(Report producer/author: Kaiyuan Securities, Cai Mingzi, Long Yongmao)
1. State-owned enterprises of traditional Chinese medicine have the potential to rejuvenate, the policy promotes large growth space, and the long-established brand power provides strong advantages
1.1. State-owned Chinese medicine enterprises include 6 central state-owned enterprises and 18 local state-owned enterprises
As of 2023Q1, there are currently 24 traditional Chinese medicine enterprises with state-owned background in mainland China, including 21 A-shares (Tongrentang, Baiyunshan, Taiji Group, Guangyuyuan, China Resources Sanjiu, Jiangzhong Pharmaceutical, Dong'a Jiao, KunYao Group, Darentang, Kang'en Bei, Foci Pharmaceutical, Jingjing Pharmaceutical, Yunnan Baiyao, Qianjin Pharmaceutical, Yabao Pharmaceutical, Tus Pharmaceutical, Longshen Rongfa, Tailong Pharmaceutical, Zhongheng Group, Pian Zixi, Ma Yinglong) and 3 Hong Kong stocks (China Traditional Chinese Medicine, Tongrentang Technology, Tongrentang Sinopharm). Among them, there are 6 central state-owned assets (China Sinopharm, Taiji Group, China Resources Sanjiu, Jiangzhong Pharmaceutical, KunYao Group, Dong'a Ejiao), and 18 local state-owned assets.
1.2. Policy aspects: the reform of state-owned enterprises is the focus of national development, the traditional Chinese medicine industry continues to be supported by policies, and state-owned enterprises of traditional Chinese medicine have considerable development space
As a key national development target, state-owned enterprises continue to receive strong support from national policies. During the "12th Five-Year Plan" to "14th Five-Year Plan" period, the state adopted positive policies to promote the strategic readjustment and mobility mechanism of the state-owned economy, the reform of large state-owned enterprises, the structural reform of industries, and the reform of the state-owned asset management system. From the level of strategic adjustment and mobility mechanism of the state-owned economy, the policy in the "Twelfth Five-Year Plan" period mainly aims to promote the flow mechanism of state-owned enterprises and promote the entry of state-owned assets into the national lifeline industry field. The policy for the "13th Five-Year Plan" period establishes the development goals and positioning of state-owned enterprises, firmly improves and optimizes state-owned enterprises, enhances the vitality, control, influence, and ability to resist risks in the state-owned economy, and achieves the goal of preserving and increasing the value of the assets of commercial state-owned enterprises, as well as the goal of public welfare state-owned enterprises protecting people's livelihood, serving society, and providing public goods and services. By the "14th Five-Year Plan" stage, it has become a new goal to complete the optimization and structural adjustment of the layout of the state-owned economy, further optimize the layout of the state-owned economy, readjust and readjust the strategic reorganization, revitalize existing assets, optimize the allocation of incremental capital, and improve the mechanism for optimizing the allocation of state-owned capital. The state's economic strategic structure layout for state-owned enterprises is steadily advancing and constantly optimizing and perfecting.
From the level of reform of large state-owned enterprises, the policy "Twelfth Five-Year Plan" period encourages the listing of state-owned enterprises, share reform and company system reform; In the "Thirteenth Five-Year Plan" period, supplement and improve the modern enterprise system and corporate legal person structure, establish a professional manager system, and divest enterprises from social functions and historical problems; In the "14th Five-Year Plan" period, we will improve modern enterprises with Chinese characteristics, promote the unity of strengthening party leadership and improving corporate governance, strengthen the construction of the board of directors, promote mixed reform, improve market-oriented salary distribution and incentive policies, and improve the research and development assessment mechanism. From the form of the company to the internal structure to the personnel system, the state has gradually promoted the implementation of the reform of large state-owned enterprises from the outside to the inside and from the shallow to the deep.
At the level of structural reform of the pharmaceutical industry, during the "Twelfth Five-Year Plan" to the "14th Five-Year Plan", the state continued to propose to strengthen the construction of the public health service system, continuously put forward precise policies for the establishment of urban and rural medical services and the status of public hospitals and private hospitals, continuously improved the governance structure, personnel remuneration and performance appraisal mechanism, promoted the reform of centralized procurement and use of drugs and consumables, improved the basic drug system, promoted the medical service industry, and accelerated the construction of graded diagnosis and treatment. For the structural reform of the pharmaceutical industry, the state adopts a policy of gradual improvement and gradual expansion.
From the level of reforming the state-owned asset management system, during the "Twelfth Five-Year Plan" period, the policy encourages adherence to the separation of government public management functions from the functions of state-owned asset investors, the implementation of classified management of public welfare and competitive state-owned enterprises, the improvement of the state-owned capital operation budget and revenue sharing system of hierarchical management, and the improvement of the supervision system of state-owned financial assets, assets of administrative institutions, and natural resource assets; The focus of the "Thirteenth Five-Year Plan" policy has shifted to strengthen the supervision and management of state-owned assets with capital management as the mainstay, and to increase returns, reorganization and establishment of state-owned capital investment and operation companies, a nationwide mechanism for the rational flow of capital to guide capital flow to key areas, and the establishment of a budget management system for state-owned capital operation covering all state-owned enterprises and hierarchical management; During the "14th Five-Year Plan" period, the policy vigorously promoted the multi-directional change of the concept, focus, and method of state-owned assets supervision, deepened the reform of state-owned capital investment and operating companies, and accelerated the centralized and unified supervision of operational state-owned assets. The management of state-owned enterprises' assets has changed from separating public and private affairs to mainly managing the flow of state-owned capital, and then vigorously promoting the supervision and control of state-owned assets, and the state-owned asset management system has continuously matured and improved while developing.
