CHINARES PHARMA(03320) 海通国际·2024-09-04 02:14Investment Rating - Maintains an "Outperform" rating with a target price adjusted to HKD 6.94 [5][14] Core Views - The company achieved sales of CNY 128.6 billion in 1H24, representing a 4.7% year-over-year (y-y) growth [3][9] - The pharmaceutical manufacturing, distribution, and retail segments contributed 16.5%, 79.6%, and 3.8% to total revenue, respectively [3][9] - Gross profit margin (GPM) improved to 16.3% (+0.2 ppts y-y), driven by higher margins in the pharmaceutical manufacturing segment [3][9] - Net profit reached CNY 5.5 billion (+10.2% y-y), while attributable net profit was CNY 2.6 billion (-2.9% y-y) [3][9] - The company has over 350 projects under research, including approximately 100 new drug projects [3][9] Business Segment Analysis Pharmaceutical Manufacturing - Sales reached CNY 23.8 billion (+5.8% y-y) in 1H24 [3][10] - Traditional Chinese medicine (TCM) sales grew by 12.0% y-y, contributing 50.3% of the segment's revenue [3][10] - The segment's GPM improved to 60.1% (+1.2 ppts y-y) due to product mix changes and process efficiency enhancements [3][10] - The company produced 792 drugs, with 430 included in the National Reimbursement Drug List and 203 in the basic drug list [3][10] Distribution - Sales were CNY 105.9 billion (+4.9% y-y), with medical device distribution contributing CNY 16.7 billion (+3.1% y-y) [3][11] - The segment's GPM slightly declined to 5.9% (-0.2 ppts y-y) [3][11] - The distribution network covers 28 provinces, serving approximately 210,000 clients, including over 10,000 second- and third-tier hospitals [3][11] - The company operates more than 220 logistics centers with nationwide temperature-controlled storage and distribution capabilities [3][11] Retail - Sales grew by 9.3% y-y to CNY 4.9 billion, driven by the high-value drug direct-to-patient (DTP) business, which grew by 19% y-y [3][12] - The segment's GPM decreased to 6.5% (-1.4 ppts y-y) due to the increased proportion of lower-margin DTP business [3][12] - The company operates 760 self-owned retail pharmacies, including 275 DTP pharmacies (162 dual-channel pharmacies) [3][12] Financial Forecasts - Revenue forecasts for 2024/2025/2026 were slightly revised to CNY 263.6 billion, CNY 291.1 billion, and CNY 320.7 billion, respectively [5][13] - Attributable net profit forecasts for 2024/2025/2026 were adjusted to CNY 4.1 billion, CNY 4.5 billion, and CNY 5.0 billion, respectively [5][13] - The adjustments reflect challenges in the pharmaceutical distribution industry and the impact of equity restructuring on attributable net profit [5][13] Valuation - The target price was revised to HKD 6.94, based on a 9.5X PE for 2024, down from HKD 8.12 (previously based on 11X PER) [5][14] - The valuation reflects uncertainties in the distribution industry, including extended reimbursement cycles for medical insurance funds [5][14]