Yunnan Baiyao (000538): Steady Closing in 2018 Expects Reverse Mergers and Acquisitions to Release New Vitality

2018 performance increased by 5.

14% is expected to maintain steady growth in 2019. The company announced its 2018 annual report: to achieve revenue of 267.

08 million yuan, an increase of 9 in ten years.

84%; net profit attributable to mother 33.

07 billion, an annual increase of 5.

14%; net profit after deduction to non- mother is 29.

18 ppm, a ten-year increase4.

91%, operating net cash flow 26.

30 ppm, a 127-year increase.

55%, the company’s overall performance basically meets market expectations.

The company’s major business segments achieved steady growth in 2018. Looking forward to 2019, the company’s absorption and reorganization will gradually come to an end, which will help to further stimulate internal vitality and operating efficiency. The company’s performance is committed to maintaining stable growth. At the same time, resource integration and extension are worth looking forward to.

Both industry and commerce are advancing steadily, strengthening the secondary development of medicines and health products. Looking at the marketing of traditional Chinese medicine resources by sector, the company’s industrial income is 107.

27 ppm, a ten-year increase of 7.

68%, with a small margin range of 1.

82% to 63.

79%.

Looking at the industrial divisions: 1) Revenue of the Pharmaceuticals Division 45.

31 ppm, a 10-year increase2.

98%, the company focuses on Yunnan Baiyao series products focusing on hemostatic analgesia, swelling and stasis, covering natural and unique drugs in the fields of tonifying qi and blood, cold and cold, cardio-cerebral blood vessels, gynecology, children and other fields; the company initiated a project in YunnanStudy on Pharmacoeconomics of Baiyao Cream, Qixuekang Oral Liquid for Elevating Red and White 成都桑拿网 Cells and Attenuating Synergistic Effects After Chemoradiotherapy, Yunnan Baiyao Capsules for Bone and Joint Replacement, Antithrombotic, Hemostasis and Healing, Clinical trials such as analgesic research projects, to carry out secondary development of the company’s products to promote the steady growth of the pharmaceutical field; 2) Revenue of the Health Products Division 44.

67 ppm, a ten-year increase4.

54%.

The toothpaste business still maintained rapid growth, the market share ranked second in the country, and the national brand ranked first. The report pointed out that the new products such as Yunnan Baiyao Children’s Toothpaste and Active Peptide Series were listed.Upgrading, the brand has achieved healthy development; Yangyuanqing series products have stabilized efficacy and positioning to further consolidate the brand influence in the local market; they have adopted the skin-skinning series of products, and cooperated with universities and international advanced technology platforms to provide good product quality.Good foundation for good output.

The company continues to make efforts on the marketing side, unites high-quality communities such as financial media, women’s self-media, and reaches more than 10 million middle-class and high-spending consumers; it continues to deploy multiple high-quality e-commerce channels such as Tmall; 3) Revenue of the Chinese Medicine Resources Division13.

67 ppm, an increase of 20 in ten years.

03%.

The company continues to cultivate the four core sectors of medicinal materials operation, plant extraction, import and export, and terminal operations, and actively explores the “base + white medicine + purchaser” cooperation to build a processing plant in the production area to achieve the sustainable use of traditional Chinese medicine resources.The product “Leopard Seven” 37, continued to enhance its brand building efforts, and launched a new retail model led by “Baiyao Life + Experience Store” to make the company closer to and understand market demand, and the company expanded 8 offline physical stores.

The upgrade of the core Leopard 7 series product packaging, the extension of Leopard 737’s entire line of materials, and the new 4P full case system further strengthen the Leopard 7 brand’s position in the mid-to-high-end market of Sanqi, and promote the continuous and rapid growth of Chinese medicine resources business revenue.

Commercial sales revenue of the company 15.

94 ppm, a 10-year increase of 11.

58%.

The company complies with the “two-vote system” policy, leverages government cooperation, and seeks strategic cooperation opportunities with more retail pharmacies.

The company promotes the medical S-SPD supply chain management project in large hospitals, and fully promotes the “Yunyibao” cloud platform, expands the depth of cooperation with hospitals, and expands the hospital’s market share; at the same time, it increases the retail pharmacy market around the hospital.Develop and develop the drug distribution business of major pharmacies around the hospital, effectively undertake the distribution of outflow prescriptions from the hospital, and explore the establishment of new models such as special, chronic medical insurance pharmacies, and DTP pharmacies. The company’s pharmaceutical distribution business is expected to continue to improve in the future.

Reported company selling expenses and administrative expenses increased by 6 respectively.

46%, 3.

08%, maintaining steady growth.

Promote the reverse absorption and merger of Baiyao Holdings, and start a new chapter of development. The company launched the reverse absorption and merger of Baiyao Holdings, and the existing conditions passed the review of the CSRC.

After the completion of the transaction, the Yunnan State-owned Assets Supervision and Administration Commission, Xinhua Capital and their concerted parties are tied for the largest shareholder of the listed company. The listed company will serve as the sole platform for industrial mergers and acquisitions and integration, which will help integrate the internal advantages of the Yunnan Baiyao system and increase incremental funds.Used in industrial mergers and acquisitions to enhance competitiveness.

The company has simplified the management level of listed companies, improved its governance mechanism, and streamlined its organizational structure, further improving the decision-making efficiency of listed companies, and optimizing its corporate governance structure. Through the learning and complementation of various ownership capitals, they can promote each other and jointly promote the development of Yunnan Baiyao.Sustainable and healthy development; in the long run, the State-owned Assets Supervision and Administration Commission of Yunnan Province, Xinhua Capital and everyone acting in concert have made long-term stock lock commitments to maintain the long-term stability of the equity structure of listed companies. We are optimistic about the company’s new development, maintaining a “buy” rating and absorbing the merger of the parent company to start a new stage of strategic development and optimistic about the company’s future development prospects. It is expected that the earnings per share for 2019-2021 will be 3.

63, 4.

09, 4.

53 yuan (of which the last slight change before 19/20 was 0.

88% / 3.

13%), corresponding to pe of 24, 21, 19 times, maintaining the “buy” level.

Risk warning: there is uncertainty in the timing and results of the reverse absorption merger transaction, the progress of the promotion of big health products is gradually expected, the results of the improvement of operating efficiency are gradually expected, and the integration of resources and extensions are gradually expected