As a national feature, traditional Chinese medicine continues to be supported by policies. In 2013, the State Administration of Traditional Chinese Medicine issued the Outline of the Medium- and Long-term Development Plan for Standardization of Traditional Chinese Medicine (2011-2020), strengthening the theoretical and technical research on standardization of traditional Chinese medicine and further optimizing the development environment of standardization of traditional Chinese medicine. In 2015, the General Office of the State Council issued the Development Plan for Chinese Medicine Health Services (2015-2020), vigorously developing Chinese medicine health care services, actively promoting the development of supporting industries related to Chinese medicine health services and improving relevant policies. In 2022, the state issued the 14th Five-Year Plan for the Development of Chinese Medicine (2021-2025), effectively improving the capacity of Chinese medicine medical services, focusing on promoting the innovation of Chinese medicine, developing and expanding the Chinese medicine industry, and promoting the dissemination of Chinese medicine culture and overseas development.
1.3. Performance: State-owned traditional Chinese medicine enterprises still have potential to improve their profitability compared with the industry average, and there is room for optimization at the cost end
By comparing the core financial indicators of Chinese medicine sub-industry companies with state-owned Chinese medicine enterprises, we believe that state-owned Chinese medicine enterprises still have room for performance improvement. From the perspective of the compound growth rate of revenue and net profit attributable to the parent in the past 3 years, the traditional Chinese medicine sector as a whole has maintained relatively stable growth: the average CAGR of revenue of enterprises in the traditional Chinese medicine sub-sector in 2020-2022 is 10.1% (excluding negative value, the same below), the average CAGR of net profit attributable to the parent is 114.3% (excluding negative value, the same below), and the average CAGR of revenue of state-owned traditional Chinese medicine enterprises in 2020-2022 is 9.3%, and the average CAGR of net profit attributable to parents is 137.5%. From the perspective of profitability, state-owned traditional Chinese medicine enterprises still have a lot of room for improvement: the average gross profit margin and net profit margin of enterprises in the traditional Chinese medicine sub-sector in 2022 will be 56.7% and 13.5%, respectively, and the average gross profit margin and net profit rate of state-owned traditional Chinese medicine enterprises in 2022 will be 46.4% and 12.8%, respectively, which is far from the industry average. From the perspective of expenses, the average sales expense rate and management expense rate of enterprises in the Chinese medicine sub-sector in 2022 were 33.4% and 13.2%, respectively, and the average sales expense rate and management expense rate of state-owned Chinese medicine enterprises in 2022 were 26.0% and 10.2%, respectively, indicating that state-owned Chinese medicine enterprises still have room for optimization in terms of channels and employee incentives. We are optimistic that the future performance of state-owned traditional Chinese medicine enterprises that attach importance to channel development and management optimization is expected to grow rapidly. In addition, the average financial expense ratio of state-owned traditional Chinese medicine enterprises is 0.1%, and the average financial expense ratio of traditional Chinese medicine sub-sectors is 4.6%, and the capital cost of state-owned enterprises of traditional Chinese medicine is lower than the industry average, which has the advantage of capital cost and helps the company expand its business.
1.4. Fundamentals: Time-honored state-owned enterprises of traditional Chinese medicine are national high-quality assets, and branded traditional Chinese medicines have strong competitive advantages
State-owned background Chinese medicine enterprises have the title of "Chinese time-honored brand" is an extremely high-quality asset, with strong technology, resources and brand accumulation, has a long history and tradition, and has rich experience and technology in traditional Chinese medicine research and development, solid business foundation, years of accumulated industry experience and excellent quality has won the trust and reputation of many consumers, with the state-owned background of Chinese time-honored Chinese medicine enterprises fully have the potential for rapid development. The existing Chinese medicine enterprises with the background of time-honored Chinese brands and state-owned assets on the mainland include Tongrentang, Pian Zixi, Baiyunshan (with a number of time-honored Chinese brands: Pan Gaoshou, Baiyunshan, Chen Liji, Jingxiutang, Zhongyi, He Jigong, Qixing, Mingxing, and Hesui Brand), Foci Pharmaceutical, Darentang, Yunnan Baiyao, KunYao Group (which owns Kunzhong, Yunkun Brand), Taiji Group, Dong'a Jiao, Guangyuyuan, and Ma Yinglong, of which Tongrentang and Guangyuyuan are century-old brands.
Traditional Chinese medicine enterprises with state-owned background have strong brand advantages and core varieties. Large state-owned Chinese medicine enterprises have deep heritage, each has its own core products and core business, which has steadily brought sustainable growth to the company, coupled with strong brand value advantages, the company has been standing in the traditional Chinese medicine industry for a long time.
The brand value of time-honored brands provides a solid foundation for the performance growth of traditional Chinese medicine enterprises with state-owned background, and is a strong moat for enterprises. Time-honored brands have established a good brand image and reputation in the minds of consumers, and have the ability to influence consumers' purchase decisions, and by forming a stable and solid brand foundation, Chinese medicine enterprises can effectively increase the market share and sales revenue of their products. As one of the "weather vanes" to witness the economic development trajectory of the Chinese market, the Hurun brand list is considered to be the "lens mirror" of China's commercial social development. According to the 2022 Hurun Brand Value List released by Hurun Report on April 3, 2023, among which Pian Zixi, Yunnan Baiyao, Tongrentang, Sanjiu and Dong'a Ejiao occupy the top five traditional Chinese medicines with 43 billion yuan, 18 billion yuan, 14 billion yuan, 8 billion yuan and 5.5 billion yuan respectively, including 4 time-honored brands.
Strong brand power can enhance the company's ability to raise prices for products and maintain stable performance growth. From the perspective of the company's exclusive core product, the competitiveness of the company mainly comes from the brand's high-end image and the resulting product premium ability. First of all, the substitution of Pian Zixi is not high, and it has a high market position in the field of liver protection and liver protection; Secondly, the company has always followed the logic of "luxury" in publicity, that is, it has a long history, rare raw materials, and is famous abroad. From the perspective of the market share of the same type of drugs, it is expected that Pian Zixi will maintain the top 1 pharmaceutical companies in 2020, and its market share will increase year by year, and no one can shake its leading position. As a non-exclusive product, the price of Dong Ejiao is higher than that of other Ejiao brands. Also a non-exclusive brand of Angong Niuhuang Pill, Tongrentang's perennial brand establishment has made consumers have a brand awareness of it, and its sales lead similar Angong Niuhuang Pill products.
