HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

China Resources Pharmaceutical / Equity Bottom-Up

<ul>
<li>The distribution business is stable, but it’s difficult to achieve high growth/profits due to industry trend. Therefore, the valuation of this business is hard to increase.</li>
<li>The performance of pharmaceutical manufacturing business is important, which largely determines the overall profit margin. But it actually depends on what the subsidiaries can contribute, who are facing different challenges.</li>
<li>China Resources Pharmaceutical may need to improve its vision of asset selection and its ability to judge and grasp the long-term trend of the industry. The current valuation isn’t attractive.</li>
</ul>


The distribution business is stable, but it’s difficult to achieve high growth/profits due to industry trend. Therefore, the valuation of this business is hard to increase.
The performance of pharmaceutical manufacturing business is important, which largely determines the overall profit margin. But it actually depends on what the subsidiaries can contribute, who are facing different challenges.
China Resources Pharmaceutical may need to improve its vision of asset selection and its ability to judge and grasp the long-term trend of the industry. The current valuation isn’t attractive.


China Resources Pharmaceutical (3320.HK) - Here Are the Concerns

Thematic (Sector/Industry)

<ul>
<li>China approved the first self-developed COVID-19 oral drug (Azivudine), but there are controversies about efficacy and safety profile on it, which could increase the unpredictability of domestic innovative drugs approval.</li>
<li>Due to the VBP, fierce competition, uncertainties in the COVID-19 prevention/control policies and decreasing demand, the commercialization performance and outlook of Azivudine could be lower-then-expected in China and overseas markets.</li>
<li>The approval of Azivudine wouldn’t change the zero-COVID policy. Until President Xi’s third term appointment is confirmed, there’s no reason to expect China to deviate from this policy.</li>
</ul>


China approved the first self-developed COVID-19 oral drug (Azivudine), but there are controversies about efficacy and safety profile on it, which could increase the unpredictability of domestic innovative drugs approval.
Due to the VBP, fierce competition, uncertainties in the COVID-19 prevention/control policies and decreasing demand, the commercialization performance and outlook of Azivudine could be lower-then-expected in China and overseas markets.
The approval of Azivudine wouldn’t change the zero-COVID policy. Until President Xi’s third term appointment is confirmed, there’s no reason to expect China to deviate from this policy.


Will the Approval of Genuine Biotech's COVID-19 Oral Drug Change China's Zero-COVID Policy?

Quality-Value Investing

Marc Melendez, CFA

Emerging Market Small and Mid Cap Equities

Reperio Capital

Reperio Capital Research was founded in 2013 with the goal of better serving the investment community with in-depth, high quality, value oriented research.

Reperio means to discover in latin. Using value investing principles, we aim to discover a minimum of 12 investment opportunities per year within the Emerging Markets Small and Mid Cap universe.

We take a business owners perspective with a long term investment horizon. We conduct bottom up, fundamental research. We focus on downside risks and require a significant margin of safety in any investment to prevent the permanent loss of capital. All factors differentiating our research from the short term, trading focus of traditional research providers.

<a href="https://www.smartkarma.com/entities/ssy-group-ltd" target="_blank" data-smartkarma-citation="entities:7799:1" rel="noopener">SSY Group Ltd (2005 HK)</a> is a manufacturer of intravenous solutions in China. Since 2007, its intravenous solutions revenue grew by 22.1% per year. In H1 2020, as a result of the pandemic, hospital admissions fell and the demand for IVs dropped causing the company’s sales to decline by 23.3% year-on-year. As the pandemic passes and hospital admissions normalize IV sales should normalize
Prior to the pandemic, the IV market was expected to grow by 8.4% per year. SSY should be able to grow faster than the market as it expands its distribution network. There are also economies of scale that will allow it to take share from smaller players. The company's growth trajectory is returning with Q3 2020 sales increasing by 12% YoY.
With SSY’s share price down 50% from its peak of HKD9.46, there is limited downside. There is 9% downside to the bear case, 81% upside to the base case, and 260% upside to the bull case. 
Despite its problems being temporary, its potential growth rates, strong competitive position, and good management team, SSY  trades on an EV/2019 EBIT of 12.6 times. At its peak valuation in June 2018, the market valued the company at 27.9 times its trailing twelve month EBIT.
SSY is a very attractive opportunity with a very strong chance of doubling your money over the next three years as the company’s temporary issues should be resolved within the next year or two.

SSY Group Ltd (2005 HK) is a manufacturer of intravenous solutions in China. Since 2007, its intravenous solutions revenue grew by 22.1% per year. In H1 2020, as a result of the pandemic, hospital admissions fell and the demand for IVs dropped causing the company’s sales to decline by 23.3% year-on-year. As the pandemic passes and hospital admissions normalize IV sales should normalize
Prior to the pandemic, the IV market was expected to grow by 8.4% per year. SSY should be able to grow faster than the market as it expands its distribution network. There are also economies of scale that will allow it to take share from smaller players. The company's growth trajectory is returning with Q3 2020 sales increasing by 12% YoY.
With SSY’s share price down 50% from its peak of HKD9.46, there is limited downside. There is 9% downside to the bear case, 81% upside to the base case, and 260% upside to the bull case. 
Despite its problems being temporary, its potential growth rates, strong competitive position, and good management team, SSY  trades on an EV/2019 EBIT of 12.6 times. At its peak valuation in June 2018, the market valued the company at 27.9 times its trailing twelve month EBIT.
SSY is a very attractive opportunity with a very strong chance of doubling your money over the next three years as the company’s temporary issues should be resolved within the next year or two.

