\u3000\u3000 Lushang Health Industry Development Co.Ltd(600223) (600223)
Biomedicine + ecological health two wheel drive, with "buy" rating for the first time
Lushang Health Industry Development Co.Ltd(600223) started from the real estate business and gradually cut into the fields of medicine, cosmetics and raw materials. At present, a two wheel drive layout of biomedicine + ecological health has been formed. We believe that the pharmaceutical and raw material business of the company's biomedical sector is highly competitive, the cosmetics business has been cultivated for many years, and high-quality large single products drive high growth. The introduction of war investment empowerment is expected to open up further growth space in the future. We expect the net profit attributable to the parent company from 2021 to 2023 to be RMB 741 / 947 / 1111 million, corresponding to EPS of RMB 0.73/0.94/1.10, and the current share price corresponding to PE of 16.3 / 12.8 / 10.9 times. The company is given a "buy" rating for the first time.
Cosmetics business has been deeply cultivated for many years; Drug and raw material business is stable
In 2018, the company acquired Freda Pharmaceutical Group to cut into the field of medicine and cosmetics, and in 2019, it acquired Shandong focus Freda (60% equity) overweight hyaluronic acid raw materials. Cosmetics: through the "hyaluronic acid + brand" brand lotus and the main brand of "micro ecological skin care" brand, Dr. Phill has cut into the high functional Racecourse of functional skin care products. Dr. Ph. D. has built up the excellent quality products such as anti gravity fermented water emulsion set, precursor essence liquid and so on, which has promoted the company's cosmetics business to grow at a high rate, and realized sales income of 993 million yuan (+174.6%) in the first three quarters of 2021. Drugs: the company distributed the drug sector through Mingren Freida and BOSLUN Freida (joint venture), covering traditional Chinese medicine, chemical drugs and health food, ophthalmology and orthopedic hyaluronic acid products, and recovered rapidly after the epidemic (2021h1 year-on-year + 45.4%). Raw materials: focus Freida's sales of hyaluronic acid raw materials ranks second in the world (accounting for 13% in 2019). By 2021h1, the production capacity has reached 420 tons / year, with obvious capacity advantages.
The cosmetics business of biomedical sector is expected to grow rapidly with the introduction of war investment; Positive transformation of ecological health sector
Biomedical sector: (1) cosmetics: in December 2021, the company introduced war investment and landed, with a strong lineup of strategic investors, including Tencent venture capital, Hangzhou Onechance Tech Corp(300792) and so on (with a total shareholding of 16.9%), which is expected to enable the development of the company's cosmetics business in many aspects, and high growth can be expected in the future. (2) Raw materials: the company's annual output of 520 tons of medical grade sodium hyaluronate and derivative projects are under construction, and the production capacity is expected to be continuously released in the future; At the same time, China's hyaluronic acid has been approved as a new food raw material, and the company's active layout is expected to open up new growth space. (3) Drugs: with the recovery of the epidemic situation, it is expected to achieve steady growth. Ecological health sector: the company actively transformed, and the proportion of property and hotel revenue continued to rise.
Risk tips: the risk of policy changes in the real estate industry, intensified competition in the cosmetics industry, loss of core personnel, etc.