2. Chinese medicine state-owned enterprises adopt diversified measures such as adjusting equity, optimizing management, and focusing on the main business of asset structure to explore the development path
2.1、 Continue to optimize the equity structure and strengthen the corporate governance structure
Continue to introduce state-owned capital and enhance strategic positioning. Taking Foci Pharmaceutical as an example, in February 2023, the company issued a notice that Gansu SDIC intends to become the company's controlling shareholder by acquiring 100% of the shares of Lanzhou Foci Pharmaceutical Industry Development Group Co., Ltd. Before this equity change, Foci Group held 61.63% of the shares of Lanzhou Foci Pharmaceutical, was the controlling shareholder of Foci Pharmaceutical, and Lanzhou State-owned Assets Supervision and Administration Commission was the actual controller of the company.
Establish a flexible mechanism to introduce private capital, and bring new vitality to the mixed reform. Taking Yunnan Baiyao as an example, since Xinhuadu acquired a stake in Baiyao Holdings in 2015, the company's management mechanism has gradually become market-oriented, and Jiangsu Yuyue was introduced as a strategic investment in Baiyao Holdings in June 2017, demonstrating the determination of management reform. In 2017, the company formulated the new "Senior Management Remuneration Management and Assessment Measures" to establish a long-term assessment and incentive mechanism that closely combines the interests of management and shareholders; In 2019, it absorbed and merged with Baiyao Holdings, integrated superior resources, reduced management levels, improved operational efficiency, and enhanced the company's overall core competitiveness. The company's mixed reform has achieved remarkable results, and the management has attracted outstanding talents through several incentives, continuously improving the enthusiasm of employees and boosting performance.
2.2、 Empower the management of enterprises by introducing management talents and setting incentive indicators, and continuously improve the company's operational efficiency
A number of traditional Chinese medicine enterprises with state-owned background have injected new blood into the development and empowerment of enterprises through the adjustment of management personnel. For enterprises, by adjusting and replacing management personnel, the company can introduce talents with richer and more professional knowledge background and management experience, which will help improve the management level and ability of the management team, improve the management level and competitiveness of the enterprise, and achieve high performance, and also provide new ideas for other different fields of the enterprise.
A number of state-owned traditional Chinese medicine enterprises actively set up equity or stock option incentive indicators, which have a strong role and significance in promoting the development of enterprises. Improve the operational efficiency and productivity of enterprises by setting equity or option incentive indicators; Attract more outstanding talents for the company, improve the company's competitiveness and market image, and at the same time allow employees to share the company's growth and benefits, condense the spirit of enterprise and teamwork awareness; The company can mobilize the enthusiasm and creativity of employees more flexibly, and at the same time reduce the cash flow pressure of the enterprise, which is conducive to the financial stability of the enterprise and promotes the long-term development of the enterprise.
2.3、 Disposal of non-main business assets, acquisition of assets related to the main business to optimize the asset structure
In the past two years, a number of state-owned Chinese medicine enterprises have optimized their asset structure through the completion of equity transfer transactions or equity acquisition transactions, and concentrated on their main businesses, so as to improve corporate efficiency, reduce operational risks, increase enterprise value, and adapt to market changes. Some state-owned traditional Chinese medicine enterprises focus on their main business through equity transfer transactions, dispose of assets unrelated to the main business, optimize the asset structure, optimize the industrial layout, transfer some subsidiaries or shares of holding companies, reduce the holding ratio or not hold the shares, so as to obtain more funds and resources to focus on the company's core main business, develop the core business, continue to enhance the company's value, and reduce the company's financial pressure and financing costs.
Some state-owned Chinese medicine enterprises have expanded the scale of their main assets through acquisitions and other means, made their main business bigger and stronger, and continuously optimized their own asset structure. In order to optimize the industrial layout and broaden the company's main business, some enterprises will acquire assets related to the main business, continuously expand investment and acquisition channels, and more effectively explore high-quality projects that match the company's strategic development, so as to improve the company's overall asset operation level and improve the efficiency of capital use. By integrating the product and resource advantages of both parties, the company's product line can be further enriched, the industrial chain layout can be expanded, and good synergies can be achieved, and at the same time, the competition in the same industry can be reduced and related transactions can be reduced by acquiring assets related to the main business.
Some state-owned Chinese medicine enterprises have optimized the company's equity and capital entry and exit management mechanism, more systematically improved the corporate governance mechanism, and optimized the company's asset structure. Taking Combe as an example, on July 26, 2021, Combe held a press conference on the mixed reform plan of Combe, formulated 52 supporting systems related to mixed reform, further improved the corporate governance mechanism, emphasized hierarchical and decentralized management, and approved investment projects and equity disposal according to hierarchical classification, which placed more approval power on the management, optimized the company's asset structure, and improved the capital entry and exit mechanism.
3. Optimistic about the accelerated growth of state-owned enterprises of traditional Chinese medicine under the continuous optimization of asset structure, management and marketing
We are optimistic about the thematic investment opportunities brought by the deepening of the reform of state-owned enterprises, mainly in the traditional Chinese medicine sector, and optimistic that the state-owned enterprises of traditional Chinese medicine will accelerate their growth under the continuous optimization of asset structure, management and marketing. From the perspective of policy, the reform of state-owned enterprises has become the focus of state development, and further optimizing the layout of the state-owned economy, restructuring and strategic reorganization, readjusting and revitalizing stock assets, optimizing the allocation of incremental capital, and perfecting the mechanism for optimizing the allocation of state-owned capital have become new goals. The state's economic strategic structure for state-owned enterprises is steadily advancing and constantly optimizing and perfecting it. The traditional Chinese medicine industry continues to be supported by policies, and state-owned enterprises in traditional Chinese medicine have considerable room for development. From the performance point of view, the growth rate of revenue and profit of traditional Chinese medicine state-owned enterprises is generally stable and stable, and there is room for optimization on the expense side, and state-owned traditional Chinese medicine enterprises still have room for optimization in terms of channels and employee incentives. We are optimistic that state-owned traditional Chinese medicine enterprises that attach importance to channel development and management optimization are expected to grow rapidly in the future and their profit margins are expected to increase. From a fundamental point of view, the title of "China's time-honored brand" owned by traditional Chinese medicine state-owned enterprises is an extremely high-quality asset, and the industry experience and excellent quality accumulated over the years have won the trust and reputation of many consumers.
