Regarding the chain pharmacy industry, I have successively written about the three listed companies of Yifeng Pharmacy, Dashenlin and Laobaimin, and today I will talk about the lowest valuation among the four major pharmacies listed - Yixintang.
When it comes to Yixintang, many friends may feel relatively unfamiliar, because its stores are almost invisible in many parts of the country, and it does not seem to be as famous as Yifeng and ordinary people, but in fact it is also a leading enterprise in the industry, and its scale and development trend are also very impressive. The company is a brand of Yunnan Hongxiang Pharmaceutical Co., Ltd., which began in 1981 and has developed into a large-scale joint-stock pharmaceutical enterprise group integrating Chinese herbal medicine planting, processing, Chinese and Western patent medicine research and development, production, wholesale, retail chain operation and medical industry after 33 years of deep cultivation. With Yunnan as the basic market, the company has more than 9,500 Yixintang chain pharmacies in Yunnan, Guizhou, Guangxi, Sichuan, Shanxi, Chongqing and other provinces and cities, with more than 10,000 employees and more than 39 million Yixintang health members all over the country, which is not inferior to other giants.
From 2011 to 2022, the company's operating income, net profit, and non-net profit deducted from 221.9 billion, 13.5 billion, 13.3 billion, an increase to 1743.2 billion, 10100 million, 98.9 billion, the annualized growth rate can reach %, with the blessing of the track dividend, rapid development has been achieved. At the same time, the company's average ROE during the period was as high as 195%, which can be described as a proper high growth and high return on equity.
However, even with such a strong performance, the company's valuation has long been at the bottom of the big four pharmacies. As of January 19, 2024**, among the four major pharmacies listed: Yifeng Pharmacy, 2761 times PE, 424-fold pb;Dashenlin, 2203 times PE, 427x pb;Ordinary people, 1996 times PE, 267x pb;Ichishindo, 1217 times PE, 158x pb. Yixintang is obviously a notch lower than the other three peers, why is that?
Strictly speaking, if the company is placed in a vacuum, only looking at the operating data, it should never give such a low valuation, but the problem is that everything is most afraid of comparing it with others.
The company is the most regionally colored of the four major pharmacies. As shown in the table below, as of the first half of 2023, the company has a total of 9,569 stores, of which 77% are located in the southwest region, and the proportion of Yunnan Province has even reached a staggering 5506%, which means that Yixintang's cross-provincial expansion into the whole country is not as strong as the other three pharmacies. For a long time, the company has adhered to the development strategy of "few regional high-density outlets" and "highly standardized and unified management", and has taken "building the first brand of local pharmacies", "building a reasonable and dense store network" and "achieving a high market share" as the regional market business goals. Perhaps because of such a strategic goal, the market is worried that the vast market space outside the basic market will be eaten up by others, so that it comes to the conclusion that Yixintang's growth is insufficient.
Through the implementation of the comprehensive three-dimensional and in-depth layout strategy of "few areas and high density", the number of stores in provinces, cities, counties and towns in southwest China is currently in a synchronous and balanced development trend. However, from the actual effect, the largest contribution to income is still the provincial capital or big city, although the layout of towns and towns is more, but the proportion of sales is relatively low. In this regard, the company explained that the three-dimensional and in-depth layout is the long-term development model of Yixintang's store expansion, and the store group effect can increase the synergy between stores and form regional brand competitiveness, but in the short- and medium-term view of the market, it is inevitable that there is a waste of resources and a suspicion of reducing efficiency.
Yixintang adopts the expansion strategy of the "direct sales" model, that is, through the standardized replication ability to continuously spread the territory of the direct chain. This is very different from the expansion strategy of the other three giants in the same industry, the expansion model of Dashenlin is "self-construction + mergers and acquisitions + joining", the expansion model of Yifeng Pharmacy is "new opening + mergers and acquisitions + joining", and the expansion model of ordinary people pharmacy is "self-construction + mergers and acquisitions + franchise + alliance" go hand in hand. Obviously, Yixintang's strategy is more conservative, and the direct sales model can indeed ensure the quality of service and the integrity of the first-class system, but in the current situation where the three giants are desperately expanding at a high speed, it may be more time-consuming and labor-intensive, and consume more expansion costs, which is very unfavorable to quickly occupy the market.
To sum up, the relatively slow speed and efficiency of store expansion is the core shortcoming of Yixintang, but this state often has advantages and disadvantages. (To be continued).
Risk Warning: The views mentioned in this article only represent personal opinions, and the subject matter involved is not recommended. ）