【Depth】Zihua Palace 832566: "China's time-honored brand" has been renewed, and new drugs for the nervous system have entered the harvest period to inject vitality

"China Time-honored Brand" has been renewed, and new drugs for the nervous system have entered the harvest period and injected vitality

·Guide·

Citicoline tablets are the company's main varieties, and rizatriptan benzoate capsules and acaphenol are growing rapidly
In 2022, the market size of Citicoline Sodium Tablets will be 1 billion, and the sales market share of Zihuagong will be 29%
Highlights: New products such as pregabalin oral solution have been launched, and the pipeline layout of the "15th Five-Year Plan" has been launched

⭐ A collection of research at the end of the article | We have focused on the research of the New Third Board and the Beijing Stock Exchange for 10 years 🏆

Citicoline tablets are the company's main varieties, and rizatriptan benzoate capsules and acaphenol are growing rapidly

Zihua Palace is a "Chinese time-honored brand", a national high-tech enterprise, and a "specialized, special and new" small and medium-sized enterprise in Sichuan Province. As of December 31, 2023, the company has 99 drug production approval numbers, forming a development pattern dominated by nervous system and digestive system drugs, focusing on nervous system, digestive system, endocrine system and analgesic drugs. In 2023, the company's rizatriptan benzoate capsules and other varieties will achieve rapid growth, and new varieties such as pregabalin oral solution will be sold, laying a good foundation for the company's future performance growth. In 2023, the company's revenue will be 408 million yuan, a year-on-year increase of -7.71%; 2024Q1 revenue was 94 million yuan, a year-on-year increase of +3.61%. The company's net profit attributable to the parent company has maintained stable growth since 2016, reaching 102 million yuan in 2023, a year-on-year increase of +0.25%; The net profit attributable to the parent company in 2024Q1 was 19.8862 million yuan, a year-on-year increase of +22.99%. We expect the company's net profit attributable to the parent company from 2024 to 2026 to be 1.12/1.24/136 million yuan, EPS of 0.77/0.85/0.93 yuan/share, and the PE corresponding to the current stock price is 8.9/8.0/7.3 times respectively. In 2022, the market size of Citicoline Sodium Tablets will be 1 billion, and the sales market share of Zihuagong will be 29%

In 2023, the total sales of the national sample hospital drug market will be 225.3 billion yuan, a year-on-year increase of 2.2%. Among them, the sales of nervous system drugs in 2023 will be 13.4 billion yuan, and analgesics will account for the largest subcategory. According to the data of Minenet, from 2020 to 2022, the compound growth rate of the terminal market size of Citicoline Sodium Tablets was 10.11%, and the market size has increased to about 1 billion yuan in 2022; In 2023, the sales scale of physical pharmacies in key provinces will exceed 20 billion yuan, a year-on-year increase of 8.76%. In terms of sales volume, China Resources Shuanghe has the highest sales volume, and the sales volume of Lijiexun and Zihuagong are similar, with 29.54% and 28.64% respectively.

Highlights: New products such as pregabalin oral solution have been launched, and the pipeline layout of the "15th Five-Year Plan" has been launched

During the "13th Five-Year Plan" and "14th Five-Year Plan" period, the company's new drug R&D projects entered the harvest period, and the new drug varieties celecoxib capsules and vildagliptin tablets obtained drug registration certificates; Pregabalin oral solution is on the market; The original anti-cancer traditional Chinese medicine project Majiazi Capsule started drug clinical trials. As of December 31, 2023, the company has 84 patents, including 26 invention patents. At the same time, the company is actively looking for new drug research and development varieties to enrich the analgesic product line. At the end of 2023, the company will establish 3 new R&D projects, and the "15th Five-Year Plan" product pipeline will be laid out ahead of schedule.

Analyst:

Zhuhaibin: S0790522080007 Report date: June 26, 2024

Risk warning: the risk of dependence on a single product, the risk of quality control of medicinal materials, and the risk of increasing the concentration of distribution channels.

1. Company: Citicoline sodium tablets are the main products, and acaphenol powder is growing rapidly

1.1. Product combing: Xinkelai's revenue accounts for ninety percent, and new products such as pregabalin oral solution are on the market

Founded on April 26, 2005, Zihuagong is mainly engaged in the research and development, production and sales of drugs. The drugs produced include proprietary Chinese medicines, specialty drugs and external medicines. As of December 31, 2023, the company now has 26 invention patents, 99 drug production approval numbers, tablets, hard capsules, powders, liniments, ointments and other dosage forms. Form a development pattern with nervous system and digestive system drugs as the leading fields, and nervous system, digestive system, endocrine system and analgesic drugs as the focus of future development.

The company's main products in production are Citicoline Sodium Tablets (trade name: Xinkelai), Oriental Stomach Medicine Capsules, Rizatriptan Benzoate Capsules (trade name: Xinqu) and some general medicines.

