Tonghua Dongbao (600867): Diabetes Leader Shows Its Turning Point

Tonghua Dongbao (600867): Diabetes Leader Shows Its Turning Point
Summary of the report The historically outstanding domestic incremental industry leader, the performance is expected to return to a faster growth trackThe company with the most complete specifications.  The company’s historical performance is excellent. From 2005 to 2018, the company’s revenue / net profit compound growth rates were 18% / 35%, respectively.In the third quarter of 2018, the company proactively reduced the scale of channel inventory, reduced the size of accounts receivable, and controlled shipments, resulting in a slight shift in net profit for the year.At present, the company’s accounts receivable has returned to normal levels, and the channel inventory has returned to normal. Since Q3 of 18 was a low performance, we think the company’s performance is expected to return to a faster growth track since Q3 of 19  Insulin glargine is about to be approved, the product line is about to be rapidly enriched, and the performance is expected to grow steadily in the long term. Insulin glargine has completed the production field testing and on-site sampling stage.50, GLP-1 analogs, oral hypoglycemic drugs and many other varieties, the company is about to enter the rapid enrichment period of the product line, the first diabetes leader.We estimate that the company’s second-generation insulin will still maintain a growth of about 10-13% in the next 3-5 years, and insulin glargine has been sold for more than 1 billion cents.  The value is reassessed, and the leading diabetic leader is projected to have an income of 19-21 years28.5.3 billion, 32.98 ppm and 38.1.6 billion, with a growth rate of 6% / 16% / 16%, and a net profit of 9.6.6 billion, 11.5.2 billion and 13.86 billion yuan, a growth rate of 15% / 19% / 20%.  The faster growth of profits than the growth of revenues stems from: scale effects, gross profit margins gradually increase with the increase in sales scale, and the company’s expense ratio gradually declines, and the 都市夜网 proportion of non-insulin business decreases.  At present, the company’s PE for 20 years is only 30 times, which is at a historically low level. It is called other leading pharmaceutical companies and is estimated to be attractive.Give a target price of 25.65 yuan, corresponding to 45 times PE in 20 years.Covered for the first time and given a “Buy” rating.  Risk reminder: The growth rate of second-generation insulin exceeds the expected growth rate; the market progress of the research varieties exceeds expectations.

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