Medicine, a track with long slopes and thick snow.
According to the data, the size of China's pharmaceutical market in 2023 will be 1,797.7 billion yuan, and the market size is expected to reach 1,931.2 billion yuan in 2024.
As an absolute mainstream track, medicine has attracted the attention of the majority of investors, and its growth is undoubted, and the logic is very tough.
On the one hand, medicine has the attribute of hard demand.
The demand of the pharmaceutical industry is rigid, and no matter what the economic situation is, people always need to see a doctor and take medicine when they are sick. This rigid demand makes the performance growth of the pharmaceutical industry relatively stable.
For many chronic diseases or long-term diseases (such as diabetes, hypertension, etc.), patients need long-term or even lifelong drug treatment, and this long-term and continuous demand makes medicine an indispensable rigid product.
On the other hand, the aging of the population is deepening.
For a long time, the elderly have been the main force of pharmaceutical consumption, and the mainland is running into an aging society.
In 2023, there will be 297 million people over the age of 60 in mainland China, accounting for 21.1% of the total population; There are more than 217 million people over the age of 65, accounting for 15.4%, and the aging trend is obvious.
The deepening of the aging population will continue to promote the continuous growth of the pharmaceutical market and bring performance release to companies in the industry.
Therefore, based on the growth of market scale brought about by hard demand and aging, there are great opportunities for innovative drugs, medical devices, traditional Chinese medicine and other subdivisions.
From the perspective of performance, the growth of representative pharmaceutical companies such as Hengrui Pharmaceutical, Livzon Group, and China Resources Sanjiu is very stable.
Livzon Group's business is mainly divided into finished drugs, APIs and traditional Chinese medicines, of which finished drugs are divided into digestive tract drugs, sex hormone drugs and antipsychotropic drugs.
Among the digestive tract drugs (about 3.4 billion), ilaprazole (nearly 3 billion) is the mainstay, and sex hormones (about 2.6 billion) are mainly leuprolide microspheres (more than 2 billion).
According to the company's annual report, a number of products maintain the first share of the global export market.
In terms of performance, the growth rate of profit was faster than the growth rate of revenue.
Livzon Group's operating income increased from 3.16 billion yuan in 2011 to 12.43 billion yuan in 2023, and achieved operating income of 6.28 billion yuan in the first half of 2024, a year-on-year decrease of 6.1%.
Net profit increased from 360 million yuan in 2011 to 1.95 billion yuan in 2023, and net profit of 1.17 billion yuan in the first half of 2024, a year-on-year increase of 3.2%, of which the large increase in net profit in 2017 was mainly related to the large non-recurring profit and loss in that year, mainly the profit and loss on the disposal of non-current assets.
It is not difficult to see that the profit growth rate of Livzon Group is significantly faster than the growth rate of revenue, which is due to the steady improvement of gross profit margin and net profit margin.
The company's gross profit margin increased from 55.8% in 2011 to 66% in the first half of 2024, and the net profit margin increased from 12.3% in 2011 to 21.6% in the first half of 2024.
In 2023, the revenue of chemical preparations will account for 52.86%, the revenue of APIs will account for 26.17%, the revenue of diagnostic reagents will account for 5.3%, and the revenue of traditional Chinese medicine will account for 14.04%.
Among the new drug pipelines, Livzon Group's innovative drugs have good prospects, aripiprazole is a potential 1 billion+ large single product, and semaglutide is currently in clinical phase III and is expected to be approved for marketing before the patent expires in 2026.
The good performance growth has made Livzon Group's return to shareholders very impressive.
In the past 5 years, Livzon's average dividend payout ratio has been as high as 72.2%, which can be said to be quite generous. Since the company's listing, a total of 1.54 billion yuan has been raised, with a dividend of 9.58 billion yuan, and the dividend fundraising ratio has reached 622%.
Moreover, Livzon Group also released a 2022 buyback plan in October 2022, which is equivalent to a disguised dividend.
As of October 25, 2023, the company used funds of 400 million yuan to repurchase shares, accounting for 1.24% of the total share capital, and the cancellation was completed on December 4, 2023.
In December 2023, the 2023 repurchase plan was announced, which is set within one year, and it is planned to use 4-600 million yuan to repurchase Livzon shares at no more than 38 yuan per share.
As of February 29, 2024, the company used 73 million yuan to repurchase shares, accounting for 0.23% of the total share capital, and has not yet been cancelled. It is estimated that the end of the year will be cancelled along with other repurchased shares.
In order to continue to expand its business, Livzon Group has also made a number of acquisitions.
Because of the relatively stable performance growth, Livzon Group's cash flow is very abundant, with more than 10 billion monetary funds alone, which provides a solid foundation for the company's acquisition.
In 2021, Livzon Group won a 40% stake in Tianjin Tong Ren Tang at a price of 724 million yuan. After the completion of the acquisition, Livzon Group actively promoted the listing of Tianjin Tong Ren Tang.
In addition, Livzon Group also acquired 8% of the equity of Livzon Reagent, a holding subsidiary, for 65.52 million yuan in November 2023, and after the acquisition was completed, Livzon Group's shareholding in Livzon Reagent increased to 47.425%. It is reported that Livzon Reagent is mainly responsible for the diagnostic reagents and equipment business of Livzon Group.
In addition, Livzon Group has also done a good job in R&D and internationalization.
Livzon Group's R&D efforts continued to increase, with R&D investment increasing from RMB230 million in 2013 to RMB1.24 billion in 2023, accounting for 9.9% of operating revenue.
The number of R&D personnel increased from 373 in 2015 to 906 in 2023, accounting for 10.1% of the total number of employees.
Thanks to its strong R&D strength, in 2022, the company obtained 1 EU GMP certificate for APIs and intermediates, and the certified varieties are teicoplanin and vancomycin hydrochloride; There are 3 CEP certificates, namely moxictin CEP certificate, acarbose CEP certificate, and tobramycin CEP certificate.
As of December 31, 2022, the company has completed 133 international registration projects for 32 APIs and intermediates in 62 overseas countries/regions.
In China, Livzon Group has a high market position and a good reputation in China's pharmaceutical industry.
In recent years, the company has won a number of honors and awards, and has been on the list of the 2023 Top 20 ESG Competitiveness (Mid-Cap Stocks) of China's Pharmaceutical Listed Companies for two consecutive years. And won the 2023 China Top 100 Pharmaceutical Innovation Enterprises list.
To sum up, Livzon Group has shown obvious advantages in terms of market share, brand influence, supply chain and production capacity, diversified product portfolio, R&D and innovation capabilities, financial status, management team and policy adaptability.
These advantages have laid a solid foundation for the company's long-term development, and won the company wide market recognition and customer trust.
Follow Feijing Investment Research (id: Feijingtouyan) and receive the most valuable "Growth 20: 20 Companies with the Most Growth Potential in 2024" investment report now!
Source: Flying Whale Investment Research