3.1. Central state-owned traditional Chinese medicine enterprises
3.1.1、 CR Sanjiu: Strengthen innovation and transformation and deepen the quality management system, and expand its core business to all fields of self-diagnosis and treatment
CR Sanjiu is mainly engaged in the research and development, production, sales and related health services of pharmaceutical products, and its main core business is located in the field of CHC health consumer goods and RX prescription drugs. "999 Cold Ling", "999 Dermatitis Ping", "Sanjiu Gastric Tai", "999 Pediatric Cold", "999 Antiviral Oral Liquid", "Good Doll Products", "Qi Stagnation Stomach Pain Granules", "Tianhe Bone Patch", "Calcium Zinc Gluconate Oral Solution" and so on have a leading position in related categories. A number of traditional Chinese medicine prescription drugs such as ginseng injection and Liwei ace blood plug softgel capsule enjoy a high reputation in the traditional Chinese medicine prescription drug industry. The company's revenue and profit growth were steady. From the perspective of revenue, the company's operating income increased from 13.428 billion yuan to 18.079 billion yuan from 2018 to 2022, with a CAGR of 7.72%. From the perspective of profit, the company's net profit attributable to the parent increased from 1.432 billion yuan to 2.449 billion yuan from 2018 to 2022, with a CAGR of 14.36%.
CR Sanjiu has a strong core competitive advantage. In terms of brand advantages, on the basis of the "999" main brand, the company has successively developed pharmaceutical brands recognized by consumers, such as "Tianhe", "Shunfeng", "Aonuo" and "Kangnute"; In terms of product advantages, CHC's health consumer goods business covers nearly 10 categories such as colds and skin, and the prescription drug business covers anti-tumor, cardiovascular and cerebrovascular treatment areas; In terms of channel terminal advantages, CHC business has extensive and in-depth cooperation with the best dealers and chain terminals in China, covering more than 400,000 pharmacies across the country, and prescription drugs have covered thousands of hospitals and tens of thousands of primary medical institutions across the country; In terms of the advantages of intelligent manufacturing, the company's Deep Blue (Intelligent Manufacturing) Laboratory uses 5G, blockchain, digital twin, cloud computing, AI intelligent production equipment and other technologies to upgrade the traditional drug manufacturing system and accelerate the digital transformation and modernization of traditional Chinese medicine. In 2022, CR Sanjiu will improve and optimize its brand, innovation, mergers and acquisitions, and the company has good development and promotion potential. In 2022, focusing on the strategic direction, the company will continue to strengthen innovation and research and development, improve the construction of innovation systems and mechanisms, and enhance innovation and transformation capabilities, with R&D investment of 736 million yuan in 2022, and the proportion of new product R&D investment increased significantly; In terms of brand building, continue to build brand influence, enhance brand market share, and consolidate brand leadership; The company announced a major asset restructuring plan to acquire 28% of the shares of KunYao.
3.1.2、 Chinese Traditional Chinese Medicine: Based on the advantages of the whole industrial chain, grasp the opportunity of the pilot opening of traditional Chinese medicine granules, and actively respond to changes in the policy of centralized procurement of proprietary Chinese medicines
The company has a perfect industrial chain, integrating scientific research, manufacturing and sales, with more than 800 finished drug specifications, more than 700 varieties of single-flavor Chinese medicine formula granules, more than 400 classic compound concentrated granules (exclusively for export), the main business covers Chinese medicinal materials seed collection, Chinese medicine pieces, formula granules, Chinese proprietary medicine, Chinese medicine health and other related fields. The company has 10 exclusive basic drugs in the country: "Fairy Bone Capsules", "Neck Comfort Granules", "Rheumatic Bone Pain Capsules", "Qili Capsules", "Moisturizing and Anti-itching Capsules", "Zao Ren Anshen Capsules", "Jade Ping Feng Granules", "Rhinitis Kang Tablets", "Golden Leaf Septic Granules" and "Turtle Jia Frying Pills". The company's revenue and profit fluctuated slightly, and the overall growth was steady. From the perspective of revenue, the company's operating income increased from 11.295 billion yuan to 14.315 billion yuan from 2018 to 2022, with a CAGR of 6.1%. In terms of profit, the company's net profit decreased from 1.439 billion yuan to 764 million yuan from 2018 to 2022, with a CAGR of -14.64%.
The layout of China's traditional Chinese medicine in the whole industry chain of traditional Chinese medicine and health has formed an industry-leading advantage. Production scale advantages: In 2022, the Group will build a total of 226 GACP Chinese herbal medicine bases, involving a total of 91 Chinese medicinal materials varieties, with a planting area of 250,000 mu. Leading advantage in formula granule industry: According to data from China Pharmaceutical Industry Information Center, the total market of traditional Chinese medicine formula granules in mainland China in 2020 was RMB 19 billion, and the company accounted for more than 52% of the market share that year, ranking first. In 2022, the company completed the listing and filing of 199 national standard varieties and 281 provincial standard varieties, ranking first in the industry in the number of listed filings. Channel terminal coverage advantages: In 2022, the company's 35 shared traditional Chinese medicine intelligent distribution center systems will operate stably, and the number of terminal access will continue to grow. The beverage tablet business has newly developed more than 1,500 medical terminal customers of various types. China Traditional Chinese Medicine has optimized and improved its business sectors and industrial chain, innovative R&D, and management system, and the company has good development potential. The company optimizes the coordination effect of business segments, volatilizes the advantages of the whole industry chain of traditional Chinese medicine and health, strictly controls the source resources, and strengthens the planting and operation of traditional Chinese medicinal materials; The company adheres to the drive of scientific and technological innovation, cultivates and develops strong forces, continuously strengthens the construction of scientific research teams and platforms, and maintains the leading research on national and provincial standards of traditional Chinese medicine formula granules; We have continued to deepen systematic management, effectively enhanced the ability to execute strategies, optimized the human resources system, and stimulated the ability of talents to innovate and create.
