Pientzehuang's stock price has soared from the lowest 98 yuan in November last year to 300 yuan recently, tripled in less than a year, hitting Luzhou Laojiao and kicking Haitian Taste Industry, and becoming the biggest brother of the consumer white horse in terms of the rate of increase.

In recent years, Lin Yuan, the "folk stock god", has repeatedly expressed his optimism about the investment value of Pientzehuang. According to Pientzehuang 2020 half-yearly report shows that the company's top ten shareholders holdings, "Lin Yuan investment 21, 29 and 101" shareholding ratio of 0.65%, 0.42% and 0.39% respectively. Beiketouyan (ID:Beiketouyan) has a question, what does Lin Yuan see in Pientzehuang?

I. Economic Franchise Ideology

Lin Yuan adheres to the concept of value investment, pursues long-term steady appreciation, and the investment targets are monopolized enterprises with absolute competitive advantages. He once said that Pientzehuang's advantage lies in the fact that natural musk is approved for use by the state, which is not only a monopoly, but also an unparalleled pricing power! This coincides with Warren Buffett's most classic investment philosophy - economic franchise thinking.

What is an economic franchise?

1. Being needed - treating liver disease with unique curative effect

Pientzehuang series products include Pientzehuang, Pientzehuang capsules and other liver disease medicines, which are applicable to acute and chronic viral hepatitis and carbuncle and boils caused by heat toxicity and blood stasis and have both medical and health care functions. At present, the prevalence rate of fatty liver among adults in China has been increased. At present, the prevalence rate of adult fatty liver in China has reached 12.5%-35.4%, which has become the first major liver disease in China, and Pientzehuang has its own unique efficacy in treating liver diseases.

Recently, Pientzehuang's PZH2111 tablets have been approved to carry out clinical trials, which is the first Class 1 new drug of Pientzehuang to obtain clinical approval, with indications for advanced solid tumors such as intrahepatic cholangiocarcinoma and uroepithelial cell carcinoma. In addition, Pientzehuang's another Class 1 new drug PZH2109 capsule has completed preclinical research, and clinical declaration is currently under acceptance, which is mainly used for the treatment of non-alcoholic steatohepatitis.

2. Unrepeatable - Top secret formula builds moat

The most crucial raw material of Pientzehuang is musk, which is the dry secretion extracted from mature male scent sacs of musk animals. Musk is listed as one kind of wild protected animals, and the use of musk is approved and distributed by the state. Natural musk is extremely precious, and in 2015, the state stopped the quota supply of natural musk, in which Pientzehuang belongs to the few enterprises that are allowed to use natural musk under the state license.

After 500 years of inheritance and innovation, Pientzehuang has been included in the national level protected varieties of traditional Chinese medicines, and its prescription and process are protected by the state, which belongs to the state's top-secret formula and permanent confidentiality period, which is difficult to be copied by other traditional Chinese medicines enterprises, and it is also the absolute "moat" it possesses.

3. Pricing right

Looking at A-share, except for Maotai, only Pientzehuang stock (600436) can satisfy the above points at the same time.

Second, what are the points of concern in Pientzehuang half-year report?

The half-year report of Pientzehuang in 2020 shows that it realized operating income of 3.246 billion yuan, up 12.16% year-on-year; net profit attributable to shareholders of listed companies was 865 million yuan, up 15.84% year-on-year. Lin Yuan, in response to an investor's question "Can you share the logic of Pientzehuang? When Lin Yuan answered investors' question "Can you share the logic of Pientzehuang?", he also suggested that we should look at the annual report, and we will look at the half-yearly report of Pientzehuang to see what is worth paying attention to.

1. Net cash flow from operating activities decreased by 40.53% year-on-year

The half-yearly report shows that Pientzehuang's net cash flow from operating activities was 547 million yuan, a decrease of 40.53% year-on-year, and the company explains the reasons: (1) the increase of cash outflow for payment of taxes and fees during the reporting period; (2) the increase of fixed-term deposits, which are not treated as cash at the end of the reporting period; and (3) the increase of cash outflow for payment of taxes and fees. increase in the company's time deposits, which are not presented as cash and cash equivalents.

It can be seen that the situation is true by checking the main assets of Pientzehuang which are restricted and the notes. In addition, Pientzehuang received 3.209 billion cash from the sale of goods and provision of services in the first half of the year, and the cash-to-cash ratio is 99.10% close to 1, which indicates that the cash received from the sale of goods is basically the same as the sales revenue of the period, and there is no pending account for the sale of goods, and the capital turnover is relatively good.

2. Inventory increased by 6.39% in the first half of the year

As of June 30, 2020, Pientzehuang's inventory balance was 2.231 billion, and the inventory balance was 2.097 billion at the end of 2019, and inventory increased by 6.39% in the first half of the year, inventory turnover rate declined, but the number of days of turnover of receivables was reduced from first half of 2019 30.37 days to 27.09 days, so there is no product backlog that is difficult to sell.

