Recently, Cheng Yi Pharmaceutical announced that the small capacity injection workshop of the company's fundraising project has passed GMP certification, which is conducive to the company's continued assurance of product quality and stable production capacity, better meeting market demand. At the same time, Dongwu Securities has given the company a buy rating for the first time, optimistic about the company's future business development.
The advantage of integrating raw materials and formulations contributes to high gross profit, and the growth rate of performance has been relatively fast since the listing
Cheng Yi Pharmaceutical is a pharmaceutical enterprise mainly engaged in the research and development, production, and sales of preparations and raw materials. Its main business covers three major sectors: preparations, raw materials, and intermediates. Considering the high gross profit of the preparation business, the company has adjusted its business core to fully leverage the cost leadership advantage of raw material preparation integration, and developed its preparation business. In the first half of 2020, the company's preparation business accounted for 72.17% of its revenue, with a gross profit of 81.72%.
From a product perspective, the company's products are divided into joint products, diuretic products, calming and nourishing brain products, anti-tumor products, vitamins, intermediates, and other products. As of 2020, the company and its subsidiaries have 69 drug production approval numbers, of which 37 product specifications are listed in the national medical insurance catalog, and 14 drugs are listed in the national essential drug catalog; There are 4 national new drug varieties, including 3 Class II new drugs and 1 Class IV new drug. In recent years, the company has continued to increase production of products such as tolasemide, gastrodin, and vitamins, further enriching the company's product structure. The gross profit margin of diuretic and vitamin products exceeds 90%, and joint and anti-tumor drugs exceed 70%, indicating strong profitability.
Since its listing in 2017, the company's performance has maintained a high-speed growth state. From 2017 to 2019, the company's revenue increased from 341 million yuan to 681 million yuan, with a compound annual growth rate of 41.36%. The net profit attributable to the parent company increased from 69 million yuan to 131 million yuan, with a compound annual growth rate of 37.76%, indicating a rapid growth rate in performance. Previously, the company released a performance forecast for 2020, which predicted that the net profit attributable to shareholders of the listed company in 2020 would be 160 million to 168 million yuan, a year-on-year increase of 21.4% to 27.5%; The expected net profit after deducting non recurring gains and losses is 149 million to 157 million yuan, a year-on-year increase of 23.6% to 30.3%; The expected net profit attributable to the parent company in Q4 is 57 million yuan to 65 million yuan, a year-on-year increase of 76.1% -101.0%, and the performance far exceeds market expectations.
Ammonia sugar products have both cost and production capacity advantages, and the construction of internal and external channels in the hospital continues to improve
Hydrochloric acid glucosamine preparation is the core product of the company. The company is located in Dongtou District, Wenzhou City, which is rich in marine resources, with significant geographical advantages. Coupled with the company's dual approval documents for the production of raw materials and preparations, the cost of the company's glucosamine series products is leading in the entire industry. In addition, the holding subsidiary of the company, Fujian Huakang Pharmaceutical, started laying out a thousand ton chitin production line as early as 2018, providing the necessary marine biological product chitin for the parent company, Cheng Yi Pharmaceutical, and other enterprises to produce glucosamine hydrochloride products. It was completed and put into operation in 2020, helping the company become the main raw material drug manufacturer of glucosamine hydrochloride in China, with a market share ranking first in the country.
In the third batch of centralized drug procurement nationwide in August 2020, the company won the bid for glucosamine hydrochloride capsules (0.75g) with absolute cost advantages, which can fully achieve price for quantity exchange. The execution cycle of this centralized procurement is three years. After winning the bid, it is expected that the company will obtain a 40% share of the national ammonia sugar medical market, becoming a leading player in the hospital market. According to the latest prediction from securities firms, the company is expected to increase its revenue from ammonia sugar products by over 100 million yuan in the first year, and contribute over 300 million yuan to the company's revenue within the three-year procurement cycle. The winning bid for this centralized procurement will help the company further expand the sales of related products, increase market share, promote the development of the domestic market for related products, enhance the company's brand influence, and have a positive impact on the company's future business performance.
In terms of the external market, the company will continue to reform its channels and set retail prices based on different provinces and competitors. It will strengthen cooperation with domestic chain pharmacies such as Gaoji Pharmaceutical, National Pharmaceutical Holding National University Pharmacy, and People's Daily, fully expand its products, and rapidly expand its market share on the channel side.
Multiple products leading in the industry, expanding internally and expanding simultaneously
In addition to leading the industry in ammonia sugar products, the company also holds a leading position in other raw material drug products. The company's Torasemi injection is the only water injection product on the market, with significant differentiation advantages. Other competing products are powder injection. Compared with powder injection, the dosage form of water injection products is consistent with the original research drug and has received recognition from many industry experts.
In addition, the company's products such as gastrodin raw materials and azathioprine raw materials have industry-leading market share in their respective segments. In 2018, the company's market share of gastrodin raw materials reached 49%, accounting for half of the country; According to the latest research report, from 2011 to 2015, the company's cumulative sales of azathioprine raw materials exceeded 80% of the total market volume, occupying a dominant position.
While its main business is thriving and growing steadily, the company is also actively seeking external investment opportunities and expansion opportunities. In 2020, the company became the largest shareholder of Kangle Pharmaceutical by acquiring 28.77% equity in Zhejiang Kangle, and is expected to bring about an investment income of around 20 million yuan to the company by 2020. Kangle Pharmaceutical mainly engages in the direct compression of acetaminophen granules, with exports accounting for over two-thirds of China's exports of this product. This will help the company expand its overseas channels in the future.
Since the second half of last year, due to market preferences, small and medium-sized stocks have been struggling, and many high-quality small ticket pearls have been covered in dust. They have been hit by market mistakes and have shown a one-sided downward trend, with Sincere Pharmaceutical being one of them. However, in the capital market, monthly gains lead to losses, while floods lead to overflows. The sustained speculation of large stocks will definitely not last long. With the market style switching again in the future, high-quality small and medium-sized market capitalization stocks may become the main players in the market and regain their upward momentum.
Article source: Wabei