A friend left a message and pulled a list of pharmaceutical stocks for me at once, and asked me to talk about them all, so let's take a look at them one by one according to his request.
Jiangzhong Pharmaceutical Co., Ltd. (hereinafter referred to as Jiangzhong Pharmaceutical Co., Ltd.) achieved backdoor listing through the reorganization of Jiangxi Dongfeng Pharmaceutical Co., Ltd. in 1999. Now its largest shareholder is China Resources Jiangzhong Pharmaceutical Group, and the major shareholder of China Resources Jiangzhong Pharmaceutical Group is China Resources Pharmaceutical Holdings***
Jiangzhong Pharmaceutical Co., Ltd. takes the traditional Chinese medicine industry as the core, combines the traditional Chinese medicine theory with the modern scientific research and technology platform, and is mainly engaged in the research and development, production and sales of Chinese patent medicine and health food. The main products are Jiangzhong brand stomach digestion tablets, Jiangzhong brand compound grass coral lozenges, Jiangzhong Lihuo lactobacillus tablets, Jiangzhong Lihuo probiotics, Chuyuan brand compound amino acid oral liquid, Guyou glucosamine calcium tablets, Shenlingcao oral liquid, Bolock, compound fresh bamboo leach, stone granules, Songhai Jinwei, Bazhen Yimu capsules, etc.
Let's start with its product structure in the first half of 2023, accounting for more than seventy percent of over-the-counter drugs, which is easy to understand, and its well-known products "Stomach Digesting Tablets" and "Compound Grass Coral Lozenges" are in this category;Its prescription drugs and big health products still account for more than 10%. In terms of regions, the four regions are relatively balanced, and the scale of East China is slightly higher than that of other regions.
In the three years under the epidemic, except for 2020, which was slightly affected and revenue fell slightly, the growth in other years was not bad, and each year continued to set new records. In the first three quarters of 2023, revenue continued to set a new record for the same period, but the growth rate was significantly lower than the previous two years.
In terms of net profit, the growth in 2019 and 2020 was slower or even slightly declined, and there were good growth in other years and the first three quarters of 2023, constantly hitting new highs.
In terms of quarters, revenue and net profit are growing in waves, and there are also ** situations in individual quarters. After the first quarter of 2023, the year-on-year growth of revenue in the second quarter will slow down, and the third quarter will begin to increase year-on-year**, and the future situation does not seem to be very good.
Gross profit margin has continued to decline, and in the first three quarters of 2023, it has exceeded the level of 2018 before the epidemic, and is slightly lower than that in 2017. I have to say that the gross profit margin of these Chinese patent medicines is still quite high, and the whole industry is like this, not only Jiangzhong Pharmaceutical.
The net profit margin of sales is close to the performance of 2019, the return on net assets has hit a new high in the past six years, and the overall operating situation and profitability are still strong, at least much stronger than the vast majority of manufacturing enterprises.
Like most TCM companies, the largest item in the cost composition is not the cost, but the sales expense, which alone accounts for nearly 40% of the revenue. For this kind of problem, we are all Xi, anyway, I think it is outrageous, but the whole industry is like this, and it is difficult to say anything. There are still some R&D expenses, and it is estimated that no one will believe that these investments can make big results.
The profitability of its main business is slightly higher than that of 2019 before the epidemic, but the space of traditional Chinese medicine companies is not small, and there are also profits that will increase in 2020 when the scale of revenue shrinks. That is, the amount of sales expenses and the proportion of revenue in that year have decreased, perhaps because the epidemic has caused some sales work to be unable to be carried out.
The epidemic is a demon mirror, allowing people to understand that some high-level marketing plans are not even as good as being forced to lie flat. Of course, you can't just look at the profit margin, sometimes you have to look at the net profit, the profit margin has increased, but the revenue scale has declined, and the money earned has not increased.
In terms of other income, there is some net income on an annual basis, mainly "fair value change gain" and "other income". The decline in "fair value change income" in the first three quarters of 2023 is related to the sharp decline in its "trading financial assets", what is "trading financial assets"?The main ones are some wealth management products, which they explained in their 2023 semi-annual report that these wealth management products will be converted into bank fixed deposits after maturity. This approach is more reasonable, because it has not been long before you can hear the news that a listed company can not recover the principal of financial management, and it is the general trend to gradually clean up these financial products with low returns and increasing risks.
In the first quarter of 2023, the gross profit margin is the highest and the revenue is the highest, but the profitability of the main business is not the highest, and the revenue in the second quarter is much lower, but the profit margin is higherIn general, this is because the period fee, which we believe is a relatively fixed expense, is not the case in many cases, and the amount of sales expenses should have a great relationship with the sales volume, which is generally a sales incentive such as a phased increase in sales commissions and an increase in product discounts according to sales volume. Of course, we are talking about the general situation, and Jiangzhong Pharmaceutical also conforms to this law.
Jiangzhong Pharmaceutical's cash flow performance is quite good, and the net cash flow from operating activities has also continued to hit a new high under the epidemic, on the contrary, the performance in the first three quarters of 2023 does not seem to be particularly good. The scale of its investment in fixed assets is not large, but it has continued to increase such investment in the three years of the epidemic, as if they have calculated the end of the epidemic.
The scale of fixed assets is basically fixed at more than 1 billion yuan, and in the past year or so, the balance of projects under construction has increased significantlyIt is mainly the "first phase of the modern Chinese medicine production base project of Jiangzhong Science and Technology Innovation City", and the other projects of "Beishidian New Industrial Park in the urban area".
The solvency is still very strong, and even the asset allocation is excessive, because its cash and cash equivalents at the end of the third quarter of 2023 were 2.8 billion yuan, which is nearly twice the total debt. Now financial management does not dare to engage in large-scale, either engage in some construction, or distribute it to investors, or repurchase **, can not be all retained for a fixed period, this income is too low.
As long as there are still people willing to consume, products such as traditional Chinese medicine are the best commodities for enterprises, with extremely high gross profit margins, and there is no need for the high R&D costs of chemical pharmaceutical companies. However, such pharmaceutical companies are limited by products and markets, and their revenue ceilings are generally lower than those of the chemical and pharmaceutical industry.
Disclaimer: The above is a personal analysis and does not constitute investment advice to anyone!
Traditional Chinese medicine