\u3000\u3 Shengda Resources Co.Ltd(000603) 233 Dashenlin Pharmaceutical Group Co.Ltd(603233) )
Event: 1) the company released its 2021 annual report, and achieved an operating revenue of 16.759 billion yuan during the reporting period, with a year-on-year increase of 14.92%; The net profit attributable to the parent company was 791 million yuan, a year-on-year decrease of 25.51%; Deduct non net profit of 718 million yuan, a year-on-year decrease of 29.77%. 2) The company released the first quarterly report of 2022 and achieved 4.677 billion yuan during the reporting period, with a year-on-year increase of 15.22%; The net profit attributable to the parent company was 384 million yuan, a year-on-year increase of 12.82%.
Repeated outbreaks and store expansion have led to phased pressure on performance in 2021, which is expected to recover quarterly in 2022. In 2021, Q4 achieved a revenue of 4.404 billion yuan (year-on-year + 7.67%) and a net profit attributable to the parent company of – 27 million yuan (year-on-year – 123.92%), mainly due to the decline of store passenger flow caused by epidemic prevention policies and the loss in the early stage of new stores. The Q1 performance in 2022 is in line with expectations, and the revenue side has improved significantly. It is optimistic that it is expected to return to the normal growth track in 2022.
Chinese and Western patent medicines grew brightly and their profitability remained stable. In 2021, the revenue of Chinese and Western patent medicines, Chinese ginseng medicinal materials and non drugs was 11.353 billion yuan (+ 25.05%), 2.461 billion yuan (+ 13.40%) and 2.477 billion yuan (- 17.79%) respectively. The decline in non drug revenue was mainly due to the decline in the demand for epidemic prevention materials. In 2021, the company’s overall gross profit margin was 36.41%, a year-on-year decrease of 0.69pp, mainly due to the increase in the proportion of wholesale business with low gross profit margin. In Q1 2022, the overall gross profit margin rebounded to 39.24%, of which the gross profit margin of retail business was 41.30% (year-on-year + 1.93pp), which is expected to be caused by the change of income structure. In 2021, the three expense rates rebounded, of which the sales expense rate was 25.5%, with a year-on-year increase of 1.66pp, and the store promotion activities gradually resumed in 21 years; The management expense ratio and financial expense ratio were 5.8% and 1.0% respectively, increasing by 0.92pp and 1.10pp respectively, mainly due to the adjustment of the new leasing standards, the cost of convertible bonds and the impact of equity incentives.
Deeply plough South China and speed up the pace towards the whole country. In 2021, the company added 903 self built stores, 620 franchise stores, 748 M & A stores, and entered five provinces: Hunan, Hainan, Sichuan, Shandong and Chongqing; By the end of 2021, the company had 8193 chain stores (including 935 franchise stores). In 2021, the company conducted 32 mergers and acquisitions, including 24 newly signed mergers and acquisitions, involving 1029 stores (140 stores were not delivered). In 2021, the company achieved 96.67% and 54.93% high growth in operating revenue in Northeast, North and northwest regions (covering the new provinces of Hebei, Heilongjiang and Shaanxi in 2019) and central China market (covering Henan and Hubei), respectively. With the regional encryption, the profitability outside the province is expected to continue to improve.
The new retail business has achieved high growth, and the professional service ability has been continuously strengthened. By the end of 2021, the company’s o2o covered 7240 stores (accounting for 89%), and the sales of new retail business (o2o + B2C) increased by 87% year-on-year during the reporting period. By the end of the reporting period, there were 760 hospital side stores, with a year-on-year increase of 28%, including 133 DTP specialty pharmacies, and the professional service capacity continued to be strengthened.
Profit forecast and investment suggestions: the company is still in the period of accelerated expansion in the next three years. Considering that the uncertainty of the epidemic will affect the speed of opening stores and the climbing of new stores, it is expected that the company will realize operating revenue of 19.947 billion yuan, 25.021 billion yuan and 29.987 billion yuan from 2022 to 2024, with a year-on-year increase of 19%, 25% and 20%; The net profit attributable to the parent company was 920, 1111 and 1305 million yuan (1424 and 1809 million yuan before adjustment in 202223), with a year-on-year increase of 16.33%, 20.66% and 17.53%. The concentration of chain drugstore industry has increased and the outflow of prescriptions is accelerating. The company has accelerated its layout from South China to the whole country, with broad long-term space and maintained the “buy” rating.
Risk warning events: the risk of M & A integration not reaching the expectation, the risk of store expansion not reaching the expectation, and the risk of pharmaceutical policy disturbance.
