INDUSTRY ANALYSIS OF
BAIYUNSHAN ENTERPRISES
REN JI，BC309173
LI HIOTONG, BC307522
BAO SIYUAN BC310423
TAN CHEN BC309990
WONG CHUNWING ，BC205902
SI TAKSUN ,BC306863
Table Of Content
1. Company profile
2. Industry Analysis
3. Macro Analysis: (1) Global Economy, Chinese
Economy (2) Aging
4. Financial analysis
5.Valuation model
6.Conclusion
Company Profile
· Company Name: Baiyunshan Pharmaceutical Company
· Founded: 1997
Stock code：600332（A股）
· Controlling Shareholder: Guangzhou Pharmaceutical Group
· Registered Capital: 732.9 million yuan
Four Parts
大南药（Mainly pharmaceutical
business）
大健康（Beverages, food, health
products）
大商业（Pharmaceutical
distribution business）
大医疗（medical services）
Macroeconomic analysis
Stabilization: The global economy is stabilizing after years of negative shocks.
Growth： Global growth is projected to be slightly faster in 2024 than previously expected.
Interest Rates: Expected declines in global interest rates are moderated by ongoing inflation
pressures.
Outlook: Both advanced economies and emerging markets are anticipated to grow at a
slower pace from 2024 to 2026 compared to the pre-pandemic decade.
Balanced Risks: Risks to the economy are now considered relatively balanced.
Geopolitical Tensions: These could negatively affect sentiment, disrupt trade, and increase
inflation.
Trade Policy Uncertainty: Increased restrictions may hinder trade and economic activity.
Interest Rates: High interest rates in advanced economies may persist, tightening financial
conditions and potentially slowing global growth.
China economic growth in early 2024
Growth Pickup: Economic growth picked up slightly in early 2024.
Net Exports: Positive contribution from net exports offset weak domestic demand.
Trade Strength: Both exports and imports strengthened after last year's weakness.
Investment Growth: Overall investment growth remained weak.
Infrastructure and Manufacturing: Solid momentum in infrastructure and manufacturing
investment.
Population aging trends
Growth in Elderly Population:
2012: 128 million people aged 65 and above.
2022: Increased to 210 million, a growth rate of 64.18%.
Proportion of Total Population:
2012: 9.4%.
2022: Increased to 14.9%.
Elderly Dependency Ratio:
2012: 12.7.
2022: Increased to 21.8.
Healthcare Industry Development:
Brings new employment opportunities and investment as a service industry.
Becomes a new driving force for social development.
INDUSTRY ANALYSIS
SOURCE：IQVIA
Market size
SOURCE：NANFANGSUO
The average annual growth rate of global
pharmaceutical market revenue from 2022
to 2026 will reach 2.5%-5.5%
In recent years, the total output value of
China's pharmaceutical industry has
maintained rapid growth
The United States still occupies a leading position in the global
pharmaceutical market in 2022, with a market share of about 36%.
China become the world's second largest pharmaceutical market,
accounting for about 11% of the market share in 2022
SOURCE：WORLD BANK
INDUSTRY ANALYSIS
Market share Rank：
From the perspective of corporate revenue, the revenue of two
traditional Chinese medicine companies, Baiyunshan and
Yunnan Baiyao, is more than 20 billion yuan, of which
Baiyunshan’s annual revenue exceeds 60 billion yuan;
Policy support:
1.During the 13th Five-Year Plan period, the biopharmaceutical
industry has become a strategic industry that the country focuses on
developing
2.During the 14th Five-Year Plan period, China has elevated the
biopharmaceutical industry to the strategic height of "national priority
industry" with the health of the people as the center.
China
Company Overview
Income details：
99.54% of Income comes from China
The gross profit
margin of the Great
commerce is very
low, and the
company's overall
gross profit margin
is also declining.
