East China Medical (000963): Expense increase accelerating R & D innovation transformation

East China Medical (000963): Expense increase accelerating R & D innovation transformation

Investment Highlights Event: East China Pharmaceutical released its 2019 semi-annual report and achieved operating income of 182.

49 ppm, an increase of 19 years.

08%; net profit attributable to mother 15.

96 ppm, an increase of 23 in ten years.

42%; deducted non-net profit 14

740,000 yuan, an increase of 16 in ten years.

16%.

Net cash flow from operating activities 9.

63 ppm, a decrease of 10 per year.

02%.

Opinion: Revenue fluctuations and expense accrual increase, the growth in the second quarter exceeded expectations.

Due to the fluctuations in revenue recognition, the growth rate of revenue in the second quarter fell month-on-month, and Q1 and Q2 revenues increased by 24% and 14%, respectively.

Q2 The recognition of the pharmaceutical industry’s revenue decreased, resulting in a decrease in gross profit margin and a decrease in the sales expense ratio, but the company’s management and R & D expenses were significantly increased.

Q1 and Q2 deducted non-net profit increased by 30% and 1% each year.

During the first half of the year, the company’s expenses increased significantly. R & D expenses increased by 77%, management expenses increased by 59%, and sales expenses increased by 32%.

Due to the high industrial growth, gross profit margin increased by 2.

95 points.

Industry maintained high growth and business recovered.

In the first half of 2019, the industry continued to maintain high growth and achieved revenue56.

96 ppm, an increase of 28 in ten years.

85%.

Among them, it is expected that the revenue of Bailing capsules will increase by about 16%, the revenue of acarbose will increase by more than 30%, the overall revenue of immunosuppressants will increase by about 27%, and the revenue of pantoprazole will increase by about 20%; pioglitazone metformin, tolubufen,Second- and third-line varieties such as daptomycin have more than doubled.

In addition, pioglitazone metformin has recently entered the 2019 national health insurance routine catalog. It is expected 南京桑拿网 to accelerate its volume in the future and become a new key product of the company’s diabetes pipeline.

Due to the impact of the two-vote system in the past, revenue growth has picked up and realized revenue 122.

870,000 yuan, an increase of 12 in ten years.

69%; gross profit margin rebounded to 8.

08%.

The international medical beauty sector achieved 2.

6.5 billion in revenue.

Increase R & D investment and accelerate R & D innovation transformation.

Company R & D expenses in the first half of the year 4.

69 ppm, an increase of 77 in ten years.

49%, with an estimated R & D expenditure of more than 1 billion, an annual growth of more than 40%.

Lilaglutide injection, a key product in the field of diabetes, has started the national multi-center phase III clinical trial and is rapidly reorganizing into the group; Mehuatinib is conducting first-line phase II clinical trials, and preliminary clinical trial results are expected before the end of the year.And phase III clinical trials of first-line treatment are also being prepared, and it is planned to start in the second half of 2019.

Insulin detemir is undergoing a phase I clinical trial.

The company’s generic drug consistency evaluation work is progressing smoothly. Acarbose tablets, cyclosporine soft capsules and other products have passed the consistency evaluation.

Profit forecast and estimation: We expect the company’s operating income to be 346 in 2019-2021.

77, 380.82 and 414.

53 ppm, an increase of 13 in ten years.

09%, 9.

82% and 8.

85%; net profit attributable to mother is 27.

75, 32.

11 and 36.

85 ppm, an increase of 22 in ten years.

40%, 15.

71% and 14.

74%.

The company has outstanding sales capabilities, rich product pipelines, and large space in the medical and aesthetic field. Although it may be affected by policies such as volume purchase in the future, the market has already reflected this expectation. At present, the company’s response to the corresponding PE of 2019-2021 is 19 times., 16 times and 14 times.

Maintain “Buy” rating!

Risk warning: product development progress is not expected; core product sales are not up to expectations