Traditional Chinese medicine stocks, competing for beauty!
Following Jiangzhong Pharmaceutical, Jichuan Pharmaceutical, Yunnan Baiyao, Baiyunshan, etc., which were out of the circle because of high dividends, on the one hand, Dong'e Ejiao, Zuoli Pharmaceutical, Lingrui Pharmaceutical, and Ma Yinglong continued to expand their growth boundaries, and on the other hand, China Resources Sanjiu, Kunming Pharmaceutical Group, Taiji Group, and Tongrentang stepped on the spring breeze of national reform.
Even Pien Tze Huang, which has a top-secret formula, Tasly, Kangyuan Pharmaceutical, and Fangsheng Pharmaceutical, which are actively innovating and transforming, have become "mean" stocks.
And what this has not considered is that if the short-term influencing factors are ignored, from the product level, are there any companies that have been left out of traditional Chinese medicine companies?
Shouxian Valley, which ranks first in the industry in gross profit margin and second in net profit margin, has attracted our attention.
As of the first quarter of 2024, Shouxian Valley's gross profit margin has reached 82.91%, which can be called Moutai in the traditional Chinese medicine industry, and the net profit margin has reached 34.92%, second only to Jichuan Pharmaceutical.
So, why is the gross profit margin of Shouxian Valley so high? What exactly does it do?
Gross profit margin is a direct reflection of the profitability of the company's business operations, which starts with product sales.
As of 2023, the two types of products have achieved revenue of 534 million yuan and 127 million yuan respectively, and other products include saffron (saffron), Hangzhou chrysanthemum, clover green, etc., creating the first brand of organic Chinese medicine.
Among them, Ganoderma lucidum spore powder products are mainly used to replenish qi and calm the nerves, strengthen the spleen and lungs, enhance immunity, etc., Dendrobium officinale is used to nourish the stomach, nourish yin and clear heat, and saffron is mainly used to promote blood circulation and eliminate blood stasis, cool blood and detoxify, relieve depression and calm the nerves.
The curative effect of these products, as well as the high price characteristics behind them, stems from the fact that the raw materials required for the production of the products are precious Chinese medicinal materials such as Ganoderma lucidum, Dendrobium officinalis, and saffron.
Taking Ganoderma lucidum spore powder products as an example, the daily dosage of Ganoderma lucidum spore powder (broken wall) in the lowest dosage form is 47 yuan, and the highest even reaches 119 yuan/day, among which "Xianzhi No. 1" and "Xianzhi No. 2" are Ganoderma lucidum independently cultivated by the company.
Breeding is also a kind of high-tech industry, so Shouxian Valley has mastered systematic breeding, aerospace mutagenesis and other breeding technologies, and cultivated new varieties such as Ganoderma lucidum and Dendrobium officinalis through the use of innovative technologies.
Up to now, Shouxian Valley has its own Chinese herbal medicine planting base of 4,800 acres, which is the largest precious and rare medicinal material base in the country.
In addition, the company also invented the exclusive wall removal technology, so that Ganoderma lucidum into a drinkable powder, belongs to the third generation of wall removal technology, while peer products mostly use the second generation of wall breaking technology, with active ingredients, higher absorption rate and other characteristics.
Therefore, with the advantages of independent medicinal raw materials and production technology, Shouxian Valley can not only make the products sell at a higher price, but also set prices independently, thus maintaining a higher gross profit margin, which is higher than Pien Tze Huang, Dong'e Ejiao and other products.
So, how is the growth of Shouxian Valley?
1. The industry has broad growth space, and the company actively expands the market outside the province
As of 2023, Shouxian Valley's Ganoderma lucidum spore powder products and Dendrobium officinale products have achieved sales of tens of thousands of kilograms, and in terms of region, they mainly come from Zhejiang Province, the company's main battlefield.
Zhejiang province alone has achieved sales of 478 million yuan, it can be said that the potential market for the product is still quite large, but due to the acceptance and popularity of the product itself, the popularity is not so high, and the company's expansion channels outside the province also need time to improve, so the market outside the province has not been fully opened.
However, theoretically speaking, the market of traditional Chinese medicine health care products has a large market space, and compared with general health care products with traditional Chinese medicine endorsement, it will ultimately be better in terms of efficacy, which is conducive to the sales of products.
It is reported that in 2021, the total market size of the mainland health food industry will exceed 210 billion yuan, of which the market size of traditional Chinese medicine health products will exceed 100 billion yuan and the market size of Ganoderma lucidum spore powder will be about 10 billion yuan, all of which are showing a continuous growth trend.
In this regard, Shouxian Valley took the lead in actively expanding consumers through online channels, and maintained continuous growth from 2021 to 2023, with a compound growth rate of 13.24% in online revenue, but due to the weak consumption inside and outside the province, the performance has been sluggish.
However, as of the first quarter of 2024, the company's performance has shown a recovery growth trend, and the net profit growth rate is significantly higher than the revenue growth rate.
Since 2023, Shouxian Valley will start to develop the top 100 chain OTC channels in the country, and at the same time carry out investment promotion outside the province, establish cooperation with different industry channels such as the wine industry, and high-end group purchase channels, etc., which is expected to open up sales in the market outside the province.
In addition, it is expected that more investment will be increased online, more platforms will be expanded, and younger groups will be promoted.
2. Continue to increase R&D investment and strengthen brand building
In addition to channel expansion, Shouxian Valley is also continuing to strengthen product innovation and development, including breeding, planting, processing technology and other production-end research, as well as the development of new varieties, some pharmacological and pharmacodynamic research and clinical research.
In 2023, the company's R&D investment will be 49.6828 million yuan, accounting for 6.33% of revenue, which is significantly higher than most brand companies in the traditional Chinese medicine industry.
The company actively expands the development of new products of the Shouxian Gu brand, and the more important of which should be the development of the main product, that is, the clinical research of Ganoderma lucidum spore powder in the field of cancer.
Studies have shown that Ganoderma lucidum spore powder can help to improve the comprehensive treatment effect of tumors, and the relevant extracts can inhibit the activity of tumor cells, which has great application prospects in the field of anti-cancer.
At present, the company is cooperating with a number of clinical medical centers across the country, such as Beijing Hospital of Traditional Chinese Medicine and China-Japan Friendship Hospital, to carry out multi-center double-blind clinical trials to verify the anti-cancer effect of Ganoderma lucidum spore powder, and subjects have been enrolled, and if developed, it can significantly enhance the commercial value of the product.
Of course, the development of other products is expected to be presented in the form of quantity, and the increase in the number of products requires the endorsement of strong brand power.
Shouxian Valley is currently increasing the construction of physical stores, which we believe is also a more positive level for a traditional Chinese medicine company, just like the general construction of Chinese medicine halls in Tong Ren Tang and Pien Tze Huang, which will also officially start construction in 2023.
In general, in the entire traditional Chinese medicine industry, Shouxian Valley is still relatively special, especially the company's main business is unique, and has established a strong competitive advantage, although the company's health care products characteristics are more obvious because of the challenge of growth, but from the channel, research and development and brand building, the future growth of Shouxian Valley is still worth looking forward to.
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Source: Flying Whale Investment Research