3.1.3、 Taiji Group: Focus on the main industrial products, optimize the commercial layout, promote the intelligent manufacturing of modern Chinese medicine, and build a regional commercial leader
Taiji Group is mainly engaged in the production and sales of Chinese and Western patent medicines, and has a complete pharmaceutical industry chain such as pharmaceutical industry, pharmaceutical commerce, and medicinal material planting. The company's products include digestive system and metabolic drugs (Xiangzhengqi oral liquid, Taluo as the representative), respiratory system drugs (acute bronchi syrup, sinusitis oral liquid as the representative), cardiovascular and cerebrovascular drugs (Tongtian oral liquid, danshen oral liquid as the representative), anti-infective drugs (Yibaoshiling as the representative), nervous system drugs (morphine hydrochloride sustained-release tablets, profendine sustained-release tablets as representatives), antitumor drugs (small gold tablets, granisetron hydrochloride injection Representative), big health products (tianjiao, Kidney tonic and longevity capsules are representatives) as the key treatment area. The company's revenue and profit growth were steady. From the perspective of revenue, the company's operating income increased from 10.689 billion yuan to 14.051 billion yuan from 2018 to 2022, with a CAGR of 7.08%. From the perspective of profit, the company's net profit attributable to the parent increased from 70 million yuan to 350 million yuan from 2018 to 2022, with a CAGR of 49.53%. The company's profit fluctuated greatly, mainly due to the original extensive management, in 2020, Sinopharm Group took over, carried out multi-faceted reforms on products, channels, etc., and the performance gradually improved. The decrease in the company's net profit attributable to the parent in 2021 was mainly due to the company's profit in 2020 mainly for the transfer of 95% of the equity of Chengdu Xinhengsheng Real Estate Development Co., Ltd. to obtain a gain of 400 million yuan, and the company had no major asset transfer income in 2021.
The company has a complete industrial chain, the company takes Chinese and Western patent medicine manufacturing as its core business, and has a complete pharmaceutical industry chain such as pharmaceutical industry, medical business, medicinal material planting, scientific research and so on. As of 2022, it has 13 pharmaceutical factories and more than 20 pharmaceutical commercial companies; The company has strong brand and product advantages, "TAIJI" is the first batch of well-known trademarks in China, and the first OTC brand pharmaceutical enterprises; "Tongjunge" is a century-old brand, and the traditional pill-making technology of Tongjunge has entered the national list of "intangible cultural heritage". The company has 1242 approvals for Chinese and Western medicines, 552 approvals for Chinese chemical drugs, 690 approvals for traditional Chinese medicines, 86 exclusive production varieties in China, 278 national patents and 2 well-known trademarks; Scientific research and technology advantages, in the past 20 years, the company has achieved fruitful scientific research results, successfully developed more than 40 new drugs, obtained more than 30 national new drug certificates, more than 70 production approvals, and more than 20 clinical approvals; Marketing management advantages, the company has a first-class staff team and a first-class management team in China's pharmaceutical market. Taiji Group has optimized and improved in the pharmaceutical industry, pharmaceutical business, traditional Chinese medicine and scientific and technological innovation, and the company has good development and upgrading potential. The company's pharmaceutical industry focuses on the main products, reform and innovation, leapfrog development, identifies the marketing growth track, establishes brand marketing benchmarks, and achieves breakthrough sales growth, and the pharmaceutical industry will achieve sales revenue of 8.785 billion yuan in 2022; The company optimized the layout of the pharmaceutical business, strengthened the operation of varieties, vigorously expanded the terminal, reduced costs and increased efficiency, and the pharmaceutical business achieved sales revenue of 8.006 billion yuan; Focusing on traditional Chinese medicine, strengthening source control, and laying out the development of the whole industrial chain, the company strengthens the construction of medicinal materials base, improves the control of Chinese medicinal materials resources, strengthens the whole process traceability, and digitally empowers quality Chinese medicine; The company strengthens scientific and technological innovation, makes up for the shortcomings of scientific and technological innovation, focuses on six major therapeutic areas, accelerates the progress of research projects, innovates the construction of scientific research platforms, and promotes the integration of production, education and research.
3.1.4、KunYao Group: Focusing on R&D innovation and platform construction, focusing on building a core platform for chronic disease management and high-quality Sinopharm
KunYao Group inherits the essence of Sinopharm and has created a number of high-quality Chinese medicines represented by ginseng Jian Spleen and Stomach Granules, Shu Liver Granules, etc., and gradually formed four core business patterns of chronic disease management, health consumption, overseas and international, and beauty and health, and its business focuses on pharmaceutical manufacturing industry, pharmaceutical circulation and international cooperation, and health industry. KunYao Xuesitong series products have outstanding influence in brand building and communication, and the traditional fine Chinese medicines represented by ginseng Jian Spleen and Stomach Granules, Shu Liver Granules, Xiangsha Ping Stomach Granules, Lung Clear Phlegm Pills, Oropharyngeal Clear Pills, etc. continue to make efforts, so that the brand concept of KunYao continues to penetrate. The company's revenue and profit growth were steady. In terms of revenue, the company's operating income increased from 7.102 billion yuan to 8.282 billion yuan from 2018 to 2022 million yuan, with a CAGR of 3.92%. From the perspective of profit, the company's net profit attributable to the parent increased from 336 million yuan to 383 million yuan from 2018 to 2022, with a CAGR of 3.33%.