Gross profit margin
DaYiLiao Currently
still in development
stage
70.04% of income from great commerce
Gross profit margin ratio
Financial Analysis
Data analysis
4.1 Cash flow analysis
4.2 Profitability analysis
4.3 Solvency analysis
4.4 P/E analysis
SWOT analysis
4.5 Strength
4.6 Weakness
4.7 Opportunity
4. 8 Threat
Net
cash flows
from
operating
activities
Cash
received
from selling
goods and
providing
services
The
amount of
revenue
2023
41.04
753.43
755.15
99.77%
2022
69.99
719.70
707.88
101.67%
2021
56.73
678.60
690.14
98.33%
2020
5.85
568.55
616.74
92.19%
2019
50.22
632.88
649.52
97.44%
Average
44.77
670.63
683.89
97.88%
4.1 Cash flow analysis
Year
The table shows an upward trend of
cash flow in the past five years, with
cash flow being close to 100% of the
revenue, indicating that the company
has done a very good job in
controlling cash flow and can timely
collect payments for the goods sold.
UNIT: 100 MILLION YUAN
Cash
received from selling goods and
providing services/The amount of
revenue
4.2 Profitability analysis
The total revenue of Baiyun
Shan has shown a steady
upward trend in the past 5
years, and the net profit has
also shown a steady upward
trend, indicating that the
company's operating
conditions are good.
UNIT: 100 MILLION YUAN
4.3 Solvency analysis
In the past five years, BaiYun
Shan's asset liability ratio, current
ratio, and quick ratio have
slightly decreased, but the overall
trend is stable.
By the end of 2023, the
company's quick ratio will be
1.23, which is higher than 1,
indicating that there is sufficient
funds to repay short-term debts in
the short term.
UNIT: 100 MILLION YUAN
Year
Asset
liability ratio
current
ratio
Quick
ratio
2023
0.53
1.55
1.23
2022
0.55
1.53
1.24
2021
0.53
1.64
1.31
2020
0.53
1.62
1.29
2019
0.54
1.57
1.24
4.4 P/E analysis
In the past five years,
BaiYun Shan's P/E ratio had
showed a trend of
downward.
The current ratio is 13.72.
But at the same time, the
company may also be
undervalued, and the
company may rebound in the
future.
TIME
AVERAGE
HIGHEST
LOWEST
4.5 Strength analysis
From the graph beside, compared with
the company YunNanBaiYao and
TongRenTang, which are the leading
companies in the industry, we can easily
find the revenue of BaiYunShan is the
highest,which means the Baiyunshan
occupies a large share in the industry. It
can significantly enhance
BaiYunShan’Competitiveness.
Also, in the other table, which tells
BaiYunShan have the highest Net profit.
High net profit represents BaiYunShan
has a high profitaility.
4.6 Weakness analysis
From this table, we can see that
compared with other companies in
the same industry, Baiyunshan's
investment in R&D is lower than
other companies, and its R&D
investment is lower than the
industry average. In addition,
Baiyunshan has fewer R&D patents
than other companies, and has not
yet formed a flagship product with
unique company characteristics.
Also,the R&D expense ratio keeps
decreasing, which is possible to
decline the Competitiveness.
company’s R&D expense ratio keep decresing
4.7 Opportunity analysis
In recent years, due to factors such
as the accelerated pace of life,
increased work pressure, and
unhealthy living habits, the number
of people suffering from erectile
dysfunction (ED) has been on the
rise and is becoming younger.
According to the National Health
and Health Survey, the prevalence
of ED in men over 40 years old in
my country is about 40%. According
to CMH statistics, the market sales
scale of anti-ED retail pharmacy
channels in my country in 2022 is
6.08 billion yuan, a year-on-year
increase of 8.24%.
The market sales scale of China's anti-ED drug retail
pharmacy channel has increased rapidly
In recent years, sales of PDE5 inhibitors in Chinese retail pharmacies have
increased year by year, exceeding 5.5 billion yuan in 2021, a year-on-year
increase of more than 30%.
4.7 Opportunity analysis
Based on the analysis of the industry
competition pattern, Jin Ge’s
current main competitor is not
domestic generic drugs, but foreign
original drugs. The main
competitive products are sildenafil
tablets Viagra and tadalafil tablets
Cialis. From the unit price point of
view, according to the price
displayed by Taobao’s official
flagship store on June 20, 2024, Jin
Ge’s unit price is 0.58 yuan/mg,
Viagra’s unit price is 1.24 yuan/mg,
and Cialis’ unit price is 7.5 yuan/mg.
From the unit price point of view,
Jin Ge’s product has a lower price
with basically the same efficacy.
