#以书之名#
On the whole, if you want to understand the fundamentals of this case, you must dig deep into the following details:
1) From the perspective of profitability, in the first stage, why is its gross profit margin and net profit margin declining, but ROE and ROIC are rising?
2) In the second stage, its ROE, gross profit margin, and net profit margin declined simultaneously, and even suffered a loss in 2006, what happened?
3) In 2010, its revenue, net profit, ROE, and total assets increased sharply at the same time, what happened this year?
4) In the fourth stage, although the net profit continues to rise, why is the cash flow from operating activities not good?
5) From the perspective of valuation, why does its stock price continue to rise in the fourth stage, but the PE has always fluctuated between 15X-20X?
6) In November 2017, Shanghai Pharma acquired Cardinal Health Malaysia for US$570 million, and under the expectation of such a merger, its PE is still hovering at a low level (15-20x), and slightly lower than Sinopharm and China Resources Pharmaceutical, why is this? After 2018, now its PE has been killed to a minimum of about 10x, is its valuation reasonable?
In the first stage, its ROE and ROIC showed an overall upward trend, with ROE rising from 11.06% in 1994 to 26% in 2000, and ROIC rising from 6% in 1994 to 8.13% in 2000.
Since it was restructured in 1998, we look at it in two parts – the first part: 1994-1997; Part II: 1998-2000
Before 1998, Shanghai Pharmaceutical was listed on Shanghai No. 4 Pharmaceutical Factory, and its main business was antibiotics, semi-synthetic antibiotic APIs and preparations
However, due to the high degree of homogeneity of the antibiotics produced, there are more than 100 market competitors, fierce competition, and low gross profit margin.
In addition, due to the increase in the overall expenses of retired employees and the continuous increase in management expenses, the net profit margin of sales declined, resulting in a slight decline in ROE.
It was not until 1998 that due to the recession of the main antibiotic business, the actual controller decided to dispose of all the assets of Shanghai No. 4 Pharmaceutical Factory, and put Shanghai Pharmaceutical Company, Shanghai Pharmaceutical Industry Sales Company, and Tianping Pharmaceutical Factory into the listed company to establish Shanghai Pharmaceutical, commonly known as "Lao Shangyao"
The major asset replacement has brought about two changes:
First, the main business has changed, from antibiotics to pharmaceutical distribution and pharmaceutical, and mainly distribution;
Second, the expansion of distribution scale and the increase of interest-bearing liabilities have increased the equity multiplier and promoted the recovery of ROE.
In 1998, the interest-bearing liabilities were 1 billion yuan, an increase of 358.72% year-on-year, so the equity multiplier increased from 2.31 to 3.63. And it's been on the rise ever since.
From the perspective of performance growth, after the injection of assets, its revenue and net profit have risen sharply, and the growth rate of net profit is much higher than the growth rate of revenue
In short, at this stage, affected by asset restructuring and ROE improvement, the stock price also rose sharply, from 2.46 yuan at the time of listing to 7.5 yuan in 2000, an increase of 204.88%
PE rose from 53X to a maximum of 109X, after which PE fell to 31X due to higher net profit after the restructuring, and then oscillated between 30X and 60X
The next question is: can the old business be divested and the new business injected?
Predict the follow-up and listen to the next breakdown
It does not constitute any investment advice, the stock market is risky, and you need to be cautious when entering the market