CR Sanjiu(SZ:000999) Huajing Securities·2024-03-28 16:00Investment Rating - The report maintains a "Buy" rating for China Resources Sanjiu (000999 CH) with a target price of RMB 74.40, reflecting a potential upside of 42% from the current price of RMB 52.32 [1][4]. Core Insights - In 2023, the company's net profit met expectations, with revenue and net profit reaching RMB 24.739 billion and RMB 2.853 billion, respectively, representing year-on-year growth of 37% and 16% [1][2]. - The CHC (Consumer Health Care) business showed steady growth, while the prescription drug segment faced challenges due to regulatory changes and market competition [2][11]. - The subsidiary Kunming Pharmaceutical aims to double its revenue over the next five years, targeting over RMB 10 billion in pharmaceutical industrial revenue by 2028 [2][11]. Financial Summary - Revenue for 2023 was RMB 24.739 billion, with a gross profit of RMB 13.172 billion, resulting in a gross margin of 53.2%, down from 54.0% in 2022 [8][19]. - The company plans to distribute a dividend of RMB 15 per 10 shares, achieving a dividend payout ratio of 52% and a dividend yield of 2.9% [1][8]. - The forecasted compound annual growth rates (CAGR) for revenue and net profit from 2023 to 2026 are 11% and 15%, respectively [1][2]. Business Segment Performance - The CHC business generated RMB 11.707 billion in revenue, growing by 3% year-on-year, while the prescription drug segment saw a decline of 13% to RMB 5.220 billion [2][9]. - Kunming Pharmaceutical's revenue decreased by 7% to RMB 7.703 billion, but it achieved a net profit of RMB 4.45 billion, up 16% year-on-year [2][11]. - The company’s overall net profit margin decreased to 12.8%, down from 13.5% in the previous year [8][19]. Valuation and Forecast Adjustments - The DCF target price was slightly reduced by 2% to RMB 74.40 due to adjustments in earnings forecasts for 2024-2025 [14][19]. - The projected earnings per share (EPS) for 2024 is RMB 3.49, with a P/E ratio of 21x, aligning with comparable companies [4][14]. - Revenue forecasts for 2024-2025 have been adjusted downwards by 15%-17% due to a slowdown in the retail pharmacy market and challenges in the prescription drug segment [11][12].