SSY Group- A Chinese IV Bag Manufacturer Facing Short Term Issues, but Strong Long Term Outlook

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

Consun Pharma has managed to book a double-digit growth in revenue and earnings, 47.2% and 23.2% respectively; thanks to the sales growth of 13.8% Y-o-Y in Uremic Clearance Granule (UCG) and integrating Guangxi Yulin Pharmaceutical into Consun’s.The company also plans to carry out the development of new products to increase their foothold in kidney disease, venturing into imaging products, women and children healthcare, liver and gallbladder solution, skincare solution, digestive solution and a new form of the bone fixing water, in a hydrogel. All of which will set another momentum for double-digit sales growth for this coming financial year.As the share price trades at 15x PE, it is still cheaper compared to <a href="https://www.smartkarma.com/entities/8045" target="_blank">Shanghai Fosun Pharmaceutical (Group) (2196 HK)</a> at 21x, <a href="https://www.smartkarma.com/entities/16578" target="_blank" data-smartkarma-citation="entities:16578:1">China Resources Dubl Crne Phrmctl Co Ltd (600062 CH)</a>  at 22x, or <a href="https://www.smartkarma.com/entities/16359" target="_blank" data-smartkarma-citation="entities:16359:1">Northeast Pharmaceutical A (000597 CH)</a> at 198x.

Consun Pharma has managed to book a double-digit growth in revenue and earnings, 47.2% and 23.2% respectively; thanks to the sales growth of 13.8% Y-o-Y in Uremic Clearance Granule (UCG) and integrating Guangxi Yulin Pharmaceutical into Consun’s.The company also plans to carry out the development of new products to increase their foothold in kidney disease, venturing into imaging products, women and children healthcare, liver and gallbladder solution, skincare solution, digestive solution and a new form of the bone fixing water, in a hydrogel. All of which will set another momentum for double-digit sales growth for this coming financial year.As the share price trades at 15x PE, it is still cheaper compared to Shanghai Fosun Pharmaceutical (Group) (2196 HK) at 21x, China Resources Dubl Crne Phrmctl Co Ltd (600062 CH)  at 22x, or Northeast Pharmaceutical A (000597 CH) at 198x. 

Consun Pharma 2016 FY: What's in the New Concoction?

Founder

Kemp Dolliver, CFA

Cherrystone Hill Research

Equity Capital Markets

China Resources Pharmaceutical / Equity Capital Markets

This Insight follows up on our three prior Insights on the company. Here we discuss our opinion of the offering; additional details from the PHIP; and topics of discussion for the roadshow. We should note that we have not seen a pre-deal report or the roadshow presentation. You should refer to <a href="https://www.smartkarma.com/profiles/673" target="_blank" data-smartkarma-citation="accounts:673">Toh Zhen Zhou</a> 's Insight that reviews the offering using the IPO Analyzer.We are lukewarm on the offering. The company has an interesting position in the pharmaceutical value chain, but has reported only modest organic growth during the Track Record Period.  The proposed valuation appears to reflects this. There is a potential arbitrage opportunity (if in name only) at the lower end of the proposed price range to buy shares of the listed subsidiaries at a discount. <a href="https://www.smartkarma.com/profiles/673" target="_blank" data-smartkarma-citation="accounts:673">Toh Zhen Zhou</a> 's Insight discusses this in detail.

This Insight follows up on our three prior Insights on the company. Here we discuss our opinion of the offering; additional details from the PHIP; and topics of discussion for the roadshow. We should note that we have not seen a pre-deal report or the roadshow presentation. You should refer to Toh Zhen Zhou 's Insight that reviews the offering using the IPO Analyzer.We are lukewarm on the offering. The company has an interesting position in the pharmaceutical value chain, but has reported only modest organic growth during the Track Record Period.  The proposed valuation appears to reflects this. There is a potential arbitrage opportunity (if in name only) at the lower end of the proposed price range to buy shares of the listed subsidiaries at a discount. Toh Zhen Zhou 's Insight discusses this in detail. 

China

China Resources Double-Crane Pharmaceutical Co., Ltd. develops, manufactures and markets a variety of medical products.  The Company's products include anti-influenza,  antihypertensives, and antibiotics.

China Resources Dubl Crne Phrmctl (600062 CH)

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China Resources Dubl Crne Phrmctl (600062 CH)

China Resources Pharmaceutical (3320.HK) - Here Are the Concerns

Pharmaceutical manufacturing business is the key to drive valuation,but the subsidiaries face challenge.CR Pharma should improve its vision of...

Xinyao (Criss) Wang

Will the Approval of Genuine Biotech's COVID-19 Oral Drug Change China's Zero-COVID Policy?

Due to VBP/fierce competition/weak demand, Azivudine's outlook is challenging.Until President Xi’s 3rd term appointment is confirmed,there’s no...

Xinyao (Criss) Wang

SSY Group- A Chinese IV Bag Manufacturer Facing Short Term Issues, but Strong Long Term Outlook

SSY Group is facing short term issues related to the pandemic. As the world normalizes it should win share and grow at a low double-digit pace for...

Reperio Capital

Consun Pharma 2016 FY: What's in the New Concoction?

Consun Pharma has managed to book a double-digit growth in revenue and earnings, 47.2% and 23.2% respectively; thanks to the sales growth of 13.8%...

Henry Soediarko

CR Pharma: New Details, Final Thoughts

This Insight follows up on our three prior Insights on the company. Here we discuss our opinion of the offering; additional details from the PHIP;...

Kemp Dolliver, CFA

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