DSL(603233) Wanlian Securities·2024-12-17 02:53Investment Rating - The report initiates coverage with a "Buy" rating for the company Dacilin (大参林) [7][15]. Core Views - The company is a leading chain pharmacy in South China and ranks among the top in the country, with retail from directly operated stores being the main source of revenue and profit. The company has expanded its presence to 21 provinces through a combination of self-built stores, acquisitions, and franchises. Future growth is expected to come from enhancing the profitability and operational efficiency of stores outside its traditional regions [4][5]. Summary by Sections Company Overview - Dacilin has been established for 25 years and is the largest chain pharmacy in South China, focusing on both traditional Chinese and Western medicine, health products, and medical devices. The company has expanded its operations to cover 21 provinces, with significant market shares in Guangdong, Guangxi, Henan, and Heilongjiang. As of Q3 2024, the company operates 16,453 stores nationwide, leading the industry [12][53]. Market Opportunities - The trend of prescription drug outflow presents new opportunities for large chain pharmacies. The outpatient management of designated retail pharmacies is accelerating this trend, with significant growth potential in the outpatient market compared to Japan and the US. The aging population and the increasing reliance on insurance for chronic disease management further support this growth [5][14]. Expansion Strategy - The company employs a "self-built + acquisition + franchise" strategy to expand its market presence. The number of directly operated and franchise stores is increasing, with a focus on both strong and weak regions. The company has seen a shift towards franchise operations, particularly in regions outside its traditional stronghold [6][19][108]. Financial Forecast - The company forecasts revenues of 27.26 billion yuan in 2024, with a growth rate of 11.12%. The net profit attributable to shareholders is expected to be 1.02 billion yuan, reflecting a decrease of 12.63% compared to the previous year. The earnings per share (EPS) is projected to be 0.89 yuan for 2024, with a price-to-earnings (PE) ratio of 18.12 [5][15]. Investment Recommendations - The report suggests that Dacilin, as a leader in the pharmaceutical retail industry, is well-positioned to enhance its performance in provinces outside its traditional markets while maintaining its stronghold in South China. The company is expected to improve its overall profitability and management efficiency [15][24].