Liuyao shares (603368): annual report tracking performance to maintain rapid growth and diversified distribution efforts
Core points: 1.
Event: The company released its 2018 annual report.
The company achieved revenue of 117 in 2018.
15 ppm, an increase of 24 in ten years.
00%; achieve net profit attributable to shareholders of listed companies 5.
28 ppm, an increase of 31 in ten years.
59%; net profit deducted from non-attributed mothers5.
29 ppm, an increase of 31 in ten years.
The net cash flow generated by the company’s operating activities was 22.3 million yuan. It is estimated that it changed from negative to positive last year, mainly due to the company’s enhanced collection work and the increase in cash-settled payment.
The company’s performance has grown rapidly and all three sectors have performed well.
The company’s wholesale business realized revenue of 102.
24 ppm, an increase of 20 in ten years.
04%, accounting for 87% of the company’s total revenue.
28%; gross profit margin of wholesale business 8.
11%, a year increase of 0.
Revenue from retail business13.
0.6 million yuan, an increase of 50 in ten years.
54%, accounting for 11 of the company’s total revenue.
15%; gross profit margin of retail business 26.
40%, increase by 1 every year.
Revenue from the pharmaceutical industry sector1.
63 ppm, a 57-year increase of 57.
14%, accounting for 1 of the company’s total revenue.
39%; gross profit margin of the pharmaceutical industry 43.
39%, an increase of 21 per year.
Benefiting from the increase in gross profit margin, the company’s profitability improved.
The company achieved gross profit margin of 10 in 18 years.
76%, an increase of 1 per year.
15pp, mainly due to the increase in the proportion of pure sales in the wholesale business, the increase in high-margin varieties in the retail business, and the increase in the proportion of industrial sector revenue.
The company’s three fees as a percentage of revenue have increased, of which the sales expense ratio is 2.
39%, an increase of 0 every year.
25pp; overhead cost ratio 1.97%, increasing by 0 every year.
31pp; financial expense ratio is 0.
54%, an increase of 0 every year.
The increase in management expenses and sales expenses was mainly due to the increase in retail pharmacies in the main categories, the corresponding increase in labor costs, rents and decoration expenses; the increase in financial expenses was mainly due to the company’s reduced fixed-income financing in 2017, which resulted in a smaller financial expense base in 17 years.
As the gross margin increased more than the expense ratio, the company achieved a net profit margin of 4.
85%, a year to raise 0.
In terms of quarters, the company’s Q1-Q4 revenue exceeded 25 growth rates.
32% / 23.
06% / 23.
72% / 24.
02%, stable growth performance.
The company’s Q1-Q4 gross profit margins were 9 respectively.
63% / 10.
82% / 10.
38% / 12.
14%, the net interest rate is 4 respectively.
35% / 5.
40% / 4.
51% / 5.
15%, of which the gross profit margin of Q4 increased mainly due to the acquisition of Wantong consolidation.
Our Analysis and Judgment (I) The company’s pharmaceutical business area leader is becoming more and more stable. The company’s business sector is growing faster than the industry level, and the company’s regional leader is gradually increasing.
At present, the company’s business is dominated by pharmaceutical wholesale and retail, and its annual revenue growth rate is 24%, which is significantly higher than the industrywide level of pharmaceutical commerce.
As the regional leader in pharmaceutical wholesale and retail in Guangxi, the company has a competitive advantage in the context of increasing industry concentration and continues to maintain rapid growth.
Benefiting from the integration pressure of the “two-vote system”, the company continued to integrate the Guangxi wholesale market.
The company’s wholesale business accounted for 87% of the company’s total revenue.
28%, an increase of 20 per year.
The wholesale business of the company continues to benefit from the integration advantages of regional leaders. At present, the company has established good business relationships with 100% of tertiary hospitals and more than 90% of secondary hospitals in Guangxi, and has basically achieved full coverage of middle and high-end hospitals in autonomous regions.
Benefiting from the trend of pharmacy chaining and the company’s “zero integration” advantage, the company’s retail business has developed rapidly.
