LBX(SH:603883) Soochow Securities·2024-02-06 16:00Investment Rating - The report maintains a "Buy" rating for the company [1][4]. Core Viewpoints - The company is one of the largest chain pharmacies in China, with a strong presence in the central and eastern regions, and is expanding through direct operations and franchises [3][13]. - The long-term logic of the chain pharmacy industry is driven by increasing concentration and the acceleration of prescription outflow, with significant growth potential post-pandemic [3][32]. - The company employs a multi-faceted growth strategy, including direct operations, acquisitions, franchises, and alliances, to capitalize on the benefits of outpatient coordination policies [3][45]. Summary by Sections Company Overview - The company has over 13,000 stores across 18 provinces, covering more than 72% of the Chinese pharmaceutical retail market [13][16]. - It has achieved significant growth since its establishment, with a compound annual growth rate (CAGR) of 23.6% in revenue from 2015 to 2022 [18][19]. Industry Dynamics - The retail pharmacy market in China reached 872.5 billion yuan in 2022, with a year-on-year growth of 9.7% [32]. - The industry is expected to see a significant increase in concentration, with the current CR3 at only 12%, compared to nearly 90% in the US [3][38]. Business Strategy - The company focuses on a "4-in-1" strategy of direct operations, acquisitions, franchises, and alliances, which has led to a steady increase in market share in key provinces [3][4]. - As of Q3 2023, the company has established 2,893 outpatient coordination stores, accounting for 22.14% of its total stores, which positively impacts customer traffic and sales [3][45]. Financial Projections - The company is projected to achieve a net profit of 917.54 million yuan in 2023, with estimates of 1.1 billion yuan and 1.36 billion yuan for 2024 and 2025, respectively [2][4]. - The current price-to-earnings (P/E) ratio is expected to decrease from 17.22 in 2023 to 11.58 in 2025, indicating potential for valuation improvement [2][4].