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10-03-2020(Tue) 09-03-2020(Mon) 06-03-2020(Fri) 05-03-2020(Thu) 04-03-2020(Wed)
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Investor Notes - Phillip Securities (HK) Ltd
Past Investor Notes  
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3 Jan, 2020 (Friday)

In the first half of 2019, the company realized revenue of RMB 3.195 billion, an increase of 52.5% year-on-year; realized profit of RMB 873 million, an increase of 19.0%; the profit attributable to shareholders was RMB 812 million, an increase of 10.4% year-on-year. The company announced on December 28, 2019 that the company`s wholly-owned subsidiary General Global Hospital Investment Management (Tianjin) Co., Ltd. invested about 676 million RMB in cash to the state-owned company Yangquan Coal Industry`s wholly-owned subsidiary, Yangmei Medical Management, to obtain 51% equity, after which Yangquan Coal Industry`s shareholding dropped to 49%. The company pointed out that the relevant hospital operates in Yangquan City and has more than 2,100 open beds. Among them, Yangmei General Hospital is a third-level grade-A hospital with 1155 open beds. Upon completion, according to the follow-up negotiations, Yangquan Coal will continue to increase investment in Yangmei Medical Management with other hospital assets, and the company expects that the subsequent capital investment in this part will not exceed 300 million RMB. The company adheres to the concept of high-quality medical services for the benefit of the people, fully promotes the divestiture and undertaking of more state-owned hospital projects, and actively builds a leading medical and health industry group.
Buy-in Price: $5.60, Target Price: $6.25, Cut Loss Price: $5.30

PARK24 Co., Ltd. (4666)
Founded in 1971. Carries out the operation and management of parking spaces and the leasing and sale of automobiles. Offers subleasing contracts and management entrustment contracts leasing unused land, etc. from land owners, and services offering the hourly / monthly use of parking spaces owned by the company. In addition, they also offer rental car services and car sharing services in rental car shops across the country.For FY2019/10 results announced on 16/12, net sales increased by 6.3% to 317.438 billion yen compared to the previous period, operating income decreased by 1.0% to 22.322 billion yen and net income decreased by 10.9% to 12.348 billion yen. There has been growth in parking, car rentals and car sharing, etc. A decrease in profit due to effects from special factors such as natural disasters, a relocation of their HQ and expenses involving being a Tokyo 2020 official supporter.For its FY2020/10 plan announced together with FY2019/10, net sales is expected to increase by 4.9% to 333 billion yen compared to the previous year, operating income to increase by 19.6% to 26.7 billion yen and net income to increase by 33.6% to 16.5 billion yen. Forecasted parking management projects are at 20,208 (previous year: 18,908) and vehicle units in Times Car at 61,000 (previous year: 57,716).Target Price : 2,800 yenBuy Price : 2,580 yenCut-Loss : 2,490 yen

SH Pharma (2607.HK) - Rapid growth in core segments, promising in innovation transformations

Result Update

For the nine months ended September 30, 2019, the company recorded operating income of RMB 146.617 billion, an increase of 19.57% YoY, and its main business continued to grow rapidly. Of which, the pharmaceutical manufacturing sector realized revenue of RMB 17.682 billion, a YoY increase of 24.05%. The pharmaceutical business realized revenue of RMB 129.235 billion, an increase of 18.95% YoY (among which, the pharmaceutical distribution business achieved sales revenue of RMB 121.218 billion, an increase of 18.56% YoY; the pharmaceutical retail business achieved sales revenue of RMB 5.908 billion, an increase of 15.94% YoY). The company realized a net profit attributable to shareholders of listed companies of RMB 3.399 billion, a YoY increase of 0.80%; the main business of the pharmaceutical manufacturing sector contributed a profit of RMB 1.540 billion, a YoY increase of 20.56%; the main business of the pharmaceutical business contributed a profit of RMB 1.526 billion, a YoY increase Increased by 15.73%; the participating companies contributed profits of RMB804 million, an increase of 48.13% YoY. The company's comprehensive gross profit margin was 13.70%, a decrease of 0.11 percentage point compared with the same period last year; the gross profit margin of the pharmaceutical manufacturing sector was 57.54%, a decrease of 0.10 percentage point compared with the same period last year, and the average gross profit margin of 60 key varieties was 71.71%; the gross profit margin of pharmaceutical distribution was 6.40%, a YoY decrease of 0.27 percentage points; the gross profit margin of pharmaceutical retail was 14.10%, a YoY decrease of 1.02 percentage points.

