\u3000\u30 China Baoan Group Co.Ltd(000009) 99 China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) )
Key elements of the report:
The company is a leader in the OTC industry of traditional Chinese medicine. Its core business is CHC self diagnosis and treatment and prescription drugs. Relying on the “999” brand effect, through extension integration, terminal channel optimization, brand innovation two wheel drive, active exploration of intelligent manufacturing efficiency and cost reduction, the company continues to expand the market boundary and improve the core business advantages. Under the main tone that the state attaches great importance to the development of traditional Chinese medicine and successively implements supporting policies, as an industry leader, the company is expected to achieve sustained growth in the future.
Key investment points:
The company’s vision is to “become a leader in the mass pharmaceutical and health industry”, and its business focuses on CHC health consumer products and prescription drugs. On the consumer side, CHC health consumer goods business covers cold, gastrointestinal, skin, hepatobiliary, pediatrics, orthopedics, gynecology and other categories, and actively extends to health management and rehabilitation chronic disease management products; At the medical end, the products cover the treatment fields of cardio cerebrovascular, tumor, digestive system, orthopedics, pediatrics, anti infection and so on. In 2021, the company’s operating revenue and net profit attributable to the parent company were 15.32 billion yuan and 2.047 billion yuan respectively, with growth rates of 12.34% and 28.13% respectively. Among them, CHC business accounted for 60.55% of the company’s total revenue in 2021, and has become the company’s revenue growth engine since 2019.
CHC business: brand is the core driving force. Channel grasp and product upgrading broaden the market boundary of the whole category. Brand strengthening + channel expansion is the driving force for the long-term growth of brand OTC and professional brand business line products, such as “Ganmaoling Granule”, “Sanjiu Weitai”, skin brand “Tianhe”, pediatric brand “Aonuo”, liver protection product “yishanfu”. At the same time, gastrointestinal drugs and orthopedic drugs also improve the competitiveness of products through variety upgrading or technology upgrading. Sanqi series health care products, the upstream product of Xuesaitong Soft Capsule in the field of chronic disease rehabilitation, are expected to become the growth point in this field; Big health consumption is still in the exploratory stage. At present, online business accounts for less than 5%. With the increase of online business layout, there are long-term development opportunities in the field of big health.
Prescription drugs: Traditional Chinese medicine formula granules + specialized line + anti infection, product innovation and iteration, and it is expected to achieve restorative growth in the future. After the completion of the pilot of traditional Chinese medicine formula granules, the industry is expected to usher in capacity expansion thanks to the support of demand side expansion and medical insurance side. As one of the old six pilot enterprises, the company has the first mover advantage. At the same time, it actively builds intelligent manufacturing and improves the ability of cost reduction and efficiency. It has the cost advantage and is expected to form a competitive advantage in the market expansion in the future. In terms of specialty line and anti infection, the company attaches importance to Strategic Introduction and innovative transformation. The recombinant human growth hormone product “noze” and Mitoxantrone Hydrochloride Injection (futashu) are used for tracing ®） And the fifth generation cephalosporins are expected to drive the restorative growth of prescription drug business.
Profit forecast and investment suggestion: the company is a leading OTC enterprise, and the prescription drug business includes traditional Chinese medicine formula granules. It is estimated that the revenue in 2022 / 2023 / 2024 will be 17.226 billion yuan / 19.527 billion yuan / 22.303 billion yuan, corresponding to the net profit attributable to the parent company of 2.375 billion yuan / 2774 million yuan / 3.158 billion yuan, corresponding to EPS of 2.43 yuan / share, 2.83 yuan / share, 3.23 yuan / share, corresponding to PE of 15.1 / 13.0 / 11.4 (corresponding to the closing price of 36.71 yuan on April 20, 2022). Based on the company’s brand advantages, terminal channel network expansion and product innovation iteration, it is expected to achieve sustained growth driven by new and old products in the future, and give a “buy” rating for the first time.
Risk factors: the risk of intensified market competition, the risk of centralized purchase and price reduction, the risk of less than expected R & D progress, the risk of M & A integration, and the risk of raw material price fluctuation.