The company's main product, Citicoline Sodium Tablets, is mainly used for the treatment of sequelae of the nervous system caused by head injury or cerebrovascular accident. Other products in production include rizatriptan benzoate capsules (trade name: Xinqu, a new drug of three classes of nervous system drugs and chemical drugs, which is used for the acute treatment of migraine attacks in adults with or without aura. Not for the prevention of migraines. ), Oriental gastric medicine capsule (digestive system medicine, three types of new drugs of traditional Chinese medicine, OTC class A, reducing the pH of gastric juice, protecting the gastric mucosa and relieving gastric ulcers in detail, and has a detailed inhibitory effect and antibacterial effect on Helicobacter pylori), oseltamivir phosphate (trade name: Xinsiao, treatment of influenza A and B), etc. At the same time, the holding subsidiary Kunming Brand New also has three national exclusive ethnic medicines: intestinal laxative capsules (OTC class A), Xuanju capsules (OTC class A) and knotweed pain tincture (OTC class A).

In terms of production and sales, the company's sales volume of citicoline sodium tablets will reach 155,090,500 tablets in 2023, the original products such as rizatriptan benzoate capsules and other varieties will achieve great growth, and new varieties such as pregabalin oral solution will be put on sale.

In terms of revenue proportion, citicoline tablets are the company's main source of revenue, and the revenue of citicoline tablets will account for 85.36% in 2023; It is followed by phenamine tablets, acaphenol powder and oriental stomach medicine capsules.

In terms of growth, rizatriptan benzoate capsules have the fastest growth rate, reaching 100.10%, and the sales revenue will reach 5.6133 million yuan in 2023, and the revenue scale of the newly listed pregabalin oral solution will reach 4.6419 million yuan in 2023. Affected by changes in market demand and local volume procurement, the operating income of the company's main varieties of citicoline sodium tablets decreased by 11.71% year-on-year.

In terms of profitability, the gross profit margin of Xinkelai is the highest and basically maintained at around 85%, which is relatively stable; followed by rizatriptan benzoate capsules and pregabalin oral solution, which will be newly launched in 2023, with gross profit margin decibel of 78.05% and 77.34% in 2023. The gross profit margin of Oriental Stomach Medicine will improve in 2023, increasing by 11.12 percentage points to 72.67%.

At present, the company is mainly selling 4 products and 6 specifications, all of which are sold in various provinces and cities. As of December 31, 2023, the company's products have not been included in the national centralized procurement catalog, and citicoline sodium tablets have been included in Jiangsu, Guangdong, Jiangxi, and Shenzhen.

1.2. Development history: "China time-honored brand" brand, Sichuan Province "specialized, special and new" small and medium-sized enterprises

Sichuan Zilugong Pharmaceutical Co., Ltd. is a national high-tech enterprise focusing on the research and development, production and marketing of drugs, and was listed on the Beijing Stock Exchange on August 13, 2021, as the first batch of listed companies on the Beijing Stock Exchange. The "Zihua Palace" brand began in 1780 during the Qianlong period of the Qing Dynasty and has a history of more than 240 years, and is a pharmaceutical brand with a long history in Sichuan Province. The brand of "Zihua Palace" is "China Time-honored Brand" and "China Famous Trademark".

The company is a national high-tech enterprise, Sichuan Province "specialized, special and new" small and medium-sized enterprises, the company's enterprise technology center is Sichuan Province Enterprise Technology Center, by the State Intellectual Property Office as "national intellectual property advantage enterprise". The company's products and brands have good brand awareness and reputation in the domestic market.

In terms of shareholding structure, as of 2024Q1, the controlling shareholder and actual controller of Zihua Palace is Tang Mill, with a direct shareholding ratio of 22.94%. Neijiang Jucai is the company's employee shareholding platform, with a direct shareholding ratio of 1.30%.

The chairman of the board of directors of the company is Tang Mill, who directly holds 33,625,700 shares, Li Yun, the general manager, holds 1,585,100 shares, Chen Jian, deputy general manager and R&D director, directly holds 2,796,500 shares, and Zeng Peiyu, the secretary of the board of directors, directly holds 152,100 shares.

1.3. Business model: The main customers are pharmaceutical commercial companies, and the top five sales in 2023 account for 63%

The company's main profit model is to rely on its own drug production and operation licenses, production equipment, patents, drug production approval documents and core technical personnel and other key resource elements to produce drugs that meet the good manufacturing practices of drugs, and sell them to medical terminals or pharmaceutical retail institutions through distribution by commercial circulation companies or direct distribution by themselves.

In terms of production, the production cycle of the company's main products is short, from feeding to production completion to distribution, it generally takes about two weeks.

According to the different procurement targets, the company's procurement mainly adopts three modes: MRP procurement, JIT procurement and temporary sporadic procurement.

