Question: Kangyuan Pharmaceutical's sales expenses are still high, but this academician named company has been questioned, at least not as strong as everyone imagined?
Uncle Shang
Produced by Huaxiangming Financial Omnimedia
Recently, the A-share traditional Chinese medicine sector has attracted widespread attention due to a wave of volatile markets.
In the context of the stock prices of major Chinese medicine leaders rising and falling like a roller coaster, Kangyuan Pharmaceutical, which was once widely favored by the market, was once again criticized by investors for its falling stock price performance.
When Longjin Pharmaceutical fell to the limit and Tongrentang hit the limit to fall, Kangyuan Pharmaceutical also fell ahead. When the traditional Chinese medicine sector rebounded and a large number of popular stocks were in the red, Kangyuan Pharmaceutical's share price still fell. In response to such a performance, retail investors' comments on Kangyuan Pharmaceutical are inevitably harsh.
As a star pharmaceutical company established in 1996 and successfully listed in 2002, Kangyuan Pharmaceutical has neither a lack of halo, concept, nor core products, and Xiao Wei, the founder of "Entrepreneur Academician", has provided innovation and scientific research "escort" for the development of the enterprise. However, as a well-known pharmaceutical company originating in Lianyungang, Jiangsu, Kangyuan Pharmaceutical's vertical performance has been facing controversy, and its horizontal industry status is being thrown farther and farther away by Zhengda Tianqing, Hengrui and Haosen.
Maybe the temporary downturn is not terrible, but if Kangyuan Pharmaceutical continues to "fall behind" in the case of the overall upward trend of the domestic traditional Chinese medicine industry, that is the real terrible place.
The "Big Four" of Lianyungang that is not worthy of the name?
When it comes to Kangyuan Pharmaceutical, people can't help but compare him with Chia Tai Tianqing, Hengrui Pharmaceutical, and Haosen Pharmaceutical, because Kangyuan Pharmaceutical, together with them, is known as the "four major pharmaceutical companies" in Lianyungang.
At the end of 2023, in the "2022 Top 100 Chinese Pharmaceutical Industry List" released by the 2023 China Pharmaceutical Industry Development Conference, Chia Tai Tianqing, Hengrui Pharmaceutical, Haosen Pharmaceutical, and Kangyuan Pharmaceutical were all on the list. Among them, Chia Tai Tianqing ranked 13th, Hengrui Pharmaceutical ranked 14th, Haosen Pharmaceutical ranked 34th, and Kangyuan Pharmaceutical ranked 71st. ①
It can be seen that although they are all among the top 100 in China's pharmaceutical industry, the "Big Four" of Lianyungang cannot be called tied in terms of market position.
The same gap is more reflected in the level of market capitalization.
As of the close of trading on February 2, Kangyuan Pharmaceutical's share price closed at 14.54 yuan per share, with a total market value of 8.502 billion yuan. The market value level of less than 10 billion means that no amount of glamorous labels can hide the fact that Kangyuan Pharmaceutical is not favored by investors.
Correspondingly, taking Hengrui Pharmaceutical as an example, the total market value of Hengrui Pharmaceutical in the same period was 229.3 billion yuan, and Kangyuan Pharmaceutical was obviously not an order of magnitude.
According to the ranking, the market value of Chia Tai Tianqing and Hengrui Pharmaceutical should be similar, Haosen Pharmaceutical is basically at the level of 100 billion, and the market value of Kangyuan Pharmaceutical is less than 10 billion, which is naturally easy to give people a feeling of not being worthy of the name.
In fact, under the continuous industry trend of innovative traditional Chinese medicine drugs, considering that Kangyuan Pharmaceutical's main product pillars are still a few products, and several new products that have been launched have failed to obtain good market performance support, it is understandable that Kangyuan Pharmaceutical has been thrown farther and farther away by the other three pharmaceutical leaders who made their fortunes from Lianyungang.
However, if the development of the enterprise does not advance, it will retreat, and with the increasingly fierce competition in the field of medical treatment and traditional Chinese medicine, if Kangyuan Pharmaceutical cannot reverse the gap as soon as possible, the future left to him is destined to become more and more difficult.
