Yixintang Pharmaceutical (SZ:002727) INDUSTRIAL SECURITIES·2024-05-10 03:02Investment Rating - The report maintains a "Buy" rating for the company, with an "Increase" suggestion based on the expected performance recovery and strategic expansions in key regions [7][22]. Core Insights - The company has accelerated its store expansion, focusing on the Sichuan-Chongqing region while maintaining a strong presence in Yunnan and gradually increasing its market share in South China and North China [1][14]. - In 2023, the company reported a revenue of 17.38 billion yuan, a slight decrease of 0.29% year-on-year, and a significant drop in net profit by 45.60% to 549 million yuan, primarily due to tax-related expenses and a decline in gross margin [8][9][14]. - The first quarter of 2024 showed a recovery with a revenue increase of 14.96% year-on-year, reaching 5.10 billion yuan, and a net profit of 242 million yuan, marking a 1.03% increase [8][14]. Store Expansion and Market Strategy - In 2023, the company opened 1,381 new stores, bringing the total to 10,255 by the end of the year, with a focus on increasing the number of stores outside Yunnan [1][14]. - As of the first quarter of 2024, the total number of stores reached 10,746, with 5,455 in Yunnan and 5,291 outside, indicating a balanced expansion strategy [1][14]. Financial Performance - The company’s gross margin for 2023 was reported at 33.00%, reflecting a slight decline due to increased wholesale proportions and price adjustments in the product catalog [27]. - The forecast for earnings per share (EPS) for 2024-2026 is adjusted to 1.68, 1.95, and 2.28 yuan, respectively, indicating a positive outlook for profitability [22][16]. Diversification and Health Industry Layout - The company is actively diversifying its product categories, focusing on traditional medicine and expanding into the health industry, with sales in the health category reaching 370 million yuan in 2023 [12][14]. - The establishment of a health division aims to address consumer health needs beyond medication, including skincare and functional foods [12][14].