The absolute retail industry chain rate has continued to increase, and the company has taken advantage of its regional advantage in Guangxi to quickly deploy retail pharmacies.
The company currently has 443 pharmacies, with a total increase of 173 in 18 years, and plans to increase about 150 in 19 years.
The company’s Guizhong Pharmacy ranks 27th among the top 100 pharmaceutical retail chains in China.
In addition, the company also uses the good cooperative relationship established between the wholesale business and hospital terminals to actively develop DTP pharmacies, hospital stores and e-commerce models.
(2) Optimization of the structure of the commercial sector, significant improvement in profitability The structure of the wholesale business continued to be optimized, and gross profit margin increased significantly.
In terms of business types, benefiting from the “two-vote system”, the low-margin transfer business is gradually replaced by high-margin direct sales, which effectively improves the profitability of the wholesale business.
In 2018, the company’s hospital direct sales business achieved revenue of 88.
6 ‰, an increase of 24% in ten years; the transfer business realized income 6.2 ‰, an average of 27% over a ten-year period; the direct sales business has a significant substitution effect on the transfer business.
The company’s 18-year wholesale business gross margin 8.
11%, ranking increased by 0 last year.
In terms of product structure, devices with higher gross profit margins have grown faster, which helps the company’s wholesale business to increase its gross profit margin.
At present, the company’s pharmaceutical business income is about 111.
US $ 200 million, of which the hospital direct sales segment was approximately US $ 8.4 billion, a year-on-year increase of 23%; the device business was approximately 4.
500 million, basically targeted at the hospital, with an annual increase of 55.
The company’s equipment business gross margin was 13.
34%, higher than the gross margin of the pharmaceutical business10.
Considering that the pharmaceutical business also has retail pharmacies and the pharmaceutical industry with higher gross profit, the difference between the gross profit margin of devices and pharmaceuticals will only be higher in the wholesale business.
In addition, the company actively expands the value-added services of the supply chain beyond the traditional distribution model. According to the traditional distribution business, the value-added services of the supply chain can effectively enhance the company’s profitability.
The company’s retail business layout has accelerated, and DTP pharmacy business has developed rapidly.
As the regional pharmaceutical business leader in Guangxi, the company has taken advantage of the pharmacy chain to transform its own “unification and integration” advantages and quickly and actively deploy retail business.
The wholly-owned subsidiary of the company’s retail business, Guizhong Grand Pharmacy, has directly maintained rapid growth in the number of stores and operating income.
In 2018, the number of self-built pharmacies exceeded 100, and the store layout was accelerated through acquisitions.
As of the end of the reporting period, Guizhong University Pharmacy owned 443 pharmacies (including the acquired pharmacies), of which 283 were medical insurance pharmacies, and it has completed pharmacy coverage in 14 core cities in Guangxi.
In the reporting year, the company’s pharmaceutical retail business increased by 50 compared with the same period of the previous year.
54%, much faster than the company’s overall revenue growth.
The company’s retail business gross margin reached 26.
Although the gross profit margin of DTP pharmacy prescription drugs will be low, thanks to the company’s strengthening of category management and structural adjustment, the Chinese medicine decoction pieces have grown rapidly, and the company’s retail gross profit margin is still higher than last year1.
The gross profit margin of the retail business is higher than that of the wholesale business. The proportion of the company’s retail business to total revenue has increased year by year, which has strengthened the company’s profitability.
Benefiting from the increase in the company’s gross profit margin, the company’s profitability has improved.
The number of reports, the company’s gross profit margin increased by 1.
15 up to 10.
76%. Although the management expense ratio, sales expense ratio and financial expense ratio have all been improved, the company ‘s net profit margin has increased by 0 due to the continuous increase in the gross profit margin.
32 up to 4.
The increase in the company’s financial expenses this year is mainly due to the company’s continued fixed increase in 17 years to address some of its capital needs. In 18 years, compared with 17 years, the company mainly financed debt financing, and the financial costs increased.
Considering that the overall interest rate is in a downward trend, it is expected that the pressure on the company’s financial expenses will be eased in the future.
