news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

Produced by | MiaoTou APP

Author | Wang Lutai

Header image | Visual China

On the evening of July 24, Chinese medicine Mao Pien Tze Huang released its 2024 semi-annual performance report. Data showed that in the first half of the year, the company achieved operating income of 5.65 billion yuan, a year-on-year increase of 11.99%; net profit attributable to the parent company was 1.72 billion yuan, a year-on-year increase of 11.61%. On the surface, although Pien Tze Huang's performance growth rate is not impressive, it still maintains a medium-to-high double-digit growth rate. However, the performance of the capital market is quite dramatic.

On July 25, Pien Tze Huang fell more than 6 points at the opening, with the largest intraday decline exceeding 8%, and a 7.59% drop at the close. The trading volume also increased significantly. Why did investors react so strongly? Where will Pien Tze Huang go in the future? Let's analyze it in detail.

Pien Tze Huang's revenue and profit both weakened in the second quarter

Although Pien Tze Huang achieved a double-digit growth rate in the first half of the year, this was achieved on the basis of a revenue growth of more than 20% in the first quarter. Looking at the second quarter of this year alone, the company's operating income was 2.479 billion yuan, a year-on-year increase of only 2.61%; net profit attributable to the parent company was 745 million yuan, a year-on-year decrease of 3.37%. The company's revenue growth has almost stagnated.

Judging from the revenue data of a single quarter in the past, Pien Tze Huang's revenue is slightly higher in the first quarter of each year, and the revenue in other quarters is basically the same. The company's revenue in the second quarter of this year fell back to the same level as last year, which made the market worry that the revenue growth in the first quarter is unsustainable. In other words, Pien Tze Huang's revenue growth is showing signs of stagnation.This is a fatal blow to a highly valued growth stock, because a familiar scenario may occur next, that is, the "Davis double kill" market of performance and valuation.

This is the reason for the sharp decline in the market. Companies such as Changchun High-Tech and Optoelectronics Technology, which are highly dependent on a single business, have experienced the tragedy of the Davis double kill.

Pianzihuang is also a company that is highly dependent on a single business.

In the overall revenue of Pien Tze Huang, the pharmaceutical business accounts for 89.54%, and the contribution of cosmetics and other businesses to revenue is very small. Of the 90% of pharmaceutical business, pharmaceutical manufacturing and pharmaceutical distribution each account for half, but the gross profit margin of the distribution industry is low, and this part of the business contributes very little to the profit. In short, Pien Tze Huang's profits are currently mainly contributed by the pharmaceutical manufacturing industry.

Specifically, in 2023, the company's pharmaceutical manufacturing revenue accounted for 47.74% of the total revenue, of which the revenue from liver disease drugs was 4.463 billion, accounting for 44.37% of the total revenue, or about 93% of the revenue from pharmaceutical manufacturing business. Liver disease drugs are still the main source of income, and Pien Tze Huang tablets are the core product of liver disease drugs. Cardiovascular drug products are mainly the company's Angong Niuhuang Pills. Although the revenue of this business increased by 60.57% in 2023, the business volume is too low.

It can be seen that the profit growth of Pianzihuang is mainly determined by the product Pianzihuang tablets.

Pien Tze Huang has a long history of nearly 500 years, dating back to the Ming Dynasty. In the old days in southern Fujian, it was named "Pian Zai Huang" ("Huang" is a Minnan dialect, referring to heat, toxins, swelling and pain) because of its unique effect of "one pill can cure eczema". Pien Tze Huang, known as the "Buddhist holy medicine", is praised as a "national treasure medicine" by the Chinese medicine community at home and abroad. "Pian Zai Huang" also enjoys a high reputation overseas, and its products are exported to more than 30 countries and regions in the world. It is an important brand with international influence.

Because the formula of Pien Tze Huang is unique and difficult to replicate, it has obvious exclusivity and monopoly, and has obvious market competitive advantages. Pien Tze Huang tablets have also become a highly scarce product in the market.

In recent years, the company's core product, Pien Tze Huang tablets, has maintained a state of rising volume and price, which has driven the company's continued growth in performance. By 2023, Pien Tze Huang's operating income has exceeded 10 billion, reaching 10.058 billion yuan, a year-on-year increase of 15.69%; net profit attributable to the parent company was 2.797 billion yuan, a year-on-year increase of 13.15%.

Because the company's revenue is too dependent on the single product Pian Zai Huang Tablets, in the past five years, the public health emergencies in 2020 and 2022 have had a significant impact on the company's performance.

The company's revenue fell into a slump again in the second quarter of this year, which was interpreted by the market as a slowdown in downstream demand.

