Germany Exhibition Health (000813): The First Half Of The Performance Fell Sharply, Eager To Test Water Industrial Hemp To Find A Way Out.

Recently, the A share of the industrial hemp plate has aroused investors' concern again, showing a strong trend. In September 10th, 13 industrial cannabis stocks rose by more than 5%. In September 11th, 002750.SZ and 002592.SZ even stopped trading, especially in the long Jin pharmaceutical industry this year. Up to September 12th, the stock price has risen by 210% over the past eight years.

In fact, the industrial marijuana boom began in the second half of last year. After that, many enterprises tried to enter this field. This year, 000813.SZ has been very persistent in this field. All along, the main business of German exhibition is the R & D, production and sale of drugs. According to China Pharmaceutical Association business data, in the first half of 2019, the company's wholly-owned subsidiary of Jialin pharmaceutical production of lipid-lowering drug "Ai Le" (general name: Atorvastatin Calcium Tablets) ranked first in the field of domestic lipid-lowering drugs.

In September 6th this year, the German exhibition Health announced that the company signed a three party cooperation agreement with Han Zhong Business Management Group Co., Ltd. (Han Zhong Group), hemp Investment Group Co., Ltd. (hemp investment) and Han Yi Biotechnology (Beijing) Limited (referred to as "Han Yi Sheng Wu"). It will cooperate more in the cultivation, planting, processing and extraction, terminal application of industrial hemp seeds.

The market, however, is not so enthusiastic about the health of de show in the field of industrial cannabis. In September 10th, a number of industrial cannabis stocks rose by more than 5%, while German health shares rose by only 2.09%. In September 11th, the German exhibition health dropped by 0.36%. So why is it so eager to enter the field of industrial hemp? Why are investors not enthusiastic enough to respond to it?

Decline in performance

If we judge the data of the company, it is not difficult to find that the healthy performance of German exhibition has been declining sharply in the first half of 2019. This is undoubtedly one of the important reasons why Germany exhibition is eager to enter the field of industrial hemp.

According to the annual report of German exhibition health, from 2016 to 2018, the company's revenue and net profit have achieved positive growth, including 3 billion 291 million yuan in 2018, an increase of 48.22% over the same period last year, and a net profit of 931 million yuan, an increase of 16.73% over the same period last year.

However, in 2019, the company's performance began to decline. In the first quarter of this year, the company's revenue decreased by 38.92% compared to the same period last year, and net profit of the parent company decreased by 32.09% compared to the same period last year. In the two quarter of this year, the company's revenue decreased by 49.53% compared to the same period last year, and the net profit of the parent company decreased by 54.43% compared with the same period last year, and the decline was further enlarged.

In the first half of this year, the company achieved a revenue of about 922 million yuan, down 44.50% from the same period last year, and net profit of about 242 million yuan, a decrease of 45.48% compared with the same period last year. The net profit from non return to mother was about 231 million yuan, down 47.64% from the same period last year. So what causes the turning of the company's performance?

Continuous impact on purchasing policy of receiving quantity

For the reasons for the sharp decline in its performance, de exhibition health attributed it to "4+7" pilot shopping with quantity.

In this regard, German exhibition Health said in its 2019 semi annual report that sales of 4+7 products increased significantly in the 11 pilot areas, but the unit price dropped, and at the same time led to a substantial reduction in inventories of dealers who did not carry out the volume purchase area, which, to some extent, reduced the sales volume of the company. The semi annual report also showed that the gross profit margin of drug sales fell by 5.45% in the first half of 2019 compared with the same period last year.

In short, the quantity purchase can be understood as a large group purchase, a clear purchase quantity and a low price winner. The policy aims to reduce the price of drug purchase through the function of "price change" through market competitive bidding among enterprises.

On November 14, 2018, the fifth meeting of the Central Committee for comprehensive deepening reform and deliberation adopted the "National Organization for drug centralized procurement pilot scheme". In November 15th of that year, the joint procurement office composed of representatives from 11 pilot areas issued the "4+7 City drug centralized procurement document". In March 2019, the pilot project of "4+7" volume procurement was formally implemented.

In the future, it is possible to further expand the scope of procurement with volume and promote it to the whole country, which will undoubtedly further affect the performance of pharmaceutical companies such as Germany exhibition and health.

Prospects for industrial cannabis

In the face of the acceleration of decline in the first half of the year, and the gradual promotion of the purchasing policy with quantity, Germany exhibition health is also actively looking for countermeasures, looking for new profit growth points in many directions.

According to Dezhou health 2019 semi annual report: "during the reporting period, according to the company's strategic development plan, the company has launched a series of new business layout in order to further expand the company's business areas. The joint venture has set up Deutsche Pharmaceutical Co., Ltd., the United States and Switzerland food and Beverage Co., Ltd., Dejia Kang (Beijing) Biotechnology Co., Ltd. and other shareholding companies and joint venture companies, respectively, to carry out industrial marijuana applications in the field of medical, food and beverage, and carry out cardiovascular health examination.

In the new layout and development direction of the German exhibition health, the most notable attention is to enter the field of industrial hemp.

As early as March this year, Germany exhibition health signed a framework agreement on equity purchase and comprehensive strategic cooperation with Han Zhong Group and hemp investment. Hemp investment is a legally established biopharmaceutical investment group in the whole industrial chain of industrial hemp. According to the framework agreement, the Han nationality group has pledged its 25% stake in Han Ma investment to Germany's fair, and has paid 400 million yuan in sincerity and health. Then the two sides will cooperate in the cannabis health industry and conduct in-depth consultations.

Since then, progress has been made in bilateral cooperation. In May 7, 2019, the two sides jointly invested in the establishment of De Yi Pharmaceutical Co., Ltd. with Miu Huanhui, a natural person, who mainly engaged in research and development of industrial hemp technology and biotechnology. In June 27, 2019, the two sides jointly invested in the establishment of the American food and Beverage Company Limited. The company will use "hemp" (ie industrial hemp) as an element, and create a series of products of "red hemp" for functional red bull and other functional drinks, and enter the functional beverage market.

According to statistics of Tianfeng securities, as of June this year, there were 40 A share companies in China to distribute industrial hemp fields. In fact, in 2018, when the United States and Canada relaxed the restrictions on industrial hemp, a wave of industrial marijuana was launched, and many Chinese enterprises came in. As a result, enterprises such as Germany exhibition and health have entered the field in the second half of this year. With the increase in enterprises, competition in this field has become increasingly fierce.

German exhibition health in 2019 semi annual report also hints, "at present more and more enterprises enter the field of industrial hemp, with more participants, the future industry cannabis health industry will face fierce market competition, will bring uncertainty to the company's future business development, bring market competition risk."

In the relevant industry research report, Tianfeng securities also said that the industrial hemp field is greatly influenced by national policies, and there is a risk of policy change. At the same time, as more and more enterprises enter this field, the future market opportunity and challenge coexist.