The company's product cluster has obvious advantages, focusing on core areas such as cardiovascular and cerebrovascular, bone wind and kidney (orthopedics, rheumatism and immunology, nephrology), and continues to create advantageous gold products, in 2022, the company has 10 varieties with annual sales of more than 100 million yuan; Marketing channel advantages, the company continues to innovate marketing models, has built a domestic and foreign marketing network and marketing team matching the existing rich product lines, the company's sales network has covered the whole country, and established its own sales team in large and medium-sized cities across the country; Brand advantages, the two major brands of KunYao Group, "Sanqi Innovation and Technology Leader" and "Kunqi Traditional Chinese Medicine 1381", have been widely recognized by the market, and have formed their own brand effects, and the barriers to brand competition have been deepening; After years of accumulation, the company has established a high-level drug research and development leader team with high influence, providing an inexhaustible talent power for the research and development of innovative drugs. KunYao Group has made breakthroughs and optimizations in the fields of drug platform, health and overseas sectors, and R&D and innovation, and the company has good development and improvement potential. The company focuses on the important chronic disease market of "stroke prevention and treatment", builds a cardiovascular and cerebrovascular chronic disease management ecosystem with stroke prevention as the core, and "Kun Traditional Chinese Medicine 1381" makes every effort to build a first-line brand of China's time-honored brands with the help of the long-standing and profound accumulation of traditional Chinese medicine culture and the potential energy of old brands; In 2022, channel expansion, single product building, and R&D accelerated multi-frequency resonance, driving KunYao Health to complete the acceleration in iterative upgrading, the sales scale exceeded 200 million yuan, in 2022, Ketaifu 12 tablets BE was recognized by WHO, GMP (Good Manufacturing Practice) rectification was completed, MAH (Drug Marketing Authorization Holder System) and GVP (Pharmacovigilance Quality Management Practice) system construction was completed; Clinical trials of innovative drugs progressed smoothly: KYAZ01-2011-020, a self-developed TCM/natural drug for ischemic stroke Class 1 new drug, has completed phase I clinical research and officially entered phase II clinical research.
3.1.5、 Dongea Ejiao: Attach importance to product and research and development, continue to integrate into the development of great health, and accelerate the reshaping of value, business and organization
Dong Ejiao is mainly engaged in the research and development, production and sales of ejiao and ejiao series and other proprietary Chinese medicine products, and is a leader in the formulation of ejiao industry standards, a leader in nourishing health and a model for the high-quality development of traditional Chinese medicine enterprises. The company's main products are ejiao, compound ejiao pulp, "peach blossom jiao" ejiao cake, "Dong Ejiao brand" ejiao powder, Turtle Lu Erxian oral liquid, Hailong gum oral liquid and other strategic reserve products more than 40 kinds. The company's overall revenue growth is relatively stable, and profits have fluctuated slightly. In terms of revenue, the company's operating income decreased from 7.338 billion yuan to 4.042 billion yuan from 2018 to 2022, with a CAGR of -13.85%, and achieved revenue of 1.069 billion yuan in 2023Q1, a year-on-year increase of 20.1%. From the perspective of profit, the company's net profit attributable to the parent decreased from 2.085 billion yuan to 780 million yuan from 2018 to 2022, with a CAGR of -21.79%.
The company has a strong brand advantage, Dong Ejiao as a Chinese time-honored enterprise with strong integrity and innovation genes, located in Dong'a County, the birthplace of authentic Ejiao, has widely recognized mental resource advantages, and is known as the first brand of nourishing health; Excellent product quality, 2022 certification audit external inspection pass rate of 100%, market sampling pass rate continues to maintain 100%, zero quality accidents throughout the year, ejiao, compound ejiao pulp, peach blossom ji ejiao cake won the first batch of "good product Shandong" brand in Shandong Province; Systematic technology and standards, the "Ejiao Cake" industry standard led by Dong Ejiao is the first national ejiao food standard approved and publicized by the Ministry of Industry and Information Technology, filling the gap of industry standards; With the advantages of scientific research platform, Dongea Ejiao has the only "National Rubber Traditional Chinese Medicine Engineering Technology Research Center" recognized by the Ministry of Science and Technology, and is a "national technological innovation demonstration enterprise", "national innovative pilot enterprise" and "national high-tech enterprise". Dong Ejiao has improved and optimized its products and research and development, channels and purchase convenience, and communication with consumers, and the company has good development and promotion potential. Further promote the research on the quality and efficacy differentiation of Dong Ejiao, create competitive barriers, actively expand to multiple categories based on the large category of qi and blood, create more high-quality Chinese medicine and light health products, and explore the layout of "Ejiao +" and "+ Ejiao" categories; From OTC terminals to omni-channel layout, focus on medical channels, explore the layout of online channels such as Douyin and Xiaohongshu, empower each other online and offline, deeply expand the increment, promote factories to directly reach customers, and build a customer operation service platform for Dong'a Jiao origin through high-quality customer experience services; Build a content matrix to achieve word-of-mouth dissemination and precipitation across the network.
3.2. Local state-owned traditional Chinese medicine enterprises
3.2.1、 Tongrentang: Strengthen variety cultivation and broaden the industrial layout, deepen marketing reform, focus on making up for shortcomings and optimize the layout of production lines
Tongrentang's main business is the production and sales of proprietary Chinese medicines, and has a complete industrial chain including planting of Chinese medicinal materials, processing of Chinese medicinal materials, research and development of proprietary Chinese medicines, production of proprietary Chinese medicines, pharmaceutical logistics and distribution, drug wholesale and retail. The company has produced more than 400 specifications of proprietary Chinese medicines all year round, with rich dosage forms, covering internal medicine, surgery, gynecology, pediatrics and other categories, represented by Angong Niuhuang Pill, Tongren Niuhuang Qingxin Pill, Tongren Dahuoluo Pill, Liuwei Dihuang Pill, Jin Kui Kidney Qi Pill and many classic drugs are well-known at home and abroad. The company's revenue and profit growth were steady. In terms of revenue, the company's operating income increased from 14.209 billion yuan to 15.372 billion yuan from 2018 to 2022, with a CAGR of 1.99%. From the perspective of profit, the company's net profit attributable to the parent increased from 1.134 billion yuan to 1.426 billion yuan from 2018 to 2022, with a CAGR of 5.90%.
