Wu Wei, large Health Industry Group of "Investor Network"

With the advance of the reform of separation of medicine and medicine, it is more and more convenient for patients to buy standing drugs and some prescription drugs. In this process, the pharmaceutical retail industry ushered in a golden opportunity for development. However, drugs are directly related to the health of patients, especially the abuse of antibiotics will also cause public health problems, so regulators have a lot of targeted regulations on the circulation, storage and retail of medicine.

Based on the relevant regulations, regulators have eliminated many weak single pharmacies, which makes the development opportunities of chain pharmaceutical retail enterprises with centralized procurement, storage and management. At present, there are four national pharmaceutical retail enterprises with a market capitalization of tens of billions of yuan, such as 002727.SZ, 603883.SH, 603939.SH and 603233.SH. In addition, there are also shoulder regional pharmaceutical retail enterprises such as Jian Zhijia (605266.SH) and gargle civilian (301017.SZ).

It is worth noting that although the pharmaceutical retail policy or market environment is different in different regions, the basic development logic of chain pharmaceutical retail industry is not much different. Yishintang, ordinary people, Yifeng Pharmacy, Da Shenlin, Jianzhijia and Shu Yu civilians are expanding the number of their stores and improving their income and profits through new openings, mergers and acquisitions, and even joining.

Under the similar development logic, the share prices of pharmaceutical retail companies that have been listed for a long time, such as Yishintang, ordinary people, Yifeng Pharmacy, Da Shenlin and Jianzhijia, did not show eye-catching performance in 2021, and the rolling price-to-earnings ratio is basically between 20-40 times. On the other hand, Shuyu civilians, who only completed their debut in the second half of this year, have experienced a rise since mid-October, gradually fell back after December, and plunged 12% on December 23. However, its rolling price-to-earnings ratio is still 46.6 times, higher than the industry average. From a fundamental point of view, is its current valuation level reasonable?

Shu Yu civilian stock price trend chart since listing (unit: yuan / share)

Business sinking regional market

Unlike other national pharmaceutical retail enterprises, as of the first half of 2021, Shu Yu's civilian income was mainly concentrated in Shandong. Among them, the central Shandong region contributed 77.84% of the company's income, the northern part of Shandong contributed 21.49% of the income, and the business outside Shandong contributed very little to the civilian income of Shuyu.

According to Shuyu civilian disclosure, as of the first half of 2021, the company has 2149 direct chain stores in Shandong Province, with its main branches in 15 prefectures and cities in Shandong Province. According to the disclosure of "Top 100 chain drugstores in China in 2020-021", by the end of 2020, there are more than 7 chain pharmaceutical retail enterprises in Shandong, including gargle civilians, with a total of nearly 7000 chain stores. if you add small chain retail stores and single pharmacies, the number of pharmaceutical retail stores in Shandong will far exceed 7000.

In view of this, it will be more and more difficult for Shu Yu people to continue to increase their income by opening new stores in Shandong Province. In its business planning, the means of expanding its business include seizing the business circle market, sinking the county market, opening the rural market, and so on, so as to further develop the market potential of Shandong.

However, although Shandong is an important province in the east, the market space is limited after all. According to the latest statistics, the resident population of Shandong is only more than 100 million. Therefore, even if the company's business layout sinks smoothly, it is difficult to provide the company with too much room for growth.

At the same time, in order to further improve the company's income and profit level, gargle civilians have also made a lot of efforts. Relying on the advantages of pharmaceutical storage, circulation and retail in Shandong area, Shu Yu civilians are actively arranging DTP pharmacy and online and offline O2O business, so as to further enhance the company's market share in pharmaceutical circulation and retail in Shandong area.

According to the Dongxing Securities Research report, Shuoyu civilian is the most well-known and largest chain drugstore enterprise in Shandong Province, with business deeply cultivated in the province; the company deeply arranges DTP pharmacies and courtyard stores, accounting for a proportion higher than that of the head chain drugstores, and has a strong ability to undertake prescriptions; vigorously lay out O2O Magi O2O market share first in the province.