4.8 Threat analysis
As can be seen from the right figure, the revenue of
Baiyunshan's southern medicine segment has
shown slow growth or even negative growth in
recent years. In 2023, the company's chemical drug
revenue will be 4.618 billion yuan, a year-on-year
decrease of 12.23%. This is mainly due to the
normalization of the national centralized drug
procurement in 2021. More and more generic drugs
are included in the centralized procurement scope,
and drug prices have dropped significantly, which
has further pressured the chemical drug business.
On the other hand, the growth rate of
pharmaceutical sales in my country has slowed
down significantly in recent years. With the
increasingly fierce competition among peers, this
has brought great challenges to Baiyunshan's
pharmaceutical sales.
VALUATION &RISK
4.5
4.6
4.7
4.8
Strength
Weakness
Opportunity
Threat
Beta Estimation
Regressed between 5 year weekly returns of Baiyunshan Stock (600332) and 5 year
weekly returns of CSI index. Beta = 1.05
BETA：1.05
Market returns: CAGR of 5 years CSI300 Index weekly returns less the risk free
rate: (11.4%-0.22%) = 11.18%
Equit Cost
CAPM :
Re=Rf+BETA*（Rm-Rf)
Parameters:
𝑹𝒇 : Yield to Maturity of 10-years Chinese Bonds
𝑹𝒎: Annualized return of market index in the last 5 years
Cost of Equity (Re=Rf+BETA*（Rm-Rf) )：9.97%
Rf:Risk free rate（Yield to Maturity of 20-years Chinese Bonds） (Rf)：2.2%
BETA：1.05
Rm:implied market return (Rm)：9.6%
(Rm-Rf):implied market risk premium：Rm-Rf=7.4%
Debt & WACC Cost
Break Down the Debt: Debt ⊇ Interest-bearing Debt ⊇ Short/Long-term Loans, Bonds, etc.
Rd=∑（Di/D）*RDi≈Dividend/Debt
Parameters:
Rwacc=E/(D+E)*Re+D/(D+E)*Rd*(1-t)
WACC：8.96%——8～9%
Rd=Dividends paid annually：3.231 Billion
Equity:79.256 Billion
Debt：36.235 Billion
Debt：36.235 Billion
Dividends：36.235 Billion
Rd=Dividends paid annually：3.231 Billion
SGR（g）=ROE×Retention Ratio
=ROE×(1-Divideng Per share(DPS)/Earning Per share(EPS))
=8.81%×(1-$2.30/$3.03)
=2.13%
DCF Method
Future and Past revenue GR:
FCF = EBIT + Depreciation +Amortization – Tax – Capital Expenditure + Change in net working capital
EBIT = Net Income + Interest + Tax
EBIDTA = EBIT + Depreciation + Amortization
Change in net working capital = (Total current assets- Total current liabilities) – (Cash + Short- term equity financial assets)
DCF Method
Shares Fair Value: WACC vs terminal growth rate
Cash:19.824
Debt:36.235
Share outstanding:1.41
(in billion)
P0=（V+Cash-Debt）/Share outstanding=27.26
DDM - Method
Model:
The present value of dividends
changes from $2.13 to $1.59,
from the year1 to year 5.
The present value of sum stage
1 dividends (1-5) is 9.25 .The
present value of stage 2
terminal value is 20.57 . The
final value per share is equal to
29.82 .
DDM - Method
Sensitivity Analysis of shares fair value: Cost of equity vs terminal growth rate
When Re is between 9% and 10%, the corresponding enterprise value (g) is relatively stable between 29 and 35. This may be
a reasonable value range for the company.
The potential upside for the min is 34.32%,the max is 33.22%,the difference between two value just about 1%.
P/E Multiples
We calculated the justified trailing P/E and
justified leading P/E.Corresponding to the
past 12 months and the next 12 months
respectively.
For sensitivity analysis, the justified leading
P/E is probably in the range of 12-14. This
means that Baiyunshan's stock price still has
great potential for appreciation.
Football Field Analysis
The DDM estimation method is 20.89, the peak value is 42.02
The DCF valuation method is 9.20, the peak value is 32.64
The P/E valuation method is 20.48, the peak value is 40.96
Judging from the results, there is a common price range
among these three valuation methods are 21-32. Because
the sensitivity analysis range is large, the difference is large
Since the sensitivity analysis is not evenly distributed on both
sides of the mean, the final result should be more biased
towards the high price side.
Conclusion
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