1. Jichuan Pharmaceutical's business model and advantages.
Based on traditional Chinese medicine, the dual core of pediatric soybean warp and Pudilan oral liquid lays the basic plate; Western medicine is the wing, and Leibei and iron are rich in diversified business formats; BD business blossomed in more places and expanded the third growth curve.
1) Large single product strategy.
Jichuan Pharmaceutical pursues a large-scale single product strategy, and the three drugs of Pudilan, Pediatric Soy Qiao and Rabela accounted for 70% of the revenue, and more than 1 billion are large single products with a scale of more than 1 billion. Pudilan is mainly used to clear heat, detoxification and anti-inflammatory, and pediatric soybean is mainly used to treat children's colds and fevers.
2) Classic prescription with outstanding curative effect.
The company selects traditional Chinese medicine formulas related to classic prescriptions, conducts research and development and evidence-based, and the company's Pudilan oral liquid and pediatric soybean Qiao granules are from famous prescriptions, with good clinical efficacy and good customer experience, so as to form customer stickiness, frequent use, and high-frequency repeated consumption. The strength of the product has formed a good reputation in the long-term use of patients.
3) The competitive landscape is good and there is a certain pricing power.
After the company selects the classic formula, it conducts research and development and evidence-based, and then applies for patents, so as to form exclusive products, and the selected fields are more focused, such as pediatric soybean Qiao granules focus on the field of children's wind, heat and cold, which makes the company's products have differentiation and pricing power, forming a good competitive pattern.
4) Chemical drugs are suppressed by centralized procurement, but the company's investment is also small.
Imitation chemical drugs, due to the suppression of centralized procurement, the pressure is relatively large, and the competition barriers are low, but the company's corresponding investment, such as R & D investment, is also small, so under the premise of low cost, the use of strong sales channels still brings considerable revenue to the company.
5) Strong marketing capabilities.
The aroma of wine is also afraid of deep alleys", Jichuan Pharmaceutical's marketing ability forms its core competitiveness.
There are more than 6,600 employees in Jichuan Pharmaceutical, including more than 3,000 sales personnel, more than 3,600 at the most, and more than 5,000 employees at present. The company's marketing offices cover 30 provinces, municipalities and autonomous regions across the country, covering more than 23,000 hospital terminals. Sales expenses account for about 50% of revenue all year round, of which marketing expenses account for more than 80% of sales expenses.
In 2021, I-Mab approached Jichuan Pharmaceutical to cooperate with TJ101 long-acting growth hormone because of its strong sales channels.
Therefore, on the whole, the company's core competitiveness is marketing, which does not have R&D and innovation capabilities, and second, unique market grasp ability and product judgment, which is reflected in the company's continuous "explosive" products to improve the company's revenue.
2. Marketing channel analysis.
The gross profit margin of the company's main varieties is very high, at 80-90%; However, the net profit margin is only around 20%. One of the largest expenses is sales expenses, which account for about 50% of revenue in the long run. R&D expenses account for only about 3%, which is almost negligible.
"Heavy marketing, light R&D" is what Jichuan Pharmaceutical, and even many traditional Chinese medicine companies, have been widely criticized. However, Jichuan Pharmaceutical's business model determines that marketing is the foundation of survival. Spending a small price to sell non-exclusive products through marketing is the survival logic of Jichuan Pharmaceutical. So, he dedicates half of his revenue to building and maintaining marketing channels.
But now the core purpose of the national pharmaceutical reform is to control costs, and the core of cost control is to reduce sales. The purpose of volume procurement is to reduce the price of drugs by saving huge costs in the sales process.
Although due to the particularity of traditional Chinese medicine, the consistency evaluation is somewhat difficult, so that the implementation of collection is not as uniform as Western medicine. However, at present, the centralized procurement of traditional Chinese medicine has begun, but the price reduction is relatively modest. In the gradual advancement of the centralized procurement of traditional Chinese medicine, there will be more experience to be applied to the centralized procurement of traditional Chinese medicine. In such an environment, the price reduction and cost control of traditional Chinese medicine is bound to be the general trend. Volume-based procurement has caused in-depth changes in the pharmaceutical industry, and promoted enterprises to "focus on R&D" and "light sales".
In the long run, the company's marketing channels, sales expenses remain high, and the marketing method of academic research may slowly become a burden, resulting in the weakening of core competitiveness.
