\u3000\u3 Shengda Resources Co.Ltd(000603) 939 Yifeng Pharmacy Chain Co.Ltd(603939) )
Event:
1) the company released the annual report of 2021, and the operating income, net profit attributable to the parent and net profit deducted from non attributable to the parent were RMB 15.326888/859 billion respectively, with a year-on-year increase of + 16.60% / 19.42% / 20.30%; The net cash flow from operating activities was 2.15 billion yuan, a year-on-year increase of – 7.71%. The basic earnings per share is 1.25 yuan. The performance is in line with market expectations.
2) the company issued the profit distribution plan for 2021, and distributed cash dividends of 3 yuan (including tax) to all shareholders for every 10 shares. It is expected to distribute cash dividends of 215582919 yuan (including tax). The dividend payment rate was 24.28%.
3) the company released the first quarterly report of 2022, and the operating revenue, net profit attributable to the parent and net profit deducted from non attributable to the parent were 4.148/2.72/266 billion yuan respectively, with a year-on-year increase of + 14.29% / 12.82% / 14.12%; The net cash flow from operating activities was 648 million yuan, a year-on-year increase of + 8.86%. The basic earnings per share is 0.38 yuan. The performance is in line with market expectations.
Comments:
21q4 and 22q1 achieved steady growth under a high base, with repeated epidemics and business resilience. The company achieved a revenue of 4.388 billion yuan in 21q4, a year-on-year increase of + 18.35%; The net profit attributable to the parent company was 192 million yuan, a year-on-year increase of + 12.46%. 22q1 achieved a revenue of 4.148 billion yuan, a year-on-year increase of + 14.29%; The net profit attributable to the parent company was 272 million yuan, a year-on-year increase of + 12.82%. Although the national epidemic is sporadic in many places, the company has achieved steady growth in performance under a high base by virtue of its development strategy focusing on expansion and its fine, standardized and systematic operation and management capabilities. The gross profit margin of sales in 2021 was 40.35%, with a significant year-on-year increase of 2.37pp; The net interest rate was 6.46%, down 0.13pp year-on-year. The gross profit margin of 22q1 sales was 40.95%, a year-on-year increase of 0.41pp, and the net profit margin was 7.28%, a year-on-year decrease of 0.15pp. The continuous improvement of gross profit margin is due to the adjustment of product structure, while the slight decline of net profit margin is mainly due to the rise of sales and management expense rate caused by the impact of the epidemic and the acceleration of store expansion. In terms of business structure, 22q1 retail business realized a revenue of 3.802 billion yuan, a year-on-year increase of + 13.64%; The wholesale business achieved a revenue of 209 million yuan, a year-on-year increase of + 34.81%, and the franchise business achieved rapid growth.
The store focuses on expansion, the momentum of joining is strong, and the quality of regional expansion is high. By the end of 2021, the total number of stores of the company was 7809 (6877 Direct stores, year-on-year + 28%; 932 franchise stores, year-on-year + 47%), a net increase of 1818 stores over the previous year, including 1197 self built stores, 425 M & A stores, 297 new franchise stores and 101 closed stores. The company adheres to intensive cultivation and encryption in advantageous areas. By the end of 2021, the number of stores in central and southern China, East China and North China increased by 966 / 738 / 114 respectively compared with the beginning of the year, and the speed of expanding stores in North China slowed down. In 2021, the revenue of central and southern China, East China and North China increased by 17.08% / 15.36% / 9.92% respectively year-on-year. The corresponding gross profit margin has been improved rapidly, and the operation quality is stable and solid.
The online o2o business is developing rapidly, and offline companies are actively undertaking the outflow of prescriptions. In 2021, the company’s online business achieved a sales revenue of 1.128 billion yuan, a year-on-year increase of 64%, and the proportion of total revenue increased rapidly from 5.23% in 2020 to 7.36%. In 2021, o2o achieved sales revenue of 781 million yuan, a year-on-year increase of 95%; B2C achieved a sales revenue of 347 million yuan, a year-on-year increase of 21%. By the end of 2021, the company had more than 6600 o2o online direct stores, with the number accounting for 96% from 82% at the end of 2020. The number of 24-hour stores has increased from more than 300 at the end of 2020 to 448. Offline, the company continues to improve professional pharmaceutical service management, deepen strategic cooperation with hospitals and pharmaceutical companies, and actively undertake the outflow of prescriptions. By the end of April 2022, the company has more than 500 hospital side stores and 237 DTP specialty pharmacies, including 130 dual channel medical insurance stores, more than 1000 overall medical insurance pharmacies for chronic diseases, 200 drugs negotiated under national medical insurance agreements, nearly 650 varieties of hospital prescriptions, and has established in-depth partnership with more than 150 suppliers.
Vertically extend the industrial layout, industrial and commercial cooperation and business innovation, and seek differentiation. In April 2022, the company plans to transfer Jiuzhitang Co.Ltd(000989) 5% of the equity with a cash agreement of RMB 428 million, becoming the fourth largest shareholder of the target company. Meanwhile, it plans to acquire 51% equity of Hunan Jiuzhitang Co.Ltd(000989) Pharmaceutical Co., Ltd. with 204 million yuan in cash Jiuzhitang Co.Ltd(000989) brand has been established for more than 300 years. It is a famous “Chinese time-honored brand”, and its business covers traditional Chinese medicine industry and pharmaceutical business. Hunan Jiuzhitang Co.Ltd(000989) is a holding subsidiary of Jiuzhitang Co.Ltd(000989) engaged in drug retail and wholesale business. At present, it has 190 direct chain stores and 359 franchise stores, all located in Hunan Province. In 2021, the revenue was 1.044 billion yuan and the net profit was 8.42 million yuan. After the completion of business integration, the company expects that the sales volume of Hunan Jiuzhitang Co.Ltd(000989) in the first year will not be less than 1.137 billion yuan and the net profit will not be less than 18.4 million yuan. In addition, the relevant construction of the company’s hengxiutang traditional Chinese medicine factory has been fully completed, has obtained the national certification and drug production license, and will spare no effort to build a characteristic traditional Chinese medicine decoction piece processing industry. The company continues to expand upstream industries, build high brand and commodity differentiation advantages, and optimize the supply chain system. In addition, by acquiring Hunan Jiuzhitang Co.Ltd(000989) , the company will not only improve the comprehensive strength of advantageous regions, but also expand inside and outside the province with the brand of ” Jiuzhitang Co.Ltd(000989) ” to build a retail chain pharmacy with traditional Chinese medicine characteristics. Industrial and commercial cooperation, complementary advantages, the future can be expected.
Profit forecast, valuation and rating: the company is a leading company with outstanding fine management ability in retail pharmacies, relying on self construction and M & A to achieve rapid expansion, strategic layout and business model innovation. Considering that the company’s key areas in East China are affected by the epidemic and the expansion plan is accelerated, the prediction of the company’s net profit attributable to the parent company from 2022 to 2023 is slightly reduced to 1.122/1.372 billion yuan (3.3% / 7.5% lower than the previous prediction), and the prediction of the net profit attributable to the parent company in 2024 is 1.702 billion yuan, and the current price corresponding to PE is 24 / 19 / 16 times. Maintain the “buy” rating.
Risk warning: the expansion progress of stores is less than expected; M & A integration is less than expected; The epidemic situation repeatedly exceeded expectations; The impact of centralized purchase and other policies.
