\u3000\u30 China Baoan Group Co.Ltd(000009) 99 China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) )
Event: China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) released the first quarterly report of 2022. In 2022q1, the company achieved an operating revenue of 4.194 billion yuan (+ 2.81%), a net profit attributable to the parent company of 839 million yuan (+ 30.45%), and a net profit attributable to the parent company of 797 million yuan (+ 27.96%).
Comments:
The growth rate of national standard switching formula granule business may slow down, and the net profit increased rapidly year-on-year. In 2022q1, the company achieved an operating revenue of 4.194 billion yuan (+ 2.81%) and a net profit attributable to the parent company of 839 million yuan (+ 30.45%), with a rapid year-on-year increase in net profit. From the revenue side, according to the company’s announcement, the annual growth rate of formula particle business this year is uncertain due to the switching between the old and new national standards, which is expected to be slightly lower than that in previous years. The filing speed of provincial standards and national standards is slow, and there are large differences in provincial policies. The company adopts one province and one policy to deal with the other case. The company expects that the price adjustment and sales trend in the second quarter will be clearer, and the business will maintain a good growth trend in the next year. In addition, the epidemic situation in the first quarter had varying degrees of impact on the sales of prescription drugs, cold drugs and online sales in some areas of the company, but on the whole, it had no significant impact. Looking forward to the whole year, as the company’s formula particle business adapts to the new national standard and the steady development of CHC business, we expect the company’s operating revenue to increase by 11.4% year-on-year in 2022.
The sales expense ratio decreased and the net cash flow from operations increased significantly year-on-year. From the expense side, the company’s gross profit margin in 2022q1 was 55.06%, a year-on-year decrease of 4.40pct; The net interest rate was 20.16%, a year-on-year increase of 4.28pct. Among them, the management expense rate was 4.50%, with no significant change year-on-year. The R & D expense rate was 2.48%, with a slight increase of 0.60pct year-on-year, and the sales expense rate was 23.23%, with a year-on-year decrease of 9.96pct. According to the company’s announcement, the reasons for the change of expense rate are as follows: 1) due to the influence of business structure, the sales growth rate of prescription drug business is slower than that of CHC business, and some products are affected by centralized purchase. In addition, the proportion of self operated mode of prescription drugs is increasing, which is expected to lead to the decrease of expense rate; 2) With the expansion of revenue scale of core categories in CHC business, the investment efficiency of marketing expenses has been improved. In the past few years, the company has actively controlled fees, and it is expected that the sales expense rate of each business will decline slightly in a stable manner. The company’s net operating cash flow increased significantly year-on-year. In 2022q1, the company’s net cash flow from operating activities reached 459 million yuan (+ 64.73%). Overall, the profitability of the company has improved.
CHC business has long-term growth logic and is optimistic about long-term development. In 2021, the company’s CHC health consumer goods business realized an operating revenue of 9.276 billion yuan (+ 17.72%). According to the company’s announcement, the future growth logic of CHC business lies in: 1) strengthening the brand, which is the core element of business development. Under the brand, the company will further subdivide categories to meet the health management needs of patients in the whole process of disease diagnosis and treatment, and continuously introduce new products (such as Longjiao powder and antiviral oral liquid) to enrich the product line. 2) Constantly expand new channels. In the past few years, the company has continued to layout new channels. In recent years, the proportion of online channel sales has increased rapidly. Through product structure adjustment and professional team building, the company can adapt to the development trend of online business in the future. 3) Seize the opportunity of industry reform, hope to realize the integration of high-quality resources in the industry and introduce brands with market potential. We are optimistic about its long-term development capacity.
Profit forecast: the company is a rare platform brand OTC enterprise in China. It has brand advantages and continues to strengthen its brand. CHC business has long-term growth logic. The national standard switching formula particle business was temporarily affected in the first quarter. In the long run, the formula particle industry has the potential of both volume and price rise. The company is the sixth largest company and has the advantage of industrial chain. The profitability of the company has been improved, and the reduction of sales expense rate has driven the rapid growth of net profit in the first quarter. We estimate that the operating revenue of the company from 2022 to 2024 will be RMB 17.065/19.325/21.935 billion respectively, with a year-on-year increase of 11.4% / 13.2% / 13.5%, and the net profit attributable to the parent company will be RMB 3.180/36.55/4.223 billion, with a year-on-year increase of 55.4% / 14.9% / 15.6%, corresponding to the P / E ratio of 10.53/9.16/7.93 times from 2022 to 2024.
Risk factors: the impact of epidemic situation, the risk of centralized purchase of products, the risk of intensified industry competition, the risk of price fluctuation of raw materials, and the risk of goodwill impairment.