In the limited regional market, if the business is not distributed outside Shandong Province, the income and profit scale of gargle people will reach the ceiling sooner or later. In the process of the gradual increase of the concentration of the domestic pharmaceutical retail industry, the head enterprises are very fierce in the market competition.

Yifeng pharmacy in South and East China, ordinary people in Central and East China, and one heart in Southwest China. Jianzhijia, a regional chain pharmaceutical retail enterprise, is also trying to get rid of the current situation that its income is mainly dependent on Yunnan Province. began to actively lay out provinces and cities such as Chongqing, Guangxi and Sichuan.

Judging from the business planning of Shuyu civilians, the company has realized that the business needs to break through the limitations of the Shandong area. By the end of the first half of 2021, Shu Yu civilians have signed a number of franchise stores in Heilongjiang Province, Liaoning Province, Jilin Province, Shanxi Province, Tianjin and other areas outside Shandong Province, and intend to distribute the company's business outside Shandong Province through franchise stores. Under the background that the head chain enterprises are scrambling to seize the market, it remains to be seen whether the layout of the civilian business outside the province can be smooth. In the layout process, the company needs to build a matching pharmaceutical storage, distribution and store management system, which may increase its cost pressure in the short term.

The price-earnings ratio is higher than that of the same industry.

Up to now, although the income of Shu Yu civilian is mainly from Shandong, the business model of Shu Yu civilian is compared with the income growth logic and the national chain pharmaceutical retail enterprises such as Yitang, ordinary people, Yifeng Pharmacy, Da Shenlin and so on. there is not much difference, that is, to earn the price difference through pharmaceutical distribution and retail. And through the opening of new stores, the layout of DTP pharmacy and the integration of online and offline business to improve the company's income and profit level.

Due to the impact of the epidemic in 2020, the sales of epidemic prevention products have pushed up the income base, resulting in low income growth of chain pharmaceutical retail enterprises in 2021. Affected by this, the share prices of some enterprises showed a downward trend. As of December 23, the share price of Yinxintang has risen 6.51% so far this year, while the shares of ordinary people, Yifeng Pharmacy, Da Shenlin and Jianzhijia have fallen by 30.33%, 29.21%, 44.72% and 13.63%, respectively.

Judging from the rolling price-to-earnings ratio on December 22, Yishintang, ordinary people, Yifeng Pharmacy, Da Shenlin and Jianzhijia are 22 times, 26 times, 40 times, 28 times and 18 times respectively. With the exception of Yifeng Pharmacy, whose stores are mainly in eastern China, the price-to-earnings ratio of Yifeng Pharmacy is 40 times, while several other companies are all about 20 times earnings.

As a secondary new stock, gargle opened at 33.84 yuan per share, up 282% from the issue price of 8.86 yuan, fell below 20 yuan all the way after listing, and began to rise since mid-October, rising to 35.67 yuan, and then began to pull back. As of December 23, its closing price was 23.36 yuan per share, with a rolling price-to-earnings ratio of 46.6 times, still higher than the industry average.

In terms of performance, compared with the company's revenue growth rate of 33.84% in 2020, Shu Yu civilians also experienced a decline in revenue growth in the first three quarters of 2021, like other companies in the industry.

Specifically, the company's operating income in the first three quarters was 3.715 billion yuan, an increase of only 11.34% compared with the same period last year, while due to the increase in labor costs caused by the increase in personnel reserves and the increase in short-term expenses caused by the increase in store expansion, the company's net profit in the first three quarters was only 110 million yuan, down 10.58% from the same period last year. From this point of view, the performance of Shu Yu civilians since 2021 is basically similar to that of peer companies. In this case, the price-to-earnings ratio of gargle is higher than that of peer companies, or there is a risk of overvaluation. (produced by thinking Finance)