The performance bottleneck cannot be broken
As the most important factor supporting the stock price performance and market value of a company, performance determines whether the company can gain recognition from investors. The main reason why Kangyuan Pharmaceutical has failed to prove itself in the capital market for a long time is that its performance is average.
It is worth noting that Kangyuan Pharmaceutical has also gone all the way. After its listing, Kangyuan Pharmaceutical's revenue has grown from less than 1 billion yuan at the beginning to more than 4 billion yuan in 2019. ②
However, in the two years of 2020 and 2021, Kangyuan Pharmaceutical's performance continued to be sluggish, and it was not until 2022 that it ushered in a recovery.
In 2022, Kangyuan Pharmaceutical's total revenue was RMB4.351 billion, up 19.25% year-on-year, and net profit attributable to shareholders of listed companies was RMB434 million, up 35.54% year-on-year. ②
According to the third quarter report released in 2023, Kangyuan Pharmaceutical's revenue in the first three quarters of 2023 was about 3.496 billion yuan, an increase of 11.86% year-on-year, and the net profit attributable to shareholders of listed companies was about 350 million yuan, an increase of 24.24% year-on-year. ③
So, why has Kangyuan Pharmaceutical always been able to deliver growth performance for more than a year, but it has always suffered a contrarian decline in stock prices? It has to be said that investors' vision is sharp.
According to the latest estimate of the third quarter report of 2023, there are still uncertainties whether Kangyuan Pharmaceutical's total revenue in 2023 can exceed 4.566 billion yuan, and the figure of 4.566 billion yuan is the company's revenue performance in 2019.
In other words, until now, Kangyuan Pharmaceutical is still catching up with its past self. Considering that other pharmaceutical giants that are benchmarked against Kangyuan Pharmaceutical have crushed Kangyuan Pharmaceutical in terms of performance and performance, the company's revenue growth rate of about 20% in the past two years is difficult to win the eyes of investors.
Kangyuan Pharmaceutical, which is still struggling to "return" to the level of 2019, has no way to break through its performance bottleneck in a short period of time, highlighting the lack of hard power of the enterprise. This deficiency will be continuously amplified by the capital market, which will hinder the subsequent development of Kangyuan Pharmaceutical.
Gimmicks continue to be mediocre in the market?
The market has also given Kangyuan Pharmaceutical great expectations. For a long time, Kangyuan Pharmaceutical Co., Ltd. has been a leader in traditional Chinese medicine innovation, and in the caliber of some media, Kangyuan Pharmaceutical even has the reputation of "the first leader of traditional Chinese medicine" and "Hengrui in the traditional Chinese medicine industry". ④
In fact, there is no problem with such positioning, in a large number of industries, including traditional Chinese medicine, the main line of enterprise development is innovation, and only a steady stream of innovation ability can ensure the continuous upward development path of enterprises.
However, for Kangyuan Pharmaceutical in recent years, its innovative drug gimmicks are indeed far away, but once it returns to the products that contribute to the main performance, it is still the same three.
According to the official introduction, Kangyuan Pharmaceutical takes Chinese patent medicine as the main body, and lays out the fields of chemical drugs and biological drugs, and its main product lines focus on respiratory and infectious diseases, gynecological diseases, cardiovascular and cerebrovascular diseases, orthopedic diseases and other traditional Chinese medicine advantageous fields.
However, when it comes to market influence, Kangyuan Pharmaceutical only has three products on a large scale, namely Jinzhen Oral Liquid, Retoning Injection, and Ginkgo Diterpene Lactone Meglumine Injection, covering the two fields of respiratory drugs and cardiovascular and cerebrovascular drugs.
