Jointown(SH:600998) China Post Securities·2024-03-12 16:00Investment Rating - The report gives a "Buy" rating for the company [7] Core Views - The company is a leading private pharmaceutical distribution enterprise in China, transitioning towards digitalization, platformization, and internetization [3] - The company is implementing four new strategies: new retail, new products, internet healthcare, and REITs, which are expected to enhance business efficiency and profitability [4] - The company's REITs strategy is expected to unlock the value of its underlying assets, improve asset liquidity, and diversify revenue streams [5] - The company's fundamentals are expected to improve from 2024, with steady growth in wholesale business and accelerated development of high-margin businesses supported by REITs issuance [6] Company Overview - The company is the largest private pharmaceutical distribution enterprise in China, with a market share increasing from 5.1% in 2019 to 6.28% in 2022 [3] - The company has built a "100-billion-level" pharmaceutical supply chain platform, covering full-category procurement, full-channel coverage, and full-scenario services [13] - The company's revenue grew from RMB 41.07 billion in 2014 to RMB 140.42 billion in 2022, with a CAGR of 17.3% [19] - The company's net profit attributable to shareholders grew from RMB 561 million in 2014 to RMB 2.09 billion in 2022, with a CAGR of 17.8% [19] New Strategies - New Products Strategy: The company's total agency brand promotion business revenue increased by 25.90% YoY in Q1-Q3 2023, with gross profit up by 41.49% [4] - New Retail Strategy: The company's "10,000-store franchise" plan has reached 17,272 stores as of Q3 2023, with a target of over 30,000 stores by 2025 [4] - Internet Healthcare Strategy: The company's healthcare and technical services revenue increased by 23.21% YoY in Q1-Q3 2023, with gross profit up by 36.52% [4] - REITs Strategy: The company plans to issue REITs based on its 3.3 million square meters of pharmaceutical logistics assets, with the first batch of assets submitted for approval in October 2023 [5] Financial Performance - The company's revenue for Q1-Q3 2023 was RMB 114.36 billion, up 11.09% YoY [19] - The company's net profit attributable to shareholders for Q1-Q3 2023 was RMB 1.82 billion, up 4.89% YoY [19] - The company's gross margin has remained stable at around 7% for its core distribution business, while high-margin businesses like total agency and retail have gross margins above 15% [22] - The company's operating cash flow improved significantly, with net cash flow from operating activities reaching RMB 3.99 billion in 2022, up 15.24% YoY [26] Industry Analysis - China's pharmaceutical distribution industry is highly concentrated, with the top 4 companies (including the company) holding a market share of 48.7% in 2022 [30] - The industry is expected to further consolidate, with policies encouraging the development of large-scale, digitalized pharmaceutical distribution enterprises [27] - The company's traditional distribution business is expected to benefit from the industry's consolidation and the opening of previously untapped hospital markets [58] Valuation and Forecast - The company's revenue is expected to grow to RMB 199.42 billion by 2025, with net profit attributable to shareholders reaching RMB 3.39 billion [7] - The company's current PE ratio is 12.82x for 2023E, 10.68x for 2024E, and 9.26x for 2025E, indicating attractive valuation compared to peers [7] - The company's valuation is considered competitive compared to other pharmaceutical distribution companies like Sinopharm, Shanghai Pharma, and China Resources Pharma [60]