The company has entered a period of adjustment in performance

The demand for Pien Tze Huang tablets mainly comes from three aspects, namely, liver disease medication, health care and health care gifts. The growth driver of liver disease medication is the increase in the prevalence of non-alcoholic fatty liver disease; the driving force of health care demand is the increase in the number of high-net-worth and middle-class people.

The downstream demand scenarios of this product can be divided into two categories: one is the medical scenario of treating hepatitis, and the other is the consumer scenario of protecting the liver. Although the demand for the former is relatively rigid, the latter will be affected by the downturn in the macro economy. It is just that the uniqueness of its products and the rigidity of medical treatment have delayed the arrival of the downturn in demand.

The previously popular "Moutai combination" (taking Pien Tze Huang to protect the liver before drinking Moutai) is a reflection of the health care market. As a product with a single pill price of up to 760 yuan, the consumption of Pien Tze Huang tablets is largely affected by the income level of the middle class.

Nowadays, the macro-economy is in a downturn, the consumption capacity of residents is weakening, and the price of Moutai is falling. Moutai is no longer popular, and Pien Tze Huang is also going to be unpopular. As the saying goes, if the "Mao" is gone, the "Pian" will not exist.

While demand is sluggish, Pian Zai Huang is also suffering from the double blow of rising raw material prices.

In the second quarter of this year, the company's operating income increased by 2.61% year-on-year, but its net profit attributable to the parent company decreased by 3.37% year-on-year. The company also explained this in its recently released performance report: the rising cost of important raw materials has squeezed profit margins. The raw materials mentioned here are actually natural bezoar.

Musk and bezoar are two important raw materials of Pien Tze Huang. Although they only account for 3% and 5% of its total weight, they account for more than 92% of the total cost, 41.06% and 51.32% respectively, which has a significant impact on the cost. The price of natural bezoar is experiencing a sharp rise.

Bezoar is an extremely scarce medicinal material, and is also used in products such as Angong Niuhuang Pills and Niuhuang Qingxin Pills. Natural bezoar comes from cattle gallstones, and the quantity is extremely small, and its value exceeds gold.

The supply of natural bezoar is limited, so the price continues to rise under the condition of high downstream demand. According to data from Kangmei Chinese Medicine Network, the price of natural bezoar per kilogram was only 650,000 yuan at the beginning of 2023, but it has now risen to 1.65 million yuan, an increase of more than 150%.

As the price of raw materials continues to rise, the cost of manufacturers is bound to increase, which further reduces the profitability of Pien Tze Huang. This is why the revenue increased but the profit did not in the second quarter.

Although the price of Pien Tze Huang tablets has been slowly increasing since its launch, the most recent price increase was in May 2023, when the retail price of this product rose to 760 yuan, an increase of 28.81%. Since then, the price of Pien Tze Huang tablets has not increased, while the price of natural bezoar has experienced a rapid increase during the same period.

The cost of upstream raw materials is rising rapidly, while the demand of downstream consumers is continuously weakening. Under the pressure from both sides, Pien Tze Huang is in a more difficult situation.

Although the regulatory authorities have recently relaxed the import of natural bezoar, it only eases the situation of rapid price increases and will not change the basic pattern of supply exceeding demand. At present, the domestic production of natural bezoar is about 900 kilograms, and the international production exceeds 3,000 kilograms. Japan and South Korea also have high demand for natural bezoar, so China can only obtain about 1,000 kilograms of natural bezoar on the international market. In total, the country can obtain about 2,000 kilograms of natural bezoar. However, the domestic demand has reached 5,000-6,000 kilograms and is continuing to grow. Relaxing imports is also difficult to fundamentally reverse the situation of insufficient demand for natural bezoar in China. At best, it can only stabilize the momentum of rapid price increases.

Even if we optimistically expect that the price of natural bezoar will remain relatively stable in the future, this will only control the problem of raw material price increases, but the sluggish downstream demand for Pien Tze Huang tablets will be difficult to reverse in the short term. After all, macroeconomic recovery cannot be achieved overnight. The sluggish revenue of Pien Tze Huang will drag down the company's stock price for a long time, and the time to buy at the bottom is far from coming.

From a broader perspective, the future sales of Angong Niuhuang Wan, which also uses natural bezoar as raw material and sells for 860 yuan per pill, may not be too optimistic. And Tongrentang, which focuses on Angong as a major product, is also expected to face pressure in its future performance.

In the current context of sluggish consumption, the performance of companies that rely too much on a single high-priced product is worthy of investors' vigilance. Ordinary people have no money in their pockets, and they cannot afford expensive things, no matter how good they are.

Disclaimer: The contents of this article are for reference only. The information or opinions expressed in the article do not constitute any investment advice. Readers are advised to make investment decisions with caution.

This content is the author's independent opinion and does not represent the position of Huxiu. Reprinting is prohibited without permission. For authorization matters, please contact [email protected]