What's more serious is that injection products, which account for more than one-third of the company's revenue, have encountered variables since 2020. Although the revenue growth of Jinzhen Oral Liquid is good, Jinzhen Oral Liquid, which has a sales scale of only 1 billion yuan in 2022, will not be able to bring more contributions to Kangyuan Pharmaceutical. ⑤
In the public product introduction, in addition to the above three core products, Kangyuan Pharmaceutical has also laid out development-level varieties such as Xingbei cough granules, waist bitong capsules, and compound Nanxing painkiller ointment, and cultivated cardiovascular and cerebrovascular varieties such as Tianshu capsules, Tongsaimai tablets, dragonblood Tongluo capsules, and Dazhu Rhodiola capsules as strategic reserve varieties. At the end of 2023, Kangyuan Pharmaceutical also attracted widespread attention because the "randomized double-blind, three-arm parallel-controlled, multi-center clinical study of Jinzhen oral liquid combined with azithromycin (Xishumei) in the treatment of Mycoplasma pneumoniae pneumonia in children" has been completed. ⑤
The good news is that everyone knows that Kangyuan Pharmaceutical has long relied on core products such as Retoning, Jinzhen, and Ginkgo diterpene to drive performance, and the emergence of some new popular varieties has the opportunity to help the company change the dilemma that a large number of second- and third-line drugs have become chicken ribs and sales have not exceeded 10 million.
The bad news is that the clinical research results of Jinzhen oral liquid combined with azithromycin announced by Kangyuan Pharmaceutical Co., Ltd. under the rampant mycoplasma pneumonia epidemic seem to be more like a gimmick for the sake of showmanship, and it is difficult to reverse the company's performance in a short period of time, and the sluggish stock price performance also shows the attitude of investors who are skeptical.
Interestingly, with only one research result, Kangyuan Pharmaceutical has been crowned by some people as "the next Lianhua Qingwen", and this kind of eagerness to show itself in the market is easy to be regarded as a gimmick greater than the reality.
Kangyuan Pharmaceutical's unsatisfactory performance in the core product side is still making investors question its R&D strength.
On the other hand, the company's sales expenses far exceed the proportion of R&D investment, which seems to indicate that this academician is a company that is questioned, at least not as strong as everyone thinks?
After participating in centralized procurement and realizing the exchange of price for volume, Kangyuan Pharmaceutical's sales expenses remain high.
In 2022, the company's sales expenses will be 1.868 billion yuan, a year-on-year increase of 17.99%, and the sales expense ratio will be as high as 42.93%. Among its sales expenses, product promotion and promotion expenses amounted to 1.306 billion yuan, accounting for 69.95% of the sales expenses during the year. In the first half of 2023, Kangyuan Pharmaceutical's sales expenses reached 1.088 billion yuan, including 688 million yuan for product promotion and promotion, and 151 million yuan for advertising and academic promotion. ⑤
Under the background of the state's vigorous support for the development of the traditional Chinese medicine industry, Kangyuan Pharmaceutical has not been able to deliver an answer sheet that satisfies the market for a long time. The road of "exchanging price for volume" has not yet helped the company return to the top, and there is no new main product to take on the big responsibility, leaving Kangyuan Pharmaceutical with a dilemma.
At present, behind the market value of only more than 8 billion yuan is the market's pessimism about the company's future growth. "Falling behind" among peers may just be the loss of some. But losing the expectations of investors is destined to make Kangyuan Pharmaceutical lose more.
People can't help but ask, Kangyuan Pharmaceutical has accelerated its fall, can academician Xiao Wei save himself?
Annotation:
- 2023.11.19, World Health Expo, "2022 China Top 100 Pharmaceutical Industry List"
- 2023.07.13, Jiemian News, "Why did investors abandon Kangyuan Pharmaceutical?"
- 2023.10.26, National Business Daily, "Kangyuan Pharmaceutical: Net profit of about 350 million yuan in the first three quarters of 2023"
- 2023.12.30, Flying Whale Investment Research, "Leading Traditional Chinese Medicine Innovation, Gross Profit Margin Over 70%, Hanging China Resources and Baiyao, Underestimated Pharmaceutical Champion"
- 2023.12.20, Sina.com, "Jinzhen Oral Liquid is Sought After Will Help Kangyuan Pharmaceutical Become the Next Lianhua Qingwen?"