报告名称：Liuzhou Pharmaceutical(603368)Company Visit Express：High growth expected with a
报告类型：点评报告
报告日期：2016-04-12
研究机构：中信国际
股票名称：柳州医药
股票代码：603368
页数：4
简介：Leading pharmaceutical distributor in Guangxi, with high 1Q16earnings expected. The Company is an industry leader inpharmaceutical distribution in Guangxi Autonomous Region, with itswarehousing and delivery capabilities significantly boosted by theopening of two modern logistics centers in Nanning and Liuzhou. TheCompany posted 2015 revenue of Rmb6.508bn (+15.07% YoY) and netprofit of Rmb208mn (+22.72% YoY), and expects 1Q16 net profit atRmb62mn-66mn (+50%-60% YoY), mostly driven by rocketingoperating revenue (+22% YoY) and lower financial expenses afterrepaying loans with proceeds from its IPO.
Extended services business will likely rapidly boost market share.The Companyˇs business has penetrated all 3A hospitals and above90% of 2A hospitals in Guangxi, with a delivery services network allover the autonomous region. The Company plans to spendRmb1.035bn to facilitate the development of its extended servicesbusiness along the supply chain in 15-20 3A hospitals and 30-50 2Ahospitals in Guangxi, and has already signed agreements with 14medical institutions. By assisting hospitals in establishing internal SPD(supply, processing, and distribution) system and equipping pharmacieswith automated devices, the Company will likely improve its cooperationwith medical institutions and improve customer loyalty. We expect itsmarket share to be boosted after Guangxiˇs next round of medicinetenders in 2016.
Presence in upstream pharmaceutical manufacturing subsectorwill likely optimize its business mix. The Company forayed into theupstream pharmaceutical manufacturing subsector from 2013. Theoperation of a processing base of prepared slices of traditional Chinesemedicines (TCM) in Nanning, in which the Company investedRmb127mn, is expected to generate revenue of Rmb200mn-300mn inthe next three years. In order to gain a presence in prepared slices ofTCM and preparations business, the Company established WanrunBio-tech in cooperation with Guangxi Medical UniversityPharmaceutical in January 2016, which enabled it to benefit from theprice premium in hospital-made preparations. In addition, the Companywill likely leverage its advantages in delivery networks to boost salesvolume and earnings of its pharmaceutical manufacturing business. Italso spent Rmb135mn to construct a delivery network for equipmentand consumables, which is expected to contribute revenue ofRmb500mn p.a. in the future. The development of the Companyˇsequipment and consumables delivery business and diversifiedpharmaceutical manufacturing business (including production ofprepared slices of TCM, hospital-made preparations anddirect-to-patient) will gradually optimize its business mix and improve itsprofitability.
Retail business will likely benefit from the demand for prescription drugs diverted from hospitalpharmacies. In 2015, the Companyˇs retail revenue rose by 22.68% YoY to Rmb468mn. GuizhongPharmacy, the Companyˇs wholly-owned subsidiary, has 174 directly-managed pharmacies (including 56pharmacies covered by the health insurance system) and 11 DTP (direct-to-patient) pharmacies. TheCompany also runs pharmacies neighboring hospitals. With a presence in both medicine wholesale andretail businesses, the Company has forged close cooperative relationships with hospitals, and thus willlikely benefit from the demand for prescription drugs diverted from hospital pharmacies, as theseparation of the role of hospitals and pharmacies will be the trend of the health care industry.
Potential risks: Risks in tender policy; disappointing progress of new business model.
BUY rating. Based on the Companyˇs 2015 earnings, we estimate the Companyˇs 2016-18E EPS atRmb2.17/2.87/3.64. Given the valuations of comparable companies, we assign 40x 2016E PE to theCompany, implying a TP of Rmb86.88. We initiate coverage with a BUY rating.

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