\u3000\u3 Bohai Water Industry Co.Ltd(000605) 266 Yunnan Jianzhijia Health-Chain Co.Ltd(605266) )
Event: on the evening of April 27, 2022, the company released its annual report for 2021. During the reporting period, the company realized a revenue of 5.235 billion yuan (+ 17.21%) and a net profit attributable to the parent company of 301 million yuan (+ 19.66%). Among them, Q4 realized a revenue of 1.568 billion yuan (+ 22.53%), and a net profit attributable to the parent company of 104 million yuan (+ 30.19%).
Meanwhile, the company released the first quarterly report of 2022. During the reporting period, the company realized a revenue of 1.45 billion yuan (+ 24.28%), and a net profit attributable to the parent company of 29 million yuan (- 54.64%).
In 2021, the performance of the whole year and Q4 grew steadily, and the repeated epidemic and the loss of new stores dragged down the performance of 2022q1. 2021q4 company’s performance is bright, and the annual growth is in line with expectations. In 2022q1, the net profit attributable to the parent company decreased by 55% year-on-year, mainly because the company’s new stores and secondary new stores accounted for 34.52%. The cultivation cycle of secondary new stores became longer and the loss increased due to the repeated epidemic in the business area. In addition, the financial expenses increased due to the change of leasing standards. In 2021, the company achieved a gross profit margin of 35.8%, a year-on-year increase of 2.14pct, and a net profit attributable to the parent company of 5.72%, a year-on-year increase of 0.14pct. In 2022q1, the company achieved a gross profit margin of 33.49%, a year-on-year decrease of 0.69pct, and a net profit margin of 1.96%, a year-on-year decrease of 3.5pct.
By product, the core varieties have achieved steady growth. In 2021, the company realized revenue of 3.26 billion yuan (+ 21%), gross profit margin of 29.8% (+ 1.1%), with steady growth, including revenue of 1.53 billion yuan (+ 21%), gross profit margin of 21.4% (+ 2.1%) for prescription drugs, revenue of 1.73 billion yuan (+ 21%) for over-the-counter drugs and gross profit margin of 37.3% (+ 0.14%). The revenue of medical devices was 530 million yuan (- 8.9%), and the gross profit margin was 43.5% (+ 4.1%). The sales of traditional Chinese medicine and health food with high gross profit margin increased by 18.2% and 18.6% respectively. In 2022q1, Chinese and Western patent medicines achieved revenue of 951 million yuan (+ 29%), gross profit margin of 28.5% (+ 0.21%), with rapid growth, including prescription drugs achieved revenue of 434 million yuan (+ 24.6%), gross profit margin of 19.3% (- 0.14%), over-the-counter drugs achieved revenue of 517 million yuan (+ 32.9%), and gross profit margin of 36.2% (+ 0.01%). The revenue of medical devices is 150 million yuan (+ 16.5%), and the gross profit margin is 45% (+ 0.25%). The sales of traditional Chinese medicine and health food with high gross profit margin increased by 22.8% and 26.2% respectively. In addition, the company has made great efforts to develop online business. As of 2022q1, the proportion of the company’s online business revenue has increased from 10.3% in 2020 to 20.34%.
Stores continued to expand, the county market in Yunnan continued to penetrate, and Sichuan, Chongqing and Guangxi continued to increase the core market penetration. By the first quarter of 2022, the company had 3134 stores, with a year-on-year increase of 47.14%. In Q1 of 2022, there were 90 new stores, including 99 self built stores and 9 closed stores. In 2021, the company added 914 stores, including 597 self built stores, 360 purchased stores and 43 closed stores. At present, the coverage rate of the company’s stores in the county market in Yunnan has reached 81%. At the same time, the company continues to increase the core market penetration in the Sichuan, Chongqing and Guangxi markets and replicate the Yunnan model. In 2021, there were 559 stores in Sichuan, Chongqing and Guangxi, with a year-on-year increase of 53.15%.
The proportion of stores in the cultivation period and the initial stage of M & A integration is relatively high, waiting for the improvement of store age structure to bring high performance growth. As of Q1 2022, 46.01% of the stores in the company’s cultivation period and the initial stage of M & A integration, including 34.52% of the company’s new stores and secondary new stores, most of which are in the cultivation period. 360 stores were acquired in 2021, accounting for 11.49%, of which 78% were acquired in the second half of 2021, most of which were in the early stage of integration with slow growth. With the gradual maturity of stores during the cultivation period and the completion of M & a store integration, the overall performance of the company is expected to accelerate growth.
Investment suggestion: we estimate that the net profit attributable to the parent company from 2022 to 2024 will be RMB 343 / 419 / 531 million respectively, and the corresponding PE will be 11 / 9 / 7 times respectively. The company is the leader of regional chain drugstores in Yunnan. The county penetration of Yunnan continues to improve, and actively expands to Guangxi, Sichuan and Chongqing. The scale effect is gradually reflected, the operating efficiency continues to improve, and the company is rated as “buy”.
Risk warning: competition intensifies risk; Integration is less than expected risk; Policy risk.
