Pien Tze Huang’s stock price has soared from a low of 98 yuan in November last year to a recent 300 yuan. It has tripled in less than a year. It has beaten Luzhou Laojiao and kicked Haitian Flavor Industry, becoming a major consumer in Mali. Big brother of gains.
In recent years, Lin Yuan, the "private stock god", has repeatedly expressed his optimism about the investment value of Pien Tze Huang. According to Pien Tze Huang's 2020 semi-annual report, among the company's top ten shareholders, "Linyuan Investment No. 21, No. 29 and No. 101" hold 0.65%, 0.42% and 0.39% respectively. Beike Touyan (ID: Beiketouyan) had doubts in his mind, what did Lin Yuan see in Pien Tze Huang?
1. The idea of ??economic franchise
Linyuan adheres to the concept of value investment and pursues long-term stable value-added. The investment targets are monopolies with absolute competitive advantages. He once said that the advantage of Pien Tze Huang is that the use of natural musk is approved by the state. This is not only a monopoly, but also a unique pricing power! This coincides with Buffett's most classic investment philosophy - the idea of ??economic franchise.
What is an economic franchise?
1. Being needed - treating liver diseases with unique curative effect
Pien Tze Huang series products include Pien Tze Huang, Pien Tze Huang capsules and other liver disease medicines, which are suitable for acute and chronic viral hepatitis caused by heat, toxin and blood stasis. , carbuncles, furuncles, etc., it has both medical and health care functions. At present, the prevalence of fatty liver in adults in my country has reached 12.5%-35.4%, making it the largest liver disease in my country. Pien Tze Huang has its own unique efficacy in treating liver disease.
Recently, Pien Tze Huang’s PZH2111 tablets were approved for clinical trials. This is Pien Tze Huang’s first Class 1 new drug to obtain clinical approval. It is indicated for advanced solid tumors such as intrahepatic cholangiocarcinoma and urothelial cell carcinoma. . In addition, another Category 1 new drug PZH2109 capsule from Pien Tze Huang has completed preclinical research, and clinical applications are currently being accepted. This drug is mainly used to treat non-alcoholic steatohepatitis.
2. Cannot be copied - top secret formula to build a moat
The most critical raw material of Pien Tze Huang is musk, which is the dried secretion extracted from the mature male sachet of musk animals. . The musk deer is listed as a first-class wild protected animal, and the use of musk is subject to unified approval and distribution by the state. Natural musk is extremely precious. In 2015, the country stopped the quota supply of natural musk. Among them, Pien Tze Huang is one of the few companies licensed by the state to use natural musk.
After 500 years of inheritance and innovation, Pien Tze Huang has been listed as a national first-level protected traditional Chinese medicine. The prescription and process are protected by the state. It is a national top-secret formula and has a permanent confidentiality period. This is difficult for other traditional Chinese medicine companies. What is copied is also the absolute "moat" it has.
3. Pricing power
Looking at A-shares, apart from Moutai, only Pien Tze Huang stock (600436) can satisfy the above points at the same time.
2. What are the points worthy of attention in Pien Tze Huang’s semi-annual report?
Pien Tze Huang's 2020 semi-annual report shows that it achieved operating income of 3.246 billion yuan, a year-on-year increase of 12.16%; the net profit attributable to shareholders of listed companies was 865 million yuan, a year-on-year increase of 15.84%. When Lin Yuan answered investors' question "Can you share more about Pien Tze Huang's logic?", he also suggested that everyone read the annual report. Let's take a look at what is worthy of attention in Pien Tze Huang's semi-annual report.
1. Net cash flow from operating activities decreased by 40.53% year-on-year
The semi-annual report showed that Pien Tze Huang’s net cash flow from operating activities was 547 million, a year-on-year decrease of 40.53%. The company explained the reasons: (1) Cash outflows for payment of various taxes and fees increased during the reporting period; (2) The company's time deposits increased at the end of the reporting period and were not presented as cash and cash equivalents.
Looking at Pien Tze Huang’s main asset restrictions and notes, we can see that the situation is true. In addition, Pien Tze Huang received cash of 3.209 billion from selling goods and providing services in the first half of the year, with a cash collection ratio of 99.10% close to 1. This shows that the cash received by the company from sales is basically consistent with the sales revenue of the current period, and there is no pending account for the sales. Turnover is relatively good.
2. Inventory increased by 6.39% in the first half of the year
As of June 30, 2020, Pien Tze Huang’s inventory balance was 2.231 billion. At the end of 2019, the inventory balance was 2.097 billion. Inventory in the first half of the year increased by 6.39%. The inventory turnover rate has declined, but the number of days of accounts receivable turnover has shrunk from 30.37 days in the first half of 2019 to 27.09 days, so there is no problem of product backlog that is difficult to sell.
