Ruikang Medical Medical Devices Inc. Surges

Ruikang Pharmaceutical Company disclosed that the annual report for 2013 showed that the total operating income was RMB 5,958,841,700, an increase of 28.20% year-on-year; the net profit attributable to shareholders of listed companies was RMB 14,355.49 million, an increase of 29.74% year-on-year, and the basic earnings per share was RMB 1.49. At the same time, the company plans to transfer 10 shares for every 10 shares and send 1.35 yuan (including tax) to all shareholders.

During the reporting period, the coverage of Ruikang Pharmaceuticals and Drugs distribution in the Shandong medical market has been basically completed, and on this basis, the share of each unit will be further increased. The revenue of second-level or above hospitals was 3.99 billion yuan, a year-on-year increase of 19%; the sales of essential drugs realized in the procurement platform of basic medical institutions in Shandong Province reached 539 million yuan, an increase of 46% year-on-year. In addition, in 2013, it wholly acquired an equipment company and controlled two equipment companies. In 2013, the equipment achieved an operating income of 236 million yuan, a year-on-year increase of 719.70%, achieving a leap-forward growth and becoming a strong driving force for the company's future performance growth. Overall, Ruikang Pharmaceutical maintains a stable development momentum during the three years of listing. The company's operating income has a compound growth rate of 38.86% for three years and a compound annual growth rate of 32.41% for three years.

Jiang Weina, an analyst at Everbright Securities, believes that Ruikang's pharmaceutical-based drug network has been completed and all downstream accounts have been opened. Cooperation with upstream companies is very close. The products have either obtained authorization from the province or obtained authorization from certain regions in Shandong. It is expected that the company, as an advantageous enterprise in Shandong, will be determined to benefit from the increase in market capacity, and the online business in the low-end market after the mid-term report will have a significant increase. Maintaining the previous earnings forecast, earnings per share for 2014-2015 were 1.74 yuan and 2.17 yuan respectively. Give a 30x P/E for 2014 with a target price of 52.2 yuan and maintain a “buy” investment rating. Taking into account the steady growth of the company's main pharmaceutical business, the endogenous or average annual growth of the equipment business is more than 100%, and the company has strong channel advantages in the Shandong region. After the upstream and downstream mergers and acquisitions are expected to become regional platform companies, investors are advised to pay attention. Since the existing management does not hold shares other than the actual controller, the company may consider taking equity incentives at the appropriate time.