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Jiankang Yuan (600380) Quarterly Report Commentary: Leading Respiratory Company, Waiting for the Blossoming
Published Time：
2020-04-27
Solid performance
In 1Q20, the company achieved operating revenue of 3.187 billion yuan (-4.63% yoy), net profit attributable to the parent company of 280 million yuan (-8.39% yoy), and non-net profit of 281 million yuan (+1.66% yoy). The negative growth rate of the parent company's net profit is mainly due to the reduction of government subsidies (19.7 million yuan vs. 197.495 million yuan in 1Q19) and the decrease in net income from changes in fair value (-11.38 million yuan vs. 39.2 million yuan in 1Q19). Despite the high base in 1Q19 and the impact of the epidemic in 1Q20, the company still achieved positive growth in non-net profit. Considering: 1) Lizhu Group's testing kits have gone global; 2) The epidemic has affected the supply of raw materials, leading to price increases; 3) Budesonide is about to be approved, and the company's annual profit growth rate is expected to reach 25%, we maintain our EPS forecast of 0.56/0.65/0.78 yuan for 2020-2022, maintain our target price of 15.29-17.08 yuan (corresponding to a 2020 PE of 27.3-30.5x), and maintain our buy rating.
Operating indicators remained basically stable during the epidemic, and the financial expenses for loan repayment decreased.
1) In 1Q20, the company's gross profit margin was 64.7%, down 1.9 percentage points year-on-year, and the net profit margin decreased by 0.3 percentage points, remaining basically stable overall; 2) In 1Q20, the company's operating net cash flow decreased by 13.2% year-on-year; 3) The company has established three major R&D platforms for respiratory, monoclonal antibodies, and microspheres. R&D expenses in 1Q20 were 161 million yuan, basically remaining flat year-on-year; 4) In 1Q20, loan repayments led to a decrease in financial expenses (-26.03 million yuan vs. 23.74 million yuan in the same period last year).
Significant price increase of raw materials, promising revenue growth in 2020
1) In 1Q20, Lizhu Group achieved a non-net profit of 403 million yuan (+22.6% yoy). Considering the full production and sales of colloidal gold test kits, we expect Lizhu Group's annual profit growth rate to reach 25%; 2) 7-ACA was at a low price in January-February 2020 (350 yuan/kg vs. 440 yuan/kg in the same period last year), dragging down the performance in 1Q20. In March, it jumped to 450 yuan/kg (1Q19 average 440 yuan/kg). Considering the global epidemic situation, we expect the high price to be maintained for a relatively long time, achieving a net profit of approximately 250 million yuan for the whole year; 3) In 1Q20, meropenem powder maintained rapid growth (over 30%), while preparations remained basically flat. We expect steady growth throughout the year. Considering the increase in the volume of Lizhu Group's test kits, the price increase of 7-ACA, and the gradual increase in the volume of respiratory products, we expect the company's annual net profit attributable to the parent company to reach 25%.
Respiratory pipeline creates upward space
The company is a leading domestic respiratory company, with multiple leading blockbuster products: 1) Compound ipratropium bromide inhalation solution was approved for listing in April 2019, and completed bidding and listing in 21 provinces in 2019 (peak sales of 500 million yuan); 2) Levosalbutamol inhalation solution was approved for listing in September 2019, and completed bidding and listing in 14 provinces in 2019 (peak sales of 1 billion yuan); 3) Budesonide suspension (peak sales exceeding 2 billion yuan) is currently undergoing on-site inspection and is expected to be launched in mid-2020; 4) Ipratropium bromide aerosol/solution, budesonide aerosol, and acetylcysteine inhalation solution have been filed for production; tobramycin inhalation solution, formoterol fumarate inhalation solution, and salmeterol fluticasone powder inhaler are in clinical trials; ambroxol hydrochloride has obtained clinical approval. Based on DCF valuation, the company's respiratory pipeline is valued at over 5 billion yuan.
Source: Huatai Securities
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