The main reason for the increase in inventory: Since the upstream precious medicinal materials (musk, snake gallbladder) have certain bottlenecks in the long term, and prices have continued to rise in recent years, Pien Tze Huang Stock (600436) has made strategic arrangements in advance to invest in the upstream precious medicinal materials. Carry out strategic storage, which can also be verified from the annual report.
3. Pien Tze Huang’s weighted ROE in the past ten years has been greater than 15%
For large consumer companies, return on net assets is an indicator that must be paid attention to. Pien Tze Huang’s weighted net assets from 2010 to 2019 The rate of return remains above 15%, and the ten-year average weighted ROE is as high as 21.27%. Only a handful of leading companies in the A-share market can reach such a level.
Yunnan Baiyao, which has been competing with Pien Tze Huang to be the "Moutai of Medicine", has had a slightly embarrassing weighted return on net assets in the past ten years. The weighted ROE in 2010 increased from 23.07% to 28.94% in 2013. The good times did not last long. , began to plummet in 2014, and the weighted ROE in 2019 was only 10.31%. According to the latest data, Yunnan Baiyao's weighted ROE in the first half of the year was 6.24%, while Pien Tze Huang's was as high as 12.25%, almost twice that of Yunnan Baiyao!
3. What will Pien Tze Huang rely on to grow in the future?
The future of the company is in the hands of the management. Let’s take a look at the strategies of Pien Tze Huang’s management.
1. "One core and two wings" strategy, expanding mergers and acquisitions to become bigger and stronger
Since Chairman Liu Jianshun took office in 2014, the company has actively implemented the "one core and two wings" development strategy and consolidated the On the basis of the pharmaceutical manufacturing industry, we will strengthen the two wings of cosmetics, daily chemical products, health products, and health foods, and at the same time expand the pharmaceutical distribution industry as a supplement. In its semi-annual report, Pien Tze Huang Stock (600436) company emphasized that of the increased sales revenue of 203 million yuan, the cosmetics and daily chemical industry contributed 150 million yuan. The increase in business types will avoid the phenomenon of "resting on one's laurels" in the future. After all, Dong'e Ejiao's main business is too single and it quickly became a thunderstorm.
In addition, Pien Tze Huang holds 51% of the shares of Longhui Pharmaceutical through mergers and acquisitions. Longhui Pharmaceutical has 115 Chinese and Western drug approval numbers, especially Angong Niuhuang Pills (Double Natural) and Xihuang Pills ( Traditional Chinese patent medicines such as Double Natural) have high market value. Investing in Longhui Pharmaceutical will help enrich the company's product pipeline and play a positive role in the company's layout of traditional Chinese medicine prescriptions.
2. Innovative industrial development model
Musk raw materials are very precious, and the price of natural musk has been rising slowly in recent years. In order to solve the bottleneck problem of raw materials, the management continues to promote "company + base + scientific research" + Breeders" industrial development model, while making strategic reserves of musk raw materials, it also actively lays out the musk breeding business. At present, the company has invested in two musk deer breeding companies in Shaanxi and Sichuan, established multiple musk deer breeding bases, and developed farmers to raise musk deer.
3. Build a Pien Tze Huang experience center to promote the concept of "Chinese symbols"
Since Pien Tze Huang is well-known in the southeast region, while in the north there is a feeling of being "locked in a boudoir and unknown to people" In order to expand its brand influence, in 2015, Pien Tze Huang began to build Pien Tze Huang experience centers in airports, train stations, scenic spots and other crowded places in most provincial capitals and major prefecture-level cities across the country. As of the end of 2019, the total number of Pien Tze Huang experience centers nationwide exceeded 200. It also actively promotes the experience center model overseas and vigorously promotes the concept of "Chinese symbols on the Maritime Silk Road".
4. Summary
So far in 2020, Kweichow Moutai has increased by about 50%, and Pien Tze Huang has easily reached twice that. Regardless of the stock price trend in "one-year period" or "three-year period", Pien Tze Huang significantly outperformed Kweichow Moutai. Generally speaking, when the market penetration rate reaches about 15%, corporate performance will usher in a blowout growth. At present, the penetration rate of Pien Tze Huang is well below 15%, so from an investment perspective, there is still room for growth.
Beiketouyan (ID: Beiketouyan) believes that Pien Tze Huang's core competitiveness is the "national top secret formula". This formula is like Coca-Cola and cannot be copied and incomparable by other traditional Chinese medicine companies! In addition, Pien Tze Huang's management has been active in arranging the upstream and downstream industrial chains and developing business types, and it will still have growth potential in the future.
(ty015)