\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 529 Shandong Pharmaceutical Glass Co.Ltd(600529) )
Performance review
On April 25, 2022, Shandong Pharmaceutical Glass Co.Ltd(600529) released the 2021 annual report and the first quarterly report of 2022. In 2021, the company achieved revenue, net profit attributable to the parent company and net profit deducted from non attributable to the parent company of RMB 3.875591/572 billion respectively, with a year-on-year increase of 13.08%, 4.72% and 3.40%; In the first quarter of 2022, the revenue, net profit attributable to the parent and net profit deducted from non attributable to the parent were RMB 1.042/1.53/152 billion respectively, with a year-on-year increase of 12.53%, – 1.93% and – 2.72%. The company’s revenue is in line with expectations; Affected by the rising cost of raw materials, the net profit was lower than expected.
Business analysis
Affected by the epidemic, sea freight and raw material prices rose, the company’s profit margin was under pressure, and the growth of revenue was in line with expectations. (1) In 2021 and the first quarter of 2022, the cost of raw materials, fuel and power increased significantly, the sea freight doubled, the covid-19 epidemic, the purchase of drugs with volume, the intensification of industrial competition and other impacts, which continued to put pressure on the profit margin of the company. (2) The company has made positive response in cost control and increased the sales of higher value-added products. In 2021, the company’s revenue of molded bottle series increased by more than 10%, and sold 3 billion brown bottles, a year-on-year increase of 13%; Sales of butyl plug series products were 5.1 billion, with a year-on-year increase of 11.7%.
The sales volume of pre potting and medium borosilicate tube bottle making increased by 2-3 times year-on-year, and the new production capacity and R & D were steadily promoted. (1) Sales of high-end products increased significantly: in 2021, the company sold nearly 50 million pre potted products, 2.5 times higher than 20 million in 2020; 188 million medium borosilicate tube bottles, a year-on-year increase of 235%; 55 million neutral ampoules, an increase of 150% year-on-year. (2) Promotion of medium borosilicate and high-grade glass bottle projects: the company’s pharmaceutical packaging materials phase I project has a new area of 140000 square meters, three medium borosilicate molding bottle kilns have been put into operation, and two finished product warehouses, batching plants and raw material warehouses have been completed. The company completed phase II of qianya high-grade light-weight glass bottle project in tuicheng; In 2021, 414 new products were reviewed and 206 were confirmed.
The upgrading of medicinal glass promoted by policies is worth looking forward to, and China borosilicate products welcome new opportunities for development. (1) We believe that with the continuous promotion of injection consistency evaluation policy, the advantages of medium borosilicate will be reflected, and the focus of market demand will shift to medium borosilicate tube bottle making and medium borosilicate ampoule products. (3) With the continuous promotion of consistency evaluation and centralized purchase, the industry concentration will be improved, and the company, as a leading pharmaceutical glass enterprise, will fully benefit.
Investment advice and valuation
We adjusted the profit forecast: the company’s revenue in 2022 / 23 / 24 is expected to be RMB 4.456/51.25/5.893 billion. Considering the price of raw materials and other factors, the net profit attributable to the parent company in 2022 / 23 will be reduced by 22% / 25% from RMB 876 / 1073 million to RMB 680 / 805 million. The current share price of the company is 18 / 15x corresponding to the PE in 22 / 23, maintaining the rating of “overweight”.
Risk tips
Consistency evaluation and other policy implementation effects and the risk that China’s market demand growth is lower than expected.
Upstream costs such as raw material prices continue to rise, which will affect the profitability of the company.