The company's procurement department preliminarily selects suppliers through the Internet or the recommendation of units in the same industry, raw material market, and equipment manufacturers, conducts preliminary screening according to the supplier's qualification documents and samples provided, and conducts on-site assessment and evaluation of suppliers in accordance with the provisions of the "Good Manufacturing Practice for Drugs" or "Good Management Practice for Pharmaceutical Operation" under the organization of the company's quality department, and becomes a qualified supplier of the company after passing the assessment. The company establishes quality files for the identified suppliers, including suppliers' qualification documents, quality agreements, quality standards, suppliers' inspection reports, on-site quality audit reports, product stability inspection reports, and regular quality review and analysis reports.

In terms of sales, the company's main revenue comes from pharmaceutical sales, and its main customers are pharmaceutical commercial companies. In 2023, the company's sales to the top five customers will reach 255 million yuan, accounting for 62.55%.

The company's main products are prescription drugs, on the basis of strict compliance with industry laws and regulations, in order to comply with regional pharmaceutical procurement policies and hospital procurement habits, the domestic sales of the company's main products mainly adopt the academic promotion plus distributor model (referred to as the distributor model), that is, the company or the company entrusts a third-party professional promotion agency to introduce the pharmacology, indications, usage methods, safety and related academic theories and latest clinical research results of the company's drugs to the market through academic promotion. Promote the recognition and purchase demand of terminal medical institutions, and then sell and distribute drugs to hospitals and other medical terminal institutions through distributors (pharmaceutical distribution enterprises). Under the distributor model, the distributors are mainly regional or national large-scale pharmaceutical circulation enterprises with strong distribution capacity, financial strength and business reputation. Therefore, the company sells its products directly to such customers, and from them directly to the terminal medical institutions. In FY2020, a total of 454 distributors had business dealings with the company.

In addition, in view of the characteristics of the direct sales terminal of non-prescription drugs, for the sales of over-the-counter drugs produced by the company, the company adopts the sales model of direct sales + distribution, under which the company not only builds its own team to sell drugs to pharmaceutical chain companies, but also in some areas will grant the sales agency rights of drugs to pharmaceutical commercial companies that meet the company's investment requirements, so that they can become the company's distributors.

1.4、财务分析：2024Q1营收同比+3.61%，归母净利润同比+22.99%

In terms of operating capacity, the company's revenue from 2016 to 2022 has maintained continuous growth, and in 2023, it will achieve revenue of 408 million yuan, a year-on-year decrease of 7.71%; In 2024Q1, the revenue was 94 million yuan, a year-on-year increase of 3.61%. The company adheres to the market demand-oriented, continues to strengthen the construction of product echelon, actively excavates and cultivates potential varieties, and achieves great growth in varieties such as rizatriptan benzoate capsules and acaphenol powder, and new varieties such as pregabalin oral solution have been put on the market one after another, laying a good foundation for the company's future performance growth.

In terms of the temporal distribution of revenue, there is no obvious seasonality in the pharmaceutical industry. However, due to the long holidays such as May Day, Eleventh and Spring Festival in China, the inconvenience of distribution and the objective existence of customers in advance of the situation of stocking up in advance, the sales revenue in the first half of the year will be smaller than the second half of the year, of which the first quarter accounts for a slightly lower proportion of the annual sales revenue, and the fourth quarter accounts for a slightly higher proportion of the annual sales revenue. In terms of the seasonal distribution of the company's revenue in 2023, the proportion in the first quarter is relatively small, and the proportion in the fourth quarter is the highest, reaching 27.40%.

In terms of geographical distribution, the company's revenue mainly comes from the southwest, east and north regions, and the revenue in the southwest region will reach 176 million yuan in 2023, accounting for 43.24%, followed by the east China region, which will also exceed 100 million yuan in 2023, accounting for 25.79%. In terms of development trends, in terms of revenue change trends from 2020 to 2023, South China and Northeast China are the regions with faster growth rates, with CAGR of 28.13% and 20.91% respectively. In 2023, the Northeast will maintain a rapid growth rate, with a year-on-year growth rate of 56.55%, and the southwest region, which accounts for the largest proportion of revenue, will increase its revenue by 14.85% year-on-year in 2023.

In terms of profitability, the company has maintained continuous and stable growth since 2016. In 2023, the company's net profit attributable to the parent company will be 102 million yuan, a year-on-year increase of 0.25%; The net profit attributable to the parent company in 2024Q1 reached 19.8862 million yuan, a year-on-year increase of 22.99%.

The company's gross profit margin has been basically stable since 2016, and the net profit margin has increased with the slow decline of the expense ratio during the period. In 2023, the company's gross profit margin and net profit margin will be 80.94% and 25.06% respectively.

In terms of period expense ratio, the company's period expense ratio has been slowly declining since 2016, and the company's period expense ratio will be 53.89% in 2023.

The company's administrative expenses have basically remained stable since 2020, and the management expenses in 2023 will be 30.0133 million yuan, accounting for 7.36% of the total revenue.

The proportion of sales expenses has decreased slightly since 2021, and the sales expenses in 2023 will be 184 million yuan, accounting for 45.04%.

END