through extension and merger, the company continues to enrich product pipelines and get rid of the dependence on single varieties.
The company is a small and American Standard in the traditional Chinese medicine industry, and maintains the “recommended” rating: driven by the core variety Kaihoujian, the company maintains rapid growth. At the same time, epitaxial M & A is expected to supplement more potential varieties. Considering that the epidemic situation in 2022 may have an adverse impact on the company’s operation, we lowered the net profit forecast from 2022 to 2023 to 193 million and 244 million yuan (the original forecast was 206 million and 260 million yuan), and the net profit in 2024 is expected to be 313 million yuan, corresponding to EPS of 0.47 yuan, 0.59 yuan and 0.76 yuan respectively from 2022 to 2024. The current stock price is 30 times that of PE in 2022, maintaining the “recommended” rating.
Risk warning. 1) Risk of continuous impact caused by covid-19 epidemic: at present, there is some uncertainty about the spread of the epidemic outside China and when the development situation of the epidemic will be effectively controlled in the future. The company may continue to face difficulties such as limited transportation and logistics and the inability of regular outpatient clinics in hospitals, which will have a certain negative impact on the company’s performance. 2) the risk of product concentration: Sales of main products of the company mainly include throat spray (including children), which accounts for over 95% of the main business income and high concentration. The production and sales of the above products determine the company’s income and profitability to a large extent. Once there are major adverse changes in the price of API, production and sales status and market competition pattern, it will have an adverse impact on the company’s future business performance. 3) Risk of product price reduction: with the gradual deepening of the national medical reform system, the cost control of medical insurance is becoming more and more strict. With the implementation of medical insurance payment standards, the establishment of medical insurance bureau and the implementation of volume procurement, the decline of drug prices will become an inevitable trend in the future.
