HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

Sino Biopharmaceutical / Equity Bottom-Up

<ul>
<li>As the “the king of generics”, <a href="https://www.smartkarma.com/entities/sino-biopharmaceutical" target="_blank" data-smartkarma-citation="entities:230:1" rel="noopener">Sino Biopharmaceutical (1177 HK)</a> is lucky to have three “golden eggs”(Entecavir, Anlotinib, CoronaVac) to contribute huge performance over the years.</li>
<li>The promotion of VBP and fierce competition make Sino Biopharmaceutical's products lose pricing power. Due to little revolutionary technology/slow product iteration/weak R&amp;D, it’s unlikely to have another Anlotinib level asset.</li>
<li>The Company's development mode, the mindset of management, and other concerns could be more serious problems, causing investors to distrust the management level and preventing it from getting high valuation.</li>
</ul>


As the “the king of generics”, Sino Biopharmaceutical (1177 HK) is lucky to have three “golden eggs”(Entecavir, Anlotinib, CoronaVac) to contribute huge performance over the years.
The promotion of VBP and fierce competition make Sino Biopharmaceutical's products lose pricing power. Due to little revolutionary technology/slow product iteration/weak R&amp;D, it’s unlikely to have another Anlotinib level asset.
The Company's development mode, the mindset of management, and other concerns could be more serious problems, causing investors to distrust the management level and preventing it from getting high valuation.


Sino Biopharmaceutical (1177.HK) - Three “Golden Eggs” and the Risks Behind

Global Healthcare Analyst

Tina Banerjee

Simcere Pharmaceutical Group / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/simcere-pharmaceutical-group" target="_blank" data-smartkarma-citation="entities:29186:1" rel="noopener">Simcere Pharmaceutical Group (2096 HK)</a> reported an 11% y/y revenue growth to RMB5 billion, mainly driven by 54% y/y revenue growth from innovative pharmaceuticals.</li>
<li>However, gross margin contracted 160 basis point to 78.4%, reflecting pricing headwind. Heavy R&amp;D and selling and distribution expenses are taking toll on operating profit.</li>
<li>During 2021, Simcere has added six registered clinical trials for phase 3, two trails for phase 2, three trails for phase 1, and obtained 12 clinical trial approvals for drugs.</li>
</ul>



Simcere Pharmaceutical Group (2096 HK) reported an 11% y/y revenue growth to RMB5 billion, mainly driven by 54% y/y revenue growth from innovative pharmaceuticals.
However, gross margin contracted 160 basis point to 78.4%, reflecting pricing headwind. Heavy R&amp;D and selling and distribution expenses are taking toll on operating profit.
During 2021, Simcere has added six registered clinical trials for phase 3, two trails for phase 2, three trails for phase 1, and obtained 12 clinical trial approvals for drugs.


Simcere Pharmaceutical (2096 HK): Double-Digit Topline Growth; Margin Deteriorating Spoils the Party

Hansoh Pharmaceutical Group  / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/hansoh-pharmaceutical-group" target="_blank" data-smartkarma-citation="entities:23675:1" rel="noopener">Hansoh Pharmaceutical (3692 HK)</a> is increasingly focusing on innovative drug, with revenue from such drugs contributing 42% of total revenue in 2021. R&amp;D accounted for 18% of revenue in 2021.</li>
<li>Thus far, in this year, Hansoh received approval for one more new rare-disease drug. Its rich pipeline has 25+ clinical programs of innovative drugs.</li>
<li>With its proven execution on innovative portfolio, sound financial positions, and recent business collaboration effort to enrich the pipeline, Hansoh seems to be an undervalued business.</li>
</ul>



Hansoh Pharmaceutical (3692 HK) is increasingly focusing on innovative drug, with revenue from such drugs contributing 42% of total revenue in 2021. R&amp;D accounted for 18% of revenue in 2021.
Thus far, in this year, Hansoh received approval for one more new rare-disease drug. Its rich pipeline has 25+ clinical programs of innovative drugs.
With its proven execution on innovative portfolio, sound financial positions, and recent business collaboration effort to enrich the pipeline, Hansoh seems to be an undervalued business.


