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Dashenlin (603233): Acquisition of Nantong Quality Leading Pharmacy Accelerates National Layout

Dashenlin (603233): Acquisition of Nantong Quality Leading Pharmacy Accelerates National Layout

Event: On November 6, the company announced that it planned to acquire 51% of the shares of Jianghai Pharmacy in Nantong City, including 123 chain drugstores, with an acquisition amount of 1.

2.7 billion, acquired PS1.

14. March into Nantong, Jiangsu, and increase the company’s brand influence.

This is an important step in the national layout after entering Hebei and Heilongjiang through acquisitions this year.

Comments: 1.

The acquisition of the target is of high quality and 南京桑拿论坛 great potential, which will help the company quickly stabilize the Nantong market. From the perspective of the layout area, Nantong is a leading city in the Yangtze River Delta economic belt.Nantong has a population of 7.13 million and a huge market development potential. The acquisition will enhance the company’s brand influence and competitiveness, which is in line with the company’s concept of “deep cultivation in southern China and the nationwide distribution.”

Judging from the competitive advantages of the target, Jianghai Pharmacy’s outstanding location advantage has helped the company to stabilize the Nantong market.

Jianghai Pharmacy has been cultivating Nantong for 11 years, and currently has 123 direct-operated stores (113 open and 10 open), which are located in Nantong urban area and surrounding counties, laying a foundation for the subsequent full layout.

Expansion ability is outstanding. In 1994, there were 94 stores, which increased to 107 in July 2019, and currently has 123. There are 86 medical insurance stores, accounting for 70%.

From the financial data, the target’s overall profitability is better, and the potential for internal growth is great.

18-year target income1.

24 ppm, net profit 4.37 million, net profit margin 3.

5% (18 ginseng forest 5.

93%); January-July 19’s income1.

130 thousand yuan, net profit 6.04 million yuan, net interest rate 5.

4% (19H1 Dashen Lin 7.

22%); it is expected that the tax-included income in 2019 will not be less than 2.

20,000 yuan, 18 years tax-included income1.

45 billion, 52% +.

Deduct non-net profit is not less than 12 million yuan, deduct non-net profit5.

5%.

Performance commitment for steady growth: 2020-2021 (including tax) is not less than 2 respectively.

53/2.

USD 9.1 billion, with a growth rate of not less than 15% and 15% in one year; non-net profit after deduction is not less than 13.8 / 1587 million yuan, and annual growth rate is not less than 15% and 15%.

From the perspective of increasing performance, it is expected to be consolidated in 2020. According to our profit forecast, the revenue will be 150 in 2020-2021.

76/190.

2.6 billion, return to mother 9.

43/12.

09 billion, it is expected that revenue (excluding tax) will increase to 152.

86, 192.

6.8 billion, return to mother will increase to 9.

50/12.

1.7 billion, thickened by 0.

7%, 0.

7%.

From the synergy effect, the advantages are complementary, and mutual benefit and win-win results.

After the merger and acquisition, Dashenlin’s comprehensive management system, commodity procurement resources, refined management capabilities, and the ability to expand new stores can help Jianghai Pharmacy reduce procurement costs, promote sales scale and profitability, and quickly increase market share.Of 5.

5% increased to 6.5% or more.

At the same time, Jianghai Pharmacy is at the forefront of Nantong. In the period of 2018-2019, the new store is rapidly developing while the old store still maintains a high average single store size. The store has a single store size, reasonable display layout, high customer loyalty, and professional breakthrough in pharmacy.Strong and other characteristics, with overlapping loyalty member resources, help the company to quickly stabilize the Nantong market, as the basis for subsequent expansion.

2.

The company ‘s ability to expand across provinces has gradually increased, and regional barriers to competition have continued to increase. The company ‘s performance has continued to accelerate in 19 years, and it has again verified that the company ‘s performance inflection point has arrived: 1145 new stores in 16-17 are expected to enter the profit period in 19 years. 19 The average ratio of new stores and old stores each year has reached the highest value in history (secondary store revenue growth rate is the starting point in the life cycle of stores, and old stores have the highest net interest rate). The proportion of old stores has increased year by year in 19-21, and the performance is flexible.

The company mainly builds itself in advantageous areas (Guangdong, Guangxi), re-integrates brand and scale advantages to quickly occupy the market, and has gradually covered most of the counties and towns in the two provinces.

The combination of mergers and acquisitions in other regions + self-construction has achieved a major breakthrough in the regional performance of key developments in Guangxi, Henan, and Fujian. In the first half of the year, the company entered Baoding, Hebei through acquisitions.Home), the budget company acquired a 2% stake in Hong Kong Zhongzhuo Medical Co., Ltd. in March to strengthen the layout of medical services, and the establishment of a wholly-owned subsidiary, Dashenlin Medical Health (Hainan) Co., Ltd. in September, to deploy the Internet hospital business,Expand the company’s diversified operations.

3.

Actively undertake prescription outflows and bring about flexibility in performance. Under the background of prescription outflows, the company’s 19H1 prescription drug revenue accounted for 28%.

6%, year on year.

65%.

The number of medical insurance stores in 119H1 accounted for 76.

6%.

In terms of DTP, the company completed the establishment of a 35DTP professional pharmacy, and established a complete DTP professional pharmacy management system and team. The professional DTP management team works closely with leading prescription drug manufacturers. In terms of chronic disease management, the companyThe disease management special team implements customer file management, builds professional chronic disease service stores, and improves the ability of pharmacy services. In terms of the construction of prescription platforms, the company has already launched pilot prescription sharing platforms in Guangxi, Guangdong, and Henan provinces.Achievements have brought tremendous increase to the development of enterprises.

Earnings forecast: Combined with this acquisition, the profit forecast for 2020-2121 is raised, and the net profit for 2019-2021 is expected to be 7 respectively.

23, 9.

50, 12.

1.7 billion, corresponding to 41, 31, and 24 times the corresponding PE.

Maintain “Buy” rating.

Risk warning: Store performance after mergers and acquisitions is less than expected.