\u3000\u30 China Baoan Group Co.Ltd(000009) 99 China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) )
Event: the company released the first quarterly report of 2022. In 2022q1, the company realized an operating revenue of 4.19 billion yuan, a year-on-year increase of 2.8%; The net profit attributable to the parent company was 840 million yuan, a year-on-year increase of 30.45%; The non net profit attributable to the parent company was 800 million yuan, a year-on-year increase of 28%, and the performance growth was in line with expectations.
The fine management of the company’s expenses has achieved initial results. In 2022q1, the profit side of the company grew steadily, with a sales cost of 970 million yuan (- 28%), mainly due to the continued high growth of self diagnosis and treatment business, the strengthening of cost management and the non occurrence of some sales expenses under the epidemic situation; R & D investment (+ 3.59 billion yuan) increased mainly due to R & D investment; The financial expenses were 9.047 million yuan (- 34.3%). With the expansion of the company’s revenue scale, the improvement of marketing delivery efficiency and the continuous promotion of centralized purchase, the expense ratio of each business may decline steadily in the future.
CHC’s healthy consumer goods business grew steadily, and brand value helped improve profitability. In 2021, the company’s core segment CHC health consumer goods business realized a revenue of 9.28 billion yuan (+ 17.7%). By category, cold drugs: 999 Ganmaoling, Qiangli loquat dew and Ganmaoqingre granules are growing rapidly, and the sales volume of new retail channels such as o2o is leading; Skin medication: 999 dermatitis flat green clothes are growing rapidly. Gu Fengbao’s children’s skin barrier repair series focuses on the offline market and gradually layout online; Gastrointestinal medication: Sanjiu Yangweishu granule has consolidated its leading position in the subdivision field; Orthopaedic drugs: the core varieties Tianhe Gutong plaster (PIB) series and Tianhe Zhufeng plaster have been upgraded; 999 Diclofenac Sodium Gel went public to expand the combination of plaster and topical gel. Pediatric medication: strive to build 999 Aonuo brand, launch vitamin D drops, and improve the position of vitamin mineral industry.
The product structure of prescription drugs continued to be optimized. In 2021, the revenue of prescription drug business was 5.35 billion yuan (+ 2.8%), and the pipeline covered the fields of cancer, digestion, pediatrics, orthopedics and so on. The restriction of anti infective products and the impact of centralized mining have declined significantly; The revenue of traditional Chinese medicine injection and anti infection business decreased to 4% and 6% respectively, and the product structure continued to be optimized. In the future, the company will strengthen product evidence-based research, explore product value, and promote innovation and digital transformation.
The formula particle business actively responded to the changes of pilot policies. In 2021, the company will actively respond to the industry changes brought about by the end of the pilot, promote the establishment of the whole process traceability system covering the planting of medicinal materials, pieces of traditional Chinese medicine and formula particles, accelerate the construction of standardized planting base of medicinal materials, and establish the advantage of medicinal materials resources from the source; Consolidate the core market, accelerate the expansion of grass-roots medical market and decoction pieces market, and explore and develop a series of traditional Chinese medicine health products; Accelerate the production and implementation of national and local standard varieties, and complete the digital transformation of multiple factories through intelligent manufacturing.
Profit forecast and rating. We expect that the EPS from 2022 to 2024 will be 2.44 yuan, 2.89 yuan and 3.28 yuan respectively, corresponding to the current stock price valuation of 14 times, 12 times and 10 times respectively, maintaining the “buy” rating.
Risk warning: sales are less than expected; Risk that the progress of products under development is less than expected.
