\u3000\u30 China Baoan Group Co.Ltd(000009) 63 Huadong Medicine Co.Ltd(000963) )
Event: the company released the annual report of 2021 and the first quarterly report of 2022: in 2021, the company achieved a revenue of 34.563 billion yuan, a year-on-year increase of 2.61%; The net profit attributable to the parent company was 2.302 billion yuan, a year-on-year decrease of 18.38%; Net profit after deduction of non return to parent was RMB 2.189 billion, a year-on-year decrease of 9.91%. In the first quarter of 2022, the company achieved a revenue of 8.933 billion yuan, a year-on-year increase of 0.40%; The net profit attributable to the parent company was 704 million yuan, a year-on-year decrease of 7.12%; Net profit deducted from non parent company was 699 million yuan, with a year-on-year increase of 0.39%.
Event comments:
The company’s overall performance is expected to stabilize, and the single quarter year-on-year index will become positive in 2021. In 2021, affected by factors such as centralized purchase and medical insurance negotiation price reduction, the profit side of the company fell higher than expected year-on-year (we expect the net profit attributable to the parent company to be – 16.27% year-on-year). From the data of the single quarter, the net profit deducted from non parent company is in a good state. From 2021q1 to 2022q1, the net profit deducted from non parent company is -18.80% / – 9.39% / – 8.99% / 7.04% / 0.39% respectively year-on-year.
The pharmaceutical business has developed steadily. In 2021, the pharmaceutical business of the company actively innovated its business and service model, and achieved an annual sales revenue of 23.115 billion yuan, a year-on-year increase of 5.94%. The company has always adhered to its traditional business in Zhejiang, focusing on the introduction of new products and the satisfaction rate of orders, improving market share from the two dimensions of upstream production enterprises and downstream end customers, innovating business, focusing on agency, e-commerce and high-end Tripartite logistics, cultivating new profit growth points, creating cold chain gold business cards, reshaping the core competitiveness of business in East China, and comprehensively restoring its performance to the pre covid-19 level, We will continue to maintain the industry status of the best pharmaceutical service provider in Zhejiang Province and the industry ranking at the forefront of the country.
The pharmaceutical industry sector is under pressure in stages, and continues to increase R & D investment to create an open R & D ecosystem. In 2021, the core subsidiary of the company’s pharmaceutical industry, China, the United States and East China, was affected by factors such as the national centralized drug purchase of some products and the negotiated price reduction of medical insurance, realized an operating revenue of 10.109 billion yuan, a year-on-year decrease of 8.43%, and a net profit of 2.092 billion yuan, a year-on-year decrease of 10.32%. In the face of pressure, the company continued to strengthen the construction of innovation platform and resource integration. In recent three years, the average annual R & D investment in the pharmaceutical industry accounted for more than 10% of the operating revenue of the pharmaceutical industry. 1) Innovative R & D focuses on the three core treatment fields of tumor, endocrine and autoimmunity, and differentiates the layout of ADC ecosystem. By the end of 2021, the company has reserved nearly 40 new drugs and biological analogues, of which 5 products are in phase III clinical stage and 3 products are in phase II clinical stage. The indication of GLP-1 receptor agonist for diabetes has been submitted for listing and is expected to be approved for listing within this year. 2) There are 45 R & D projects in the field of industrial microbiology, including 7 special functional chemicals, 23 pharmaceutical APIs and high-end intermediates, 12 great health and medical beauty raw materials and 3 biomaterials.