Hansoh Pharmaceutical (3692 HK): Bottom-Fishing Idea; Market Is Overlooking Innovative Portfolio

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/lenovo-group-ltd" target="_blank" data-smartkarma-citation="entities:13359:1" rel="noopener">Lenovo (992 HK)</a> could replace <a href="https://www.smartkarma.com/entities/hansoh-pharmaceutical-group" target="_blank" data-smartkarma-citation="entities:23675:1" rel="noopener">Hansoh Pharmaceutical (3692 HK)</a> in the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> at the June rebalance to be implemented on 10 June.</li>
<li>If <a href="https://www.smartkarma.com/entities/sunac-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:240:1" rel="noopener">Sunac China Holdings (1918 HK)</a> remains suspended, it could be deleted from the index and <a href="https://www.smartkarma.com/entities/great-wall-motor-co-ltd-cb302af9-398c-4d2d-ba39-023e43287eef" target="_blank" data-smartkarma-citation="entities:128:1" rel="noopener">Great Wall Motor (2333 HK)</a> could be added to the index.</li>
<li>Passive <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> trackers will need to buy around 2.45% of <a href="https://www.smartkarma.com/entities/lenovo-group-ltd" target="_blank" data-smartkarma-citation="entities:13359:1" rel="noopener">Lenovo (992 HK)</a>'s real float. Short interest is over 17 days of ADV.</li>
</ul>



Lenovo (992 HK) could replace Hansoh Pharmaceutical (3692 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the June rebalance to be implemented on 10 June.
If Sunac China Holdings (1918 HK) remains suspended, it could be deleted from the index and Great Wall Motor (2333 HK) could be added to the index.
Passive Hang Seng China Enterprises Index (HSCEI INDEX) trackers will need to buy around 2.45% of Lenovo (992 HK)'s real float. Short interest is over 17 days of ADV.


HSCEI Index Rebalance Preview: Lenovo Could Replace Hansoh Pharma; Great Wall In/Sunac Out?

Hang Seng China Enterprises Index / Event-Driven

<ul>
<li>Most companies have announced their final dividends for 2021 and most of those have announced ex-dates. Banks and oil companies have announced higher dividends than last year.</li>
<li>
<a href="https://www.smartkarma.com/entities/cnooc-ltd" target="_blank" data-smartkarma-citation="entities:175:1" rel="noopener">CNOOC Ltd (883 HK)</a> has not declared a dividend yet due to its IPO, while <a href="https://www.smartkarma.com/entities/sunac-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:240:1" rel="noopener">Sunac China Holdings (1918 HK)</a>'s suspension could lead to index deletion in June or July. </li>
<li>Using current/proforma index compositions and conservative estimates for interim dividends, we estimate fair value at 240.73 DIPS for 2022. This is a sell at the last close or higher.</li>
</ul>


Most companies have announced their final dividends for 2021 and most of those have announced ex-dates. Banks and oil companies have announced higher dividends than last year.

CNOOC Ltd (883 HK) has not declared a dividend yet due to its IPO, while Sunac China Holdings (1918 HK)'s suspension could lead to index deletion in June or July. 
Using current/proforma index compositions and conservative estimates for interim dividends, we estimate fair value at 240.73 DIPS for 2022. This is a sell at the last close or higher.


HSCEI Dividend Futures: 2022 Fair Value Update & CNOOC/Sunac/JD.com Adjustments

Hong Kong

Sino Biopharmaceutical Limited, through its subsidiaries, researches, develops, produces, and sells biopharmaceutical products for the medical treatment of ophthalmia, as well as modernized Chinese medicine and chemical medicine for the treatment of hepatitis.

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Sino Biopharmaceutical (1177 HK)