Renhe Pharmaceutical (000650): Goodwill impairment drags profits, OTC revenue grows rapidly

Renhe Pharmaceutical (000650): Goodwill impairment drags profits, OTC revenue grows rapidly

Event: The company released its 18-year annual report. The income, net profit attributable to mothers and net profit attributable to mothers were 44.

03 billion, 5.

06 billion and 4.

9.3 billion, double +14 respectively.

56%, +33.

20% and +34.

71%, lower than us 5.

The 3.3 billion forecast is mainly due to the impairment of goodwill on pharmacy websites.

The profit distribution plan is RMB 1 for every 10 shares.

Opinions are as follows: 18Q4 impairment of goodwill affects profits, and OTC income has improved.

In 18Q4, the net profit attributable to mothers and the net profit after deductions to mothers were changed to -5.

46%, -6.

61% and -12.

19%.

The 18Q4 asset impairment was 4884 million, of which the impairment of goodwill related to pharmacy network was about 42 million, which was the main factor affecting the current period and 18-year profit.

We estimate that the year-on-year decline in 18Q4 revenue was mainly due to the decline in pharmacy network revenue.

However, at the same time, OTC revenue growth has improved (Jiangxi Renhe Pharmaceutical’s 18H2 revenue increased by about + 3%). We estimate that Jiangxi Renhe Pharmaceutical’s high 17Q4 base and 18H1’s completion are better, and 18H2’s appropriate cargo control.

Over 18 years of over-the-counter trading income?
25%, much higher than the growth in the number of OTC industries.

The three largest commercial subsidiaries of the company, Renhe China, Jiangxi Renhe Pharmaceutical and Renhe Zhongjin have increased their revenues by + 24%, + 15% and + 18%, respectively.

Overall we estimate the company’s OTC revenue to increase + 20%?
25%, of which the total growth rate of 17 gold single products increased by + 40%?
+ 50%, the overall scale is close to 10 billion.

We estimate that the revenue of self-produced products will grow 25% -30%, and the revenue of OEM products will grow 15%?
20%.

The revenues of the top 5 manufacturing companies increased by 24% each year and their profits increased by + 56%.

The company’s five production subsidiaries, Jiangxi Pharmaceutical, Pharmaceutical Du Renhe, Kangmei Pharmaceutical and Health Products, Yaodu Camphor and Tonggu Renhe, increased their total revenue by + 24%, and their profits increased by + 56%. We estimate that it is mainly the company’s strategy of giving priority to self-productsLater, from the sales of products, the expansion of production volume, the increase in gross profit margin caused by the maximum increase in industrial capacity.

In terms of financial indicators: 18-year overall gross margin growth rate +4.

The 05 single, mainly high-margin 杭州夜网论坛 OTC product sales increased, and low-margin pharmacy business (pharmacy network) decreased; the sales expense ratio was 17.

67%, ten years +1.

56 single, mainly due to the company’s higher sales expense ratio OTC business revenue accounted for an increase in the proportion; management expense ratio6.

50% every year -0.

80 singles are estimated to be due to scale effects; financial expenses were -3156 million US dollars, compared to -14.87 million in the same period last year, mainly due to the increase in index revenue, but considering the company’s 19 years of investment in new camphor plants and the cannabis industry, 19Annual interest income may decline.

R & D expenditure was 51.17 million yuan, +87 in ten years.

11%. In 18 years, the company carried out research work on 16 classic famous recipes and R & D on the consistency evaluation of 6 key varieties.

The asset impairment loss was 48.84 million yuan, of which the goodwill impairment was about 42 million yuan.

Operating net cash flow 5.

6.9 billion, ten years +14.
38%.

Diversified in the industrial cannabis industry.

On April 22, the company and the Qiqihar Municipal Government of Heilongjiang and Fengtai Fuqi signed the “Renheyuan Industrial Cannabis Comprehensive Utilization Industry Demonstration Project Cooperation Framework Agreement”.

The company established a joint venture with Fengtai Fuqi with a total project investment of 10.
800 million yuan, of which the first phase investment 1.

0.8 billion yuan.

According to the framework agreement, the joint venture company will start construction of an industrial cannabis plantation demonstration base in May 2019, and agreed with the municipal government that the 2020 plantable land reserve will exceed 20,000 acres.

Maintain “Highly Recommended-A” rating.

We estimate that the company’s net profit growth attributable to mothers will be 26% / 20% / 17% in 2019-2021, and the corresponding EPS will be 0.

51/0.

62/0.

72 yuan.

As a leading OTC company, the company has a rich variety and strong brand power. After the formation of the team, we ushered in the era of OTC terminal control and sales, and our sales efforts maintained rapid growth. After the expansion of the product revenue ratio, the profitability has increased significantly. The current corresponding 19 yearspe is estimated to be around 17x, maintaining the “strongly recommended-A” rating.

Risk warning: M & A progress is not up to expectations, product sales are up to expectations, product quality and regulatory risks.