The fundamental purpose of medical reform is to meet the basic security needs of the national medical insurance, but in addition to the medical insurance, the improvement demand of individual self-payment is the market mechanism, and the national medical insurance will not control this part.
Pudilan chose not to do national medical insurance, and Jichuan Pharmaceutical should aim at the improved demand market. There is less policy regulation in this field, great autonomy and high profits, but the market may be relatively small compared with the hospital end, the competition is fierce, and customer stickiness is needed, and the developed marketing channels are the support of this competitive pattern.
3. Financial analysis.
1) Outstanding return on equity (ROE).
In the past 10 years since its listing, the company's return on net assets has only been slightly lower than 20% in 2020, and has remained at about 30% all year round, and has decreased significantly in the past two years due to the retention of a large number of cash inefficient assets. The real rate of return on capital is much higher than 30%.
According to DuPont's analysis of dismantling indicators, the company's excellent ROE is mainly due to profitability and asset operation capabilities. The significant decline in R0E in the past two years is mainly due to the decline in the efficiency of asset operations and the decline in asset turnover due to the fact that a large number of cash assets do not generate revenue.
2) Ultra-high gross profit margin and sales expense rate.
The company's profitability contributes to the company's excellent ROE. The company's gross profit margin has been above 80% for a long time, and the corresponding sales expense ratio has been maintained at about 50% for a long time, so that the company's net sales profit margin can be maintained at about 20%, ranking eighth among listed companies in the traditional Chinese medicine industry.
3) Asset operation capacity.
Accounts receivable: Most of the company's downstream customers are hospitals, which occupy an absolutely strong position, but the company's accounts receivable account period is 90 days, relatively speaking, it is not very bad, which is lower than the average level of the traditional Chinese medicine industry.
Inventory: The number of inventory turnover has increased year by year, and in 2022, it is the second, which is higher than that of the traditional Chinese medicine industry by 238 times of the level.
Total asset turnover: decreasing year by year, 066 times, close to 053 times average.
4) Asset and liability structure.
In 2022, the company's total assets will be 15 billion, and cash assets will be about 8 billion, accounting for 53%; accounts receivable 2.8 billion, accounting for 19%; inventory of 400 million; fixed assets, projects under construction, and intangible assets totaled 3.2 billion, accounting for 21%; investment assets of 300 million; Goodwill1700 million.
Liabilities of 3.6 billion, mainly about 2.5 billion current payables, 4600 million salaries and taxes, interest-bearing liabilities are mainly 400 million short-term borrowings, and the rest are deferred income, deferred income tax, etc.
The asset-liability ratio is 2422%。
The company's asset structure is extremely stable, and the disadvantage is that the proportion of cash is too high.
5) Strong operating cash flow.
From 2014 to 2022, the company's total revenue will be 54 billion, and the cash received from the sale of goods and the provision of labor services will be 59.6 billion, with a cash-to-cash ratio of 110%; From 2014 to 2022, the company's net profit totaled 11.8 billion, cash flow from operating activities was 13.5 billion, and the net cash ratio was 114%. It can be seen that the company's operating cash flow is abundant.
At present, Jichuan Pharmaceutical, whether it is financial status, profitability or cash flow, is excellent, and the company's quality cannot be exaggerated. The systematic financial analysis is omitted here, and a few key data can be seen in a simple way.
6) Limited capital expenditure.
From 2014 to 2022, the company spent a total of 3.9 billion yuan on building fixed assets and intangible assets, accounting for 29% of the operating cash flow; During the period, the company's depreciation and amortization totaled 1.8 billion, which was able to cover part of the capital expenditure.
7) Stable dividends.
In 2014 and 2019, the company's dividend rate was around 60%, and in 2020, it was low, but it was also about 30%; The dividend yield in the last two years is 35%+, and the dividend yield is around 3%.
In recent years, the dividend rate has decreased, and it is speculated that it may be related to the company's BD cooperation business, the amount of down payment and subsequent milestone expenses is not a small amount, and the company's equity incentive goal is to introduce no less than 4 varieties per year from 2022 to 2024, so there may be pressure on expenditure, so the company needs to reserve cash to deal with it.
Overall, the company's operating performance rebounded after a short period of bottoming, with revenue growth in main products, considerable profits, outstanding return on net assets, and abundant cash flow. Although the company's moat is not deep enough, but the company's marketing ability is strong, the selection of products is outstanding, with the continuous expansion of the pharmaceutical market, the company's performance growth can be expected, especially the company is also exploring new models, to take precautions, to respond to market changes.
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