Tongrentang has a strong brand advantage, and the Tongrentang brand, as a representative of mainland traditional Chinese medicine, has a profound brand accumulation. Tongrentang products are famous for "unique formula, superior material selection, exquisite craftsmanship and remarkable curative effect" at home and abroad, and have high industry appeal, social recognition and brand influence in the Chinese medicine industry and consumers' minds; Variety advantages, the company has products represented by Angong Niuhuang Pill, Tongren Niuhuang Qingxin Pill, Tongren Daluo Pill, etc., as well as many classic drugs, perennial production of more than 400 specifications of proprietary Chinese medicine, rich in variety resources, covering cardiovascular and cerebrovascular, tonics, clear heat, gynecology, pediatrics and other fields, forming a strong support for the brand; Industrial advantages, the company and its subsidiaries have a number of production bases, all over Beijing, Hebei and other regions, on the basis of inheriting traditional production technology, vigorously promote intelligent production, increase production capacity, reduce energy consumption, and gradually build an industrial cluster with advanced technology, complete functions, green environmental protection. Dong Ejiao has carried out optimization and reform in marketing, retail terminals and overseas markets, and the company has good development and improvement potential. The company makes multi-dimensional efforts to deepen marketing reform, optimize resource allocation, give full play to the advantages of the combination of three major modes of "(external) platform + (owned) platform", direct supply terminal, and characteristic variety dealers, and increase the five key OTC varieties; Increase the layout and promotion of retail terminals, as of 2022, Tongrentang Commercial has 942 stores, in the face of complex market conditions, Tongrentang Commercial coordinates economic operation and resource allocation, aims at market demand, focuses on traditional Chinese medicine services to carry out multi-level work such as marketing and publicity, cultural experience, and public welfare science popularization; Actively develop overseas markets and promote marketing reform.
3.2.2、 Foci Pharmaceutical: Gansu State-owned Assets Supervision and Administration Commission plans to take over, optimize the marketing team to increase brand power, expand the industrial volume of "traditional Chinese medicine, big health", and expand the five major markets
Foci Pharmaceutical's industry is traditional Chinese medicine manufacturing industry, the main business is the research and development, production and sales of proprietary Chinese medicine and health products, the planting and sales of Chinese medicinal materials, the processing and sales of Chinese medicine pieces, the production and sales of medical devices such as protective masks, and the analysis and testing service business. At present, the main products produced and sold by the company include Liuwei Dihuang Pill, Xiaoyao Pill, Xiangsha Stomach Nourishing Pill, Ginseng Guben Huan Shao Pill, Ejiao and other Chinese proprietary medicines, as well as Chinese medicine pieces and health products, covering many categories and fields such as tonics, colds, gastrointestinal, gynecology, tranquilative sleep and so on. The company's revenue and profit growth were steady. In terms of revenue, from 2018 to 2022, the company's operating income increased from 545 million yuan to 1.019 billion yuan, with a CAGR of 16.93%, and achieved revenue of 307 million yuan in 2023Q1, a year-on-year increase of 29.8%. From the perspective of profit, the company's net profit attributable to the parent increased from 73 million yuan to 106 million yuan from 2018 to 2022, with a CAGR of 9.77%.
Gansu State-owned Assets Supervision and Administration Commission intends to take over. In February 2023, the company issued an announcement: Gansu SDIC intends to become the controlling shareholder of the company by acquiring 100% of the equity of Lanzhou Foci Pharmaceutical Industry Development Group Co., Ltd., and the controlling shareholder of the company before the completion of the acquisition is Lanzhou State-owned Assets Supervision and Administration Commission, if the acquisition is completed, the company's strategic position will be downgraded to the provincial level. Foci brand for a hundred years, "Foci" is the first batch of "Chinese time-honored brands" recognized by the Ministry of Commerce of the People's Republic of China, "Foci" trademark is "China's well-known trademark", after 94 years of long development, "Foci" brand has a good market base and extensive influence at home and abroad; The company is located in Gansu Province with rich resources of traditional Chinese medicinal materials, which is an important national production base of traditional Chinese medicinal materials and a pilot demonstration province for the comprehensive reform of national traditional Chinese medicine development; The company has 467 drug production approval numbers, and has 10 national exclusive products such as ginseng solid ben less pills, dingdi pills, bamboo leaf pepper flakes, eryi pills, compound astragalus and spleen oral liquid, and produces more than 110 varieties all year round; The production capacity scale has been steadily increased, and the project of Foci Pharmaceutical Science and Technology Industrial Park in Lanzhou New District has built a large-scale automated production line for proprietary Chinese medicines in accordance with the high-standard modern Chinese medicine management practices and GMP requirements, realizing the wide application of new CNC automation technology in the processing of medicinal materials, concentration and extraction, preparation packaging, quality control, technological innovation and other aspects; Leading the process technology in the industry, Foci pioneered the process and dosage form of proprietary Chinese medicine concentrated pills, and the production line has passed the certification of China, Australian TGA Organization, Japanese Ministry of Health and Welfare and Ukrainian Product Certification Agency; In recent years, the company has closely followed the strategic planning and layout, and actively established good scientific research cooperation with Lanzhou University, China Academy of Chinese Medical Sciences, Tianjin Institute of Materia Medica, Lanzhou University of Technology and other universities and research institutes.
Foci Pharmaceutical has carried out reform and optimization in marketing, scientific research and innovation, and the company has good development potential. The company implements the combination of "building a team, expanding channels, managing products, and grasping sales", introduces a team of professional managers, optimizes the structure of the marketing team, optimizes policy support, and comprehensively enhances Foci's marketing ability and brand influence through advertising coverage, marketing and team incentives. Following the cooperation with Lanzhou University to build a modern Chinese medicine whole industry chain innovation research and development center, in 2022, it made a breakthrough in the construction of a national technological innovation platform, and was approved as a "national postdoctoral scientific research workstation", at the same time, according to the company's strategic planning, continue to increase the research and development of big health products, research and development of more than 70 big health product series products, "one tea" series of Chinese tea drinks, astragalus crystal, wheat selenium good drink, peach gong fresh drink and other products have been put on the market, helping the company accelerate the layout of the big health industry.