The main reason for the increase of inventories: since the upstream precious medicinal materials (musk and snake gall) have certain bottlenecks in the long run and the price has been rising in recent years, Pientzehuang stock (600436) has strategically laid out in advance and strategically stored the upstream precious medicinal materials, which can be verified from the annual report as well.

3. Pientzehuang's weighted ROE is more than 15% in the recent ten years

For large consumer enterprises, return on net assets is an index that must be concerned, and Pientzehuang's weighted ROE from 2010-2019 has remained more than 15%, and the ten-year average weighted ROE is as high as 21.27%, and only a very few leading enterprises in A-share market can reach such level.

Yunnan Baiyao has been competing with Pientzehuang to be the "medicine in Maotai" in the last ten years, the weighted return on net assets is slightly embarrassing, 2010 weighted ROE 23.07% rose to 28.94% in 2013, the good times did not last long, 2014 began to fall straight down, 2019 weighted ROE is only 10.31%. According to the latest data, Yunnan Baiyao first half of the weighted ROE 6.24%, while Pientzehuang is as high as 12.25%, almost twice as Yunnan Baiyao!

Three, what does Pientzehuang rely on to grow in the future?

The future of the enterprise is in the hands of the management, let's see what are the strategies of Pientzehuang management?

1. "One Core and Two Wings" Strategy, Expanding and Strengthening by Mergers and Acquisitions

Since Chairman Liu Jianshun took office in 2014, the company has been actively implementing the "One Core and Two Wings" development strategy, which is to strengthen the two wings of cosmetic products, daily chemical products, health care products and health care food based on the solidification of pharmaceutical manufacturing industry and expand the pharmaceutical circulation industry as a supplement at the same time. Expanding the pharmaceutical distribution industry as a supplement. In the half-yearly report, Pientzehuang stock (600436) company emphasized that among the increased sales revenue of 203 million yuan, cosmetic and daily chemical industry contributed 150 million yuan. Business type increase, this will avoid the future occurrence of "eat old capital" phenomenon, after all, Dong A Gum main business is too single soon storm thunder.

In addition, Pientzehuang holds 51% equity of Longhui Pharmaceuticals through merger and acquisition, and Longhui Pharmaceuticals owns 115 approved document numbers of Chinese and western medicines, especially traditional classic Chinese patent medicines such as Angong Niuhuang Pill (double natural) and Xihuang Pill (double natural), etc., which have high market value. The holding of Longhui Pharmaceuticals is conducive to the enrichment of the company's product pipeline, and plays a positive role in the layout of the company's 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 problem of raw material bottlenecks, the management has continued to push forward the "company+base+scientific research+breeding households" industrial development model, and has actively laid out the strategic reserve of musk raw materials. At the same time, the company is actively laying out the musk breeding business. At present, the company has invested in Shaanxi and Sichuan to set up two musk companies, establish a number of musk bases, and develop farmers to raise musk.

3. Building Pientzehuang Experience Hall and Promoting the Concept of "Chinese Symbol"

As Pientzehuang is better known in the Southeast region, while in the North, it has a kind of "locked in the boudoir and unknown to the people", in order to expand the influence of the brand, Pientzehuang began to be used in the airports, railway stations, scenic spots and other crowded areas of the capitals of most of the provinces and the major prefectural-level cities of the country in 2015, which is the first time that Pientzehuang has been used in the Southeast region. In order to expand brand influence, in 2015, Pientzehuang began to build Pientzehuang Experience Halls in most provincial capitals and major prefectural-level cities of China at airports, railway stations, scenic and scenic spots and other crowded places. By the end of 2019, the total number of Pientzehuang experience pavilions nationwide will exceed 200. It also actively promotes the experience hall mode overseas and vigorously publicizes the concept of "Chinese Symbol on the Sea Silk Road".

Fourth, Summary

So far in 2020, Guizhou Moutai has increased by about 50%, and Pientzehuang has easily doubled it. Pientzehuang has significantly outperformed Guizhou Moutai in terms of both "one-year" and "three-year" stock price trends. Generally speaking, when the market penetration rate reaches about 15%, the performance of the enterprise will usher in a spurt of growth. At present, the penetration rate of Pientzehuang is far below 15%, so there is still room for growth from investment point of view.

Beiketouyan believes that the core competitiveness of Pientzehuang is the "state top secret formula", which is like Coca-Cola, and cannot be copied or compared by other Chinese medicine enterprises! In addition, Pientzehuang's management is active in laying out the upstream and downstream industrial chain and developing business types, which still has growth potential in the future. (ty015)