Dong-E E-Jiao High Maori behind the risk of asymptony

The business club reported on April 13th that it had achieved a good annual report thanks to the high-margin Dong E-Jiao (44.70, 0.08, 0.18%) (000423), which had been maintaining high gross profit for many years in 2010. In 2010, the company achieved net profit attributable to the parent company's owner of 582 million yuan, an increase of 48.72% year-on-year, and a profit per share of 0.89 yuan, operating cash flow of 0.97 yuan per share. The company also expects to achieve 50%-100% growth in the first quarter of this year.

However, there are disagreements regarding the company’s future performance prospects. The positive view is that the company's products have strong independent pricing power, which will become the company's long-term advantage and boost performance; while the negative view is that the supply pressure and cost pressures of the company's raw material donkey skin are also increasingly significant, can we always rely on There is uncertainty in the downward price transfer.

Repeatedly raising prices to increase gross profit

Orient Securities researchers said that according to Dong'e E-Jiao's annual report, although the main business income in 2010 only increased by 17.88%, due to several price increases during the year, the gross profit rate increased by 6.15 percentage points, so the main business profit growth exceeded Income reached 32.80%.

In fact, Dongjia ejiao's multiple price increases have always been the focus of the market. In 2010, the price of many pharmaceutical products was subject to price control and the downward price pressure brought about by the intensified bidding competition. At the same time, it was able to raise the price of products smoothly and attracted the attention of the market.

It is understood that East E Ejiao experienced four price adjustments in 2010, and since then in early 2011, once again substantially raised the Ejiao block's ex-factory price, the rate of increase has also far exceeded the previous four, as high as 60%. It is worth mentioning that, since December 31 last year, Dong'e donkey-hide gelatin is no longer included in the scope of government pricing management, and companies can independently set prices according to changes in production costs and market demand. This means that Dong'e Ejiao's price increases will no longer face policy levels.

Similar to other pharmaceutical companies with price increases, Dongjia ejiao has repeatedly raised the price of donkey-hide gelatin products. The main reason is that the price of raw donkey skins of donkey-hide gelatin products has risen and supply exceeds demand.

Another source of the company’s overall performance growth is investment income. Dong'e Ejiao's investment income in 2010 was 39.92 million yuan, an increase of 542.59% compared with the same period of last year. It was mainly due to the disposal of equity in the participating companies and the increase in investment in wealth management products. This contributed to profits to a large extent.

"No Rice" risk asymptotic

Although the price increase of Dong'e E-Jiao products has won the government's “concession”, the shortage of raw materials and donkey hides has caused the company’s capacity expansion to face the risk of being a “wonderful woman can't be without rice”.

In the past ten years, the donation amount of donkeys in China continued to decline. According to statistics, in 1996, the donation amount of donkeys in China exceeded 10 million. In 2008, it was only 6.73 million. Currently donkey donation does not exceed 1.5 million heads per year. Analysts said that as mechanization replaces the function of the donkey, the donkey population will continue to shrink.

Therefore, how to ensure the supply of raw materials has become a “stumbling block” that affects the long-term development of Dong’e E-Jiao. It is understood that Dong'e E-Jiao plans to flatten the donkey skin acquisition network this year to control the purchase of terminals and control domestic raw material resources. In addition, Dong-E E-Jiao is also committed to building a standardized production base for donkey-hide gelatin and compound E-Jin mortar, and to improve product quality through the industrial chain.

China Investment Securities analysts predict that the company will make progress in the acquisition of Chinese herbal supplements and health products in the second half of this year. The sales situation of the company's donkey-hide gelatin products will gradually improve. In the future, it will control marketing, strengthen research and development, consolidate upstream raw material supply, and improve management. Such measures continue to enhance competitiveness.