3.2.3、 Darentang: Deepening mixed reform to enhance the momentum of industrial development, the research and development of new Chinese medicine drugs continues to heat up, and new models and formats are transformed
The company takes green Chinese medicine as the core, integrates production, operation and scientific research, and its business covers the whole industrial chain of Chinese medicine, covering the planting of Chinese medicinal materials, trade of Chinese medicinal materials, R&D, production and sales of proprietary Chinese medicines, production and sales of Chinese herbal tablets, pharmaceutical commercial logistics, pharmaceutical retail, R&D, production and sales of chemical raw materials and preparations, biomedicine, nutrition and health products, etc. Well-known products include quick-acting heart-saving pills, Jingwanhong ointment, Paralyzing capsules, Shu Naoxin drop pills, purple dragon gold tablets, lung clearing anti-inflammatory pills, Huo Xiang zhengqi soft capsules, Tongmai Yangxin pills, gastrointestinal pills, clear throat drop pills, seahorse kidney supplement pills, Angong Niuhuang pills, Niuhuang Qingxin pills, Qinggong Shou peach pills, etc. The company's revenue and profit growth were steady. From the perspective of revenue, the company's operating income increased from 6.359 billion yuan to 8.249 billion yuan from 2018 to 2022, with a CAGR of 6.72%. From the perspective of profit, the company's net profit attributable to the parent increased from 562 million yuan to 862 million yuan from 2018 to 2022, with a CAGR of 11.29%.
As of 2022, the company has 6 well-known trademarks in China, including Darentang, Longshun Rong, Lerentang, Songbai, Jingwanhong and Yuqi, and has 14 representative items of intangible cultural heritage; Huge product reserve, the company has 22 dosage forms, a total of 599 drug approval numbers, including 1 national secret product (quick-acting rescue pill), 1 national secret variety (Jingwan red ointment), 5 traditional Chinese medicine protected varieties, 114 exclusive production varieties, 75 varieties and 601 kinds of Chinese medicine pieces; Comprehensive industrial structure, the company now has 1 national enterprise technology center, 6 municipal enterprise technology centers, 1 enterprise key laboratory, 1 municipal technical engineering center, 1 municipal traditional Chinese medicine modernization technology engineering center and postdoctoral scientific research workstation approved by the Ministry of Personnel; The company is listed in Singapore and Shanghai respectively, and in accordance with the strict requirements of domestic and foreign laws and regulations, it has standardized and improved the corporate governance structure and has high external transparency. Darentang has carried out reform and optimization in focusing on the main business, innovation and medicinal materials system, and has good development and improvement potential. The company's proprietary Chinese medicine segment focuses on the "three cores and nine wings" product line, oversees the whole life cycle planning of products, and scientifically integrates all elements of resources; In 2022, the company adheres to the patient-centered, clinical value-oriented, re-positioning of existing varieties, layout the quality standard improvement of large varieties, and the company completed R&D investment of 151 million yuan throughout the year; The company set up a medicinal materials resource center to coordinate and manage the construction of the GAP base for medicinal materials around "cost reduction, quality assurance and supply assurance", and concentrated the key work in three aspects: procurement and strategic reserves.
3.2.4、 Combe Shell: Deepen the mixed reform and focus on the high-quality development of the main business, accelerate the development of core businesses, and continue to expand characteristic products
The company focuses on the main business of medicine and health, mainly engaged in the research and development, manufacturing and sales of drugs and health products, and has formed a product structure based on modern Chinese medicine and botanical medicine, with characteristic chemical drugs including APIs and preparations and functional health products as important support. At present, the pharmaceutical dosage forms of the company and its subsidiaries include tablets, capsules, pills, pills, granules, powders, injections, lyophilized powder injections, oral liquids, syrups, nasal drops, ointments, etc., as well as new dosage forms such as sustained release and immediate-release. The company's revenue and profit fluctuated slightly, and the overall was relatively stable. In terms of revenue, from 2018 to 2022, the company's operating income decreased from 6.787 billion yuan to 6 billion yuan, with a CAGR of -3.03%, and achieved revenue of 2.131 billion yuan in 2023Q1, a year-on-year increase of 25.3%. From the perspective of profit, the company's net profit attributable to the parent decreased from 804 million yuan to 358 million yuan from 2018 to 2022, with a CAGR of -18.31%.
Kangbei brand advantages are obvious, the company pays attention to brand building in business development, and has cultivated and formed Kangbei, Qianliekang, Tianbaoning, Jin Aokang, Jindi, Jinkang, Jin Aikang, Tiansikang, Jinkang Suli, Xitao and other well-known brands and their series of products; Product advantages, the main product line covers digestive system, respiratory system, cardiovascular and cerebrovascular system, urinary system and anti-infection and other fields. As of 2022, the company has a second-class protected variety of traditional Chinese medicine, Musk Xiang Tongxin Drop Pill; Marketing advantages, in recent years, on the one hand, the company has established strategic cooperative relations with third-party platforms such as "Ali Health", "Jingdong Health", "Meituan", "Ele.me" and other third-party platforms, actively explored the digital marketing development model of brand direct consumers, and achieved good results, the company's "Combe" brand health products have been in the leading position in the relevant online segments. Combe has optimized and improved its focus on the company's main business and digital empowerment, and the company has good development potential. The company completed the acquisition of 66% of the shares of the Chinese Medicine University Drinking Tablet Company and 100% of the shares of Otokang Technology Company in the provincial international trade group system, eliminating intra-industry competition and promoting business integration; Commencement of the subscription of non-public shares of Inter Group for a period of not more than RMB400 million; Completed the acquisition of minority shares of Jinhua Kangbei Company, a holding subsidiary. At the same time, the company continued to promote the work of slimming and strengthening the body, and in 2022, it completed the disposal of the fixed assets of Guizhou Beite under the company, as well as the equity disposal of many companies such as Dajing Eye Health, Dier Pharmaceutical, and Pizhou Zhongkang, basically digesting the unfavorable factors over the years; The company accelerates the construction of "Digital Combay" and creates an integrated architecture of "deep management embedding, high business support, process system integration, and information visibility throughout the process".
(This article is for informational purposes only and does not represent any investment advice from us.) For information, please refer to the original report. ）
Selected report source: [Future Think Tank].