Medical beauty business is growing rapidly, and the promotion performance of Chinese medical beauty products is outstanding. In 2021, the company’s medical and beauty sector achieved an operating revenue of 1.002 billion yuan, with a year-on-year increase of 123.28%, of which the international medical and beauty revenue was 666 million yuan, with a year-on-year increase of 108.51%, and the Chinese medical and beauty revenue was 367 million yuan, with a year-on-year increase of 182.82%. 1) In 2021, with the gradual liberalization of epidemic control measures in major markets such as Europe and the United States, the company’s international medical and American business achieved restorative growth in all markets. Among them, the European, Latin American and Asia Pacific markets performed better than expected and showed rapid growth, driving the overall revenue to maintain a rapid growth trend. In 2021, Sinclair (r including its subsidiary hightech) achieved an operating revenue of about 665 million yuan (76.07 million pounds), a year-on-year increase of 108.51%, and Sinclair’s own revenue increased by 79.24%; Among them, the core product of Sinclair is ellans é ® The global market has achieved 99% growth. Maili, two new fillers, was launched in the European market in 2021 ® Series and lanluma ® Also achieved rapid growth; Hightech, a wholly-owned subsidiary of Sinclair, also maintained rapid growth in frozen fat dissolving, laser and RF products. 2) In terms of China’s medical beauty business, in 2021, the company established Xinkeli aesthetics as the main operator of China’s medical beauty business, and launched China’s first imported regenerative medical beauty product ellans é certified by the State Food and Drug Administration for class III medical devices in August ® Yeon Shi. With multiple advantages such as immediate filling, long-term maintenance and natural metabolism, yiyanshi meets the plastic beauty needs of customers seeking beauty upgrading. It is deeply recognized by experts in the industry and loved by professional doctors and the majority of beauty seekers. It has become a leader in the “regeneration era” in the field of medical beauty injection. In 2021, Xinkeli aesthetics achieved an operating revenue of 185 million yuan, achieved profits in the year of operation, and exceeded the annual business objectives. In 2022q1, Xinkeli aesthetics achieved an operating revenue of 157 million yuan, showing a strong profitability, which has completely exceeded the income scale of medical beauty agency business in Ningbo, East China and its contribution to the profits of the company in the same period last year. At present, the number of Xinkeli aesthetic cooperation hospitals has exceeded 400, and the number of trained and certified doctors has exceeded 700. 3) The company’s medical beauty sector has 35 “minimally invasive + non-invasive” medical beauty international high-end products, including 21 products listed at home and abroad and 14 global innovative products under research. The product portfolio covers non-surgical mainstream medical beauty fields such as facial filling, catgut embedding, skin management, body shaping, hair removal and private repair. A comprehensive product cluster has been formed, and the number and coverage of products rank in the forefront of the industry. Many potential products are expected to be listed and sold at home and abroad after 2022, which will bring new growth momentum to the company’s global medical and American business.
In depth layout of industrial microbial market. In 2021, the company formulated a strategic plan for the industrial microbiology sector based on the key technology system for the R & D and production of microbial products built by deep ploughing the industrial microbiology industry for more than 40 years, as well as China’s leading deep technological accumulation and industrial advantages in this field. This sector mainly includes three industrialization platforms: Hunda biology, a holding subsidiary, Meiqi health, a joint venture, and Huachang high tech. In 2021, the industrial microbiology sector achieved a total revenue of 418 million yuan, with a year-on-year increase of 69.2%. It has 23 authorized patents and 59 pending patents.
In the first quarter of 2022, the performance continued to stabilize and improve. In the first quarter of 2022, the company realized an operating revenue of 8.933 billion yuan, including 2.791 billion yuan in China, the United States and East China, a year-on-year decrease of 9.73% and a month on month increase of 19.45%; After deducting non recurring profits and losses, the net profit was 580 million yuan, a significant increase of 48.08% month on month.
Investment suggestions:
We expect that the net profit attributable to the parent company from 2022 to 2024 will be RMB 2.807/3.508/4.240 billion respectively, and the EPS will be RMB 1.60/2.00/2.42 respectively. The current share price corresponds to 20 / 16 / 13 times of PE. Considering the stable development of the company’s pharmaceutical business sector, the performance of the pharmaceutical industry is expected to stabilize, the varieties under research in the innovative drug sector are progressing smoothly, the in-depth layout and firmly optimistic about industrial microorganisms, the sustained and rapid development of medical and American business and the rapid volume of products, we maintain its “buy” rating.
Risk tips:
Pharmaceutical policy risk, the progress of new drug research and development and listing is less than expected, and the risk of product price reduction.