Continue to deepen one product one policy, accelerate innovation transformations

In the pharmaceutical manufacturing sector, the company focuses on key products and continuously increases its market share, such as tanshinone IIA sodium sulfonate injection. From January to September 2019, it realized sales revenue of RMB 1.14 billion, a YoY increase of 76.39%. According to the life cycle of different products, the company has formulated a differentiated terminal strategy, and the promotion effect is significant. In January-September 2019, Ulinastatin for injection achieved sales income of RMB 673 million, a YoY increase of 32.91%; hydroxychloroquine sulfate tablets achieved sales income of RMB 587 million, a YoY increase of 20.56%; Hongyuanda achieved sales income was 366 million yuan, a YoY increase of 31.75%. Eureklin for injection achieved sales of 275 million yuan, a YoY increase of 20.85%.

In addition, the company continued to accelerate innovation transformation. From January to September 2019, R & D expenditure was RMB 860 million, an increase of 13.74% YoY; 73 invention patent applications were completed, 24 invention patent authorizations, and 20 utility model authorizations, totaling 117 patents. On September 17, the company signed a joint venture agreement with BIOCAD, the largest biopharmaceutical company in Russia, to introduce adalimumab biosimilars, trastuzumab biosimilars, bevacizumab biosimilars, and PD-1 products. Permanent and exclusive R & D, production, sales and other commercialization rights of the six blockbuster biopharmaceuticals in Greater China, including the joint venture company, will be the sole platform for BIOCAD in Greater China.

The company continued to advance the consistency evaluation of the quality and efficacy of generic drugs, further improved the production process and the quality of medicines. As of the end of September, the company has completed more than 40 product specifications for BE testing and application, of which 6 varieties have passed the consistency evaluation. Two varieties of ceftriaxone sodium for injection and lansoprazole for injection have completed a BE test and declared to CDE. Beclometasone propionate inhalation aerosol has been approved for supplementary application, 3 specifications of rosuvastatin calcium tablets have been declared for production, and lenalidomide capsules and rivaroxaban tablets have been completed for BE filing. Capsaicin, a commonly used drug for clinical chemotherapy, has been completed. Tabin has also officially started the BE trial.

Pharmaceuticals services continue promoting, expand the terminal market

In November 2019, the company continued to promote the implementation of new distribution and new retail development strategies, promote the rapid development of advantageous and innovative services, clarify the regional development strategies of key provinces, and continue to promote key provinces such as Guangdong, Shandong, Heilongjiang, Jilin, and Liaoning. The platform construction utilizes the policy opportunities brought by the two-vote system and volume purchase, integrates market resources, and strictly controls the accounts receivable, while quickly seizing the pure-sale terminal market. Among the large varieties, Pfizer's Peer vaccine market has been rapidly expanding, which has led to rapid increase in distribution revenue. During the reporting period, the company achieved 2.122 billion in distribution revenue from vaccine business, a YoY increase of 92.33%. The company has launched a new business, providing efficient and compliant sales channels for imported drugs and new special drugs that are not covered by medical insurance, and after the corresponding products enter the medical insurance, the company's distribution network will be used to provide hospital services. The one-stop service chain of innovative pharmaceutical companies has joined forces to win the general distribution rights for new varieties of large pharmaceuticals.

Financial Forecast and Valuation

We forecast that the company's FY19/FY20/FY21 income will be RMB 187.58/205.60/225.44 billion, representing an increase of 17.91%/9.61%/9.65% YoY; net profit attributable to shareholders will be RMB 4.35/4.93/5.60 billion, increasing 12.12%/13.24%/13.56% YoY; corresponding EPS will be RMB 1.54/1.74/1.98. We use DCF model and residual income model to value the company. Assuming equity cost is 10.49%, debt cost is 2.33%, and WACC is 7.19%. We get PT of HKD 18.06 and HKD 20.48 respectively. The lower valuation result corresponds to FY19/FY20/FY21 10.57x/9.33x/8.22x PE, which has an increase of +19.14% compared to the current price (HKD 15.16 as of December 31, 2019), giving an ¡§Accumulate¡¨ rating.


The launch of new products fails expectations; Industry policy risk.


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Recommendation on 3-1-2020
Price on Recommendation Date$ 15.160
Suggested purchase priceN/A
Target Price$ 18.060
Writer Info
Leon Duan
(Research Analyst)
Tel: +852 2277 6515

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