Big White Horse usually has 4 screening criteria: ROE >10%, P/E ratio < 40 times, and the compound annual growth rate of revenue in the past three years on the performance side >20%, and the compound annual growth rate of net profit attributable to the parent company >30%, of course, it also needs to have higher earnings per share among more than 5,000 listed companies.
Ranked by market capitalization, CNOOC, CATL, Shanxi Fenjiu, Sungrow, and North Huachuang are all typical white horse stocks.
Are White Horse stocks necessarily good?
In the past year, in addition to CNOOC and Satellite Chemical, which have the support of industrial logic of continuous rising oil prices, there are not many independent and good enterprises, such as Dongpeng Beverage, which has accelerated globalization, and Yingjiagongjiu, a second-tier wine company committed to upgrading its product structure, as well as Shanxi Fenjiu and Tuopu Group.
Among the top 20 white horse stocks, WuXi AppTec and Zhifei Biotech are two typical representatives of pharmaceutical white horse stocks, and their performance in the past three years has been good, but the unsustainability of the high growth behind them has gradually been exposed.
The market is not afraid of high valuations, and often slows growth.
Among them, Zhifei Biotech is currently the only vaccine company that meets the standards of the big white horse, but it has become a negative case.
In terms of operating performance, from 2022 to 2023, while the company's operating income will continue to grow rapidly, the growth rate of net profit will continue to decline, mainly due to the decrease in the revenue of self-produced products, and the substantial increase in the vaccines of agency partners, which will continue to decline in gross profit margin and net profit margin.
And for any company, the decline in profitability cannot be ignored, because it not only has a direct impact on performance, but also means that the bargaining power and potential of the product is disappearing.
Therefore, in the context of continuous performance challenges, Zhifei's market value and valuation continued to shrink, and as an advance amount, the highest point was basically in 2021, which was a perfect fit with the extremely optimistic market environment at that time.
At the same time, the revenue growth of 2% and the net profit growth of -28.26% in the first quarter of this year are still difficult to be optimistic.
Valuations alone really don't work.
So, where does the future of Zhifei go from here?
1. The ceiling of more than 50 billion revenue looms
Friends who have known Zhifei should know that Zhifei's vaccine agency business is mainly Merck's HPV vaccine, 23-valent pneumococcal vaccine and pentavalent rota-shaped vaccine, among which HPV vaccine is the largest because of its efficacy in cervical cancer prevention, covering a wide range of people and having a higher price.
In 2023, more than 46 million quadrivalent and nine-valent HPV vaccines will be issued in batches, and the total number of other products will be less than 10 million.
As a result, the revenue scale of Zhifei's agency business reached 51.9 billion yuan, but at the same time, the gross profit margin of the business is also declining, a year-on-year decrease of about 3 percentage points, to 25.68% in 2023.
In the case of procurement costs, the decline in gross profit margin can only indicate that the price of products is declining, and product price reductions are generally used in market competition, and the reason why Zhifei does this is to cope with the listing of other nine-valent HPV vaccines.
In 2022, the nine-valent HPV vaccine will directly affect the sales of bivalent and quadrivalent because of the age expansion, and from the previous bivalent dispute between Wantai and Watson, we can also see that the vaccine industry can only tolerate one winner.
So with the unveiling of Wantai Bio's nine-valent HPV vaccine in Phase 3 of this year, it is waiting for the marketing application, and there is not much window left for Zhifei, and for Wantai, it is "barefoot and not afraid to wear shoes".
At the beginning of 2023, Zhifei and Merck signed the purchase agreement seems to have expected this, although the current overfulfilled procurement, but it is expected that 2023 will be the highest point, and the agreed procurement amount in 2024 and 2025 will show a downward trend.
It is reported that the overall vaccination rate of HPV vaccine in mainland China has reached about 21%, and the vaccination rate of women aged 9-15 is even higher
Low, on the one hand, we do not deny that there is still room for incremental HPV vaccines, but on the other hand, with the increase in penetration, the growth rate of penetration rate and the speed of vaccination will face a slowdown.
Smartphones, mobile games and new energy vehicles have all experienced such a rule, and the penetration rate from 10%-20% is often the best time for the industry to grow.
2. Inventory backlog and accounts receivable soared
In addition, in addition to the problem of future growth, there are also many hidden problems in Zhifei's financial report, the first of which is the continuous growth of the two major operating assets, as of the first quarter of 2024, inventory and accounts receivable reached 12.607 billion yuan and 30.029 billion yuan respectively.
Analytically, accounts receivable have industry characteristics, and the company's low bargaining power for the CDC of downstream government customers, coupled with the fact that in order to promote sales, accounts receivable grow faster.
Most of the inventory is reflected in upstream procurement, and the company can't help but have a lot of inventory.
Therefore, Zhifei will inevitably face the problem of recovering accounts and destocking in the future, but in a market with low bargaining power and oversupply, coupled with unfavorable factors such as inventory and shelf life, it will often face impairment risks in this process.
The impact of impairment losses on profits is also relatively direct, and it has already been exposed in 2023.
3. R&D investment of 1.3 billion VS market value of 81.5 billion
Of course, for pharmaceutical companies, we all pay attention to the potential, that is to say, its fundamentals may not be very good, but if it is likely to explode, the market is still willing to give it a chance.
R&D investment is the most unified and direct measure of this potential.
According to the statistics of 2023, the pharmaceutical companies with the most R&D investment include BeiGene, Hengrui Pharmaceutical, Fosun Pharma, Mindray Medical, Shanghai Pharmaceutical, etc., among which, Zhifei ranks 14th in the pharmaceutical industry with R&D investment of 1.345 billion yuan, and the company's market value ranks 10th.
Theoretically speaking, the market value not only reflects the present, but also contains expectations, so in the context of the huge pressure on Zhifei Biotech, will its R&D projects have great potential?
At present, the company's pipeline after phase 3 of research includes quadrivalent influenza vaccine, human diploid vaccine, 15-valent pneumococcal conjugate vaccine, and quadrivalent flu brain conjugate vaccine, but only 15-valent pneumococcal conjugate vaccine is expected to become the first one, even if the market time is not considered, it is also facing strong competition from 13-valent vaccines.
In addition, in terms of demand, it is expected that the recombinant herpes zoster vaccine as a new agent of Zhifei will be more important, and the minimum purchase amount agreed between Zhifei and GSK (GlaxoSmithKline) in 2024 will be 3.44 billion yuan, which is obviously not in the same order of magnitude as other products.
However, even if it is a recombinant herpes zoster vaccine, Zhifei is also facing competition from domestic 100 grams of biology, as well as Luzhu biology, which is already in clinical phase 3, and Walvax biology, Kangtai biology and Pfizer in the field of 13-valent pneumonia vaccine, which are also very competitive.
So in general, the problem of Zhifei is not only Zhifei, but also the problem of market competition and vaccination demand, and the development of vaccine companies as a whole is a little difficult to grasp, not to mention that Zhifei's self-research ability is obviously not as good as agent sales, and agent products are facing the tiger eye of domestic vaccines.
As a result, in the first quarter of this year, major shareholders such as foreign capital, E Fund Pharmaceutical ETF and social security fund are reducing their holdings.
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Source: Flying Whale Investment Research