(3) Diversified distribution efforts, large companies with potential for growth in the pharmaceutical industry have stepped into the upstream pharmaceutical industry, and cultivated new profit growth points.
The report summarizes that the company’s Xianzhu Chinese Medicine Technology Pieces achieved operating income of 11,259.
850,000 yuan, net profit 1,366.
870,000 yuan, an increase of 133 over the same period last year.
74%.The report summarizes that the company completed the acquisition of 60% equity of Vantone Pharmaceuticals.
In 2018, Vantone Pharmaceuticals achieved operating income of 16,510.
740,000 yuan, an increase of 33 in ten years.
51%, of which consolidated income contributed about 50 million yuan; net profit of 8639.
360,000 yuan, with an annual increase of 31.
The company ‘s joint venture with the Pharmaceutical Factory of Guangxi Medical University has completed the construction of the plant and the installation and debugging of facilities and equipment, and gradually started trial production of the product.
The company’s advantages in downstream channels can quickly promote the pharmaceutical industry’s pharmaceuticals, and the upstream and downstream synergy advantages of the industrial chain are obvious.
We expect the company’s pharmaceutical industry to rapidly increase volume, and the industrial sector will become a potential new growth point.
In addition, the company jointly invested with Shanghai Runda Medical Technology Co., Ltd. to establish Guangxi Liurun Medical Technology Co., Ltd. to develop the IVD market and jointly promote the regional inspection reagent business.
(4) The company’s estimate is relatively low. The improvement of the pharmaceutical business policy environment as of April 2nd, the company’s price-to-earnings ratio (TTM) is 15.
63. The median price-to-earnings ratio (TTM) of Shenwan’s third-level pharmaceutical industry is 23.
16. The company’s price-earnings ratio is lower than the industry median.
Considering that the company’s existing product structure is optimized, profitability is enhanced, and the pharmaceutical industry has great potential for future growth, we believe that the company’s current estimate is low and has investment value.
In addition, national policies have helped the pharmaceutical business reach its inflection point.
With the end of the implementation of the “two-vote system”, the impact on the industry’s interest rate has been eliminated, and the industry performance growth has reached an inflection point.
At the same time, the current pharmaceutical policy anticipates the pressure of reimbursement from pharmaceutical companies, and the recent centralized procurement policy has also focused on ensuring the speed of repayment to enterprises. We believe that there has been a problem of funding pressure for pharmaceutical businesses for a long time.Mitigation, and the industry’s operating environment improved.
As a lightweight regional leader in the industry, the company has investment value.
Investment recommendations The company’s performance is excellent, and we are optimistic about the company’s future development prospects.
First of all, we are highly optimistic about the prospect of the company merging the regional leader in Guangxi and conducting market integration.
The company’s advantages in Guangxi’s regional advantages have enabled it to integrate the wholesale market under the measures of “two-vote system”, and have a good relationship with hospitals as well as the advantages of “zero-integration integration” to vigorously expand the layout of chain drug stores.
Improvement, we are optimistic about the company’s business structure optimization to promote profitability.
With the help of the “two-vote system”, the company’s wholesale business was able to resume more direct sales business with higher gross profit, while the device business with higher gross profit margins grew rapidly; the company’s retail business benefited from category management, and the proportion of Chinese medicine decoction pieces increased to drive gross profit marginPromotion.
In the end, we are optimistic about the company’s industrial layout. In addition to the increased production capacity of Xianzhu Traditional Chinese Medicine Technology Decoction Pieces, the company has also completed the acquisition of Wantong Pharmaceutical. The company’s pharmaceutical industry products take advantage of the company’s overall industrial chain layout to rapidly advance the volume.
We are optimistic that the company’s future performance will maintain rapid growth. It is estimated that the net profit attributable to mothers will be 6 in 2019-2021.
79 trillion, corresponding to EPS 2.
55 yuan, corresponding to PE is 11.
Maintain the “Recommended” level.
Risks suggest that the wholesale market integration is less than expected, the chain drug store layout is less than expected, and the volume of industrial products is less than expected.