2021-10-28 Ma Li of Zhejiang Merchants Securities Co., Ltd. studied the development of Shandong businessmen and released the research report "Shandong Merchants Development report on the third quarter of 2021: the income fluctuation caused by real estate settlement, the overall performance is still beautiful". This report gives an overweight rating for the development of Shandong businessmen, and the current stock price is 12.91 yuan.
The Development of Shandong Merchants (600223)
Performance overview: the fluctuation of real estate business led to a decline in income, and the volume of net profit continued to rise.
Affected by the real estate business, revenue in the first three quarters of 2021 was-10% compared with the same period last year, but the net profit was + 22% compared with the same period last year. 1) the company realized 6.35 billion yuan in revenue,-10% compared with the same period last year. 2) the net profit of returning to the mother was 500 million yuan, + 22% compared with the same period last year. 3) deducting the non-return net profit of 510 million yuan, + 28% compared with the same period last year.
Q3 single quarter, revenue year-on-year-35%, home net profit + 11% year-on-year. 1) the company realized 2.28 billion yuan in revenue,-35% compared with the same period last year. 2) the net profit of returning to the mother was 190 million yuan, + 11% compared with the same period last year. 3) the net profit of deducting non-return is 200 million yuan, which is + 19% compared with the same period last year. While the volume of income has declined, the net profit has increased compared with the same period last year, which further highlights the enhancement of the company's profitability and the optimization of the business structure.
Profitability: focus on marketing and greatly increase profitability
Profitability has improved significantly, and the expense rate has increased significantly. 21Q1-Q3: 1) Gross profit margin is 32.1% (+ 6.2pp). 2) the expense rate during the period is 17.9%, which is + 6.6pp compared with the same period last year. In terms of breakdown, the sales / management / R & D / financial expense rates are 12.7% (+ 5.3pp) / 3.9% (+ 0.9pp) / 1.3% (+ 0.6pp) / 0.02% (- 0.1pp) respectively. 3) the net interest rate is 7.8% (+ 1.3pp).
Sales expense rate increased to help marketing, single-quarter gross profit margin reached a new high in recent years. 1) Gross profit margin was 33.8% (year-on-year + 9.7pp), the highest since the third quarter of 2015. 2) the expense rate during the period is 18.2%, which is + 9.0pp compared with the same period last year. In terms of subdivision, the rate of sales / management / R & D / financial expenses is 13.7% (+ 7.2pp) / 3.2% (+ 1.2pp) / 1.3% (+ 0.8pp) /-0.07% (- 0.1pp). The proportion of the company's cosmetics business increases and develops real estate sales channels, leading to a significant increase in the rate of sales expenses. 3) Q3 single-quarter net interest rate is 7.9% (+ 2.8pp).
Business split: the performance of the pharmaceutical and cosmetics sector is beautiful, and the cosmetics business continues to grow high.
1) Cosmetics business: the company now has 11 brands, such as Yilian, Dr. Yuer, etc., mainly relying on the operation and development of Freda Biological shares. In the first three quarters of 21, the operating income reached 990 million yuan, an increase of 175% over the same period last year, with a gross profit margin of 63.2%. Among them, the contribution income of "Dr. Yue er" is 490 million yuan, and that of "Yi Lian" is 430 million yuan. Cosmetics Q3 single-quarter income of 370 million yuan, year-on-year growth of more than 130%, excellent performance. In addition, the company participated in the compilation of the "skin microecology and skin health Chinese expert consensus" has also been officially released, "Yilian" brand in the Seventh China Cosmetics Top 100 chain Conference won the "2021 China franchise store best cooperative brand" and "2021 aesthetic excellent partner", professional endorsement + market recognition, a two-pronged approach to further shape the brand image. The first phase of the company's Freda Biology 112000 square meters cosmetics "Zhimeike Chuangyuan" project has obtained a production license in October this year and has been put into production. It will further release the company's production capacity and contribute to performance growth in the future.
2) Pharmaceutical business: the revenue in the first three quarters of 21 was 400 million yuan, + 22% compared with the same period last year, and the gross profit margin reached 58.3%, of which Q3 achieved revenue of 130 million yuan in a single quarter. In addition, the company's Freda Pharmaceutical was awarded the "Top 100 Enterprises in China Pharmaceutical Manufacturing Industry" and "Top 50 growing Enterprises in China Pharmaceutical Industry" in 2020.
3) Raw materials and additives business: the company's focus Freda is the world's leading hyaluronic acid raw material production base, now has hyaluronic acid raw material production capacity of 420 tons / year. In the first three quarters of 21, the revenue was 180 million yuan, + 35.3% compared with the same period last year, and the gross profit margin reached 40%. Among them, Q3 achieved revenue of 50 million yuan in the single quarter, representing a steady growth. In August, focus Freda was selected by the Ministry of Industry and Information Technology as a national specialized special new and national key "Little Giant" enterprise. since its establishment, its R & D center has undertaken more than 30 R & D projects, most of the achievements have been transformed, and a total of more than 40 patents have been obtained. its sodium hyaluronate products were selected as "Shandong innovative Industrial products in 2021". The company's own strong R & D capabilities superimposed expertise and new policies are good, and the industry position is further consolidated.
Short-term fluctuations in the real estate business, ballast stone position is still stable. Affected by the decline in contracted area and construction area in the first three quarters of 2021, the real estate sector achieved operating income of 4.25 billion yuan,-26% year-on-year, and business gross profit margin of 22.2%, of which Q3 earned 1.24 billion yuan in a single quarter,-54% of the same period last year. In the first three quarters of this year, the amount of contracts signed by the real estate business reached 11.74 billion yuan, an increase of 11.1% over the same period last year.
Management structure: the introduction of war investment, enabling growth
On September 23, Freda Biology, a wholly-owned subsidiary of Shandong Merchants Development, plans to increase its capital and shares and introduce strategic investors. The pre-investment valuation is 3.6 billion yuan, and the opening price of the corresponding investment is not less than 738 million yuan. If this capital increase and share expansion is successfully landed, the proportion of biological equity of Freda will be changed from the wholly-owned holding of Shandong Merchants Development to 82.42% of Shandong Merchants Development + 16.90% of War Investment + 0.68% of employees. While ensuring the company's biological control of Freda, the introduction of war investment plus employee subscription will help to further optimize the capital structure, broaden the financing channels, stimulate the enthusiasm of employees, and empower the cosmetics business.
Profit forecast and valuation: increase the rating
The company's sound real estate business is based on the high-growth hyaluronic acid track, and it is expected that the raw material + cosmetics business will set sail. We estimate that the income from 2021 to 2023 will be 129.5 yuan, 165.1 yuan and 18.6 billion yuan respectively, with growth rates of-5%, 27% and 13% respectively, and the net profit of returning home will be 7.5 yuan, 8.6% and 1.21 billion yuan respectively, with year-on-year growth rates of 17%, 15% and 40% respectively, corresponding to 17, 15 and 11 times of PE.
Risk hint
The risk of real estate and biomedical policy change, the risk of price fluctuation of hyaluronic acid raw materials, the risk of competition in cosmetics market, the risk of multi-industry integration, etc.
The stock has been rated by six institutions in the last 90 days, including 4 buy ratings and 2 overweight ratings; the average institutional target price in the past 90 days is 17.14; according to the Securities Star valuation analysis tool, the rating of good companies in Shandong Shang Development (600223) is 2.5 stars, the good price rating is 3 stars, and the comprehensive valuation rating is 3 stars.
