HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Event-Driven

China Resources Sanjiu Medical & Pharma / Event-Driven

<ul>
<li>China Resources Sanjiu plans to acquire 28% stake in Tasly for RMB6.21 billion at RMB14.85/share. The acquisition of Tasly is in line with the strategic direction of 14th Five-Year Plan.</li>
<li>China Resources is positioned as a leading enterprise in modern industrial chain of TCM by the SASAC.Due to policy support, TCM assets are more likely to be favored by SOEs.</li>
<li>The deal is positive for Tasly, whose valuation has room to rise further, but the market seems "skeptical" about China Resources Sanjiu's decision, leading to a lackluster share price reaction. </li>
</ul>


China Resources Sanjiu plans to acquire 28% stake in Tasly for RMB6.21 billion at RMB14.85/share. The acquisition of Tasly is in line with the strategic direction of 14th Five-Year Plan.
China Resources is positioned as a leading enterprise in modern industrial chain of TCM by the SASAC.Due to policy support, TCM assets are more likely to be favored by SOEs.
The deal is positive for Tasly, whose valuation has room to rise further, but the market seems "skeptical" about China Resources Sanjiu's decision, leading to a lackluster share price reaction. 


CR Sanjiu (000999.CH) To Acquire Tasly Pharma (600535.CH) - SOEs Have High Enthusiasm for TCM Assets

Equity Bottom-Up

China Resources Sanjiu Medical & Pharma / Equity Bottom-Up

<ul>
<li>Sanjiu’s 2023 performance was below expectations, mainly due to the VBP of TCM formula granules and the anti-corruption since 23Q3. But dividend payout ratio reached 51.96%, the highest since 2001.</li>
<li>The prescription drug business would be the core of Sanjiu’s performance changes in next two years, especially TCM injection business, which would be benefit from favorable medical insurance reimbursement policy.</li>
<li>Sanjiu’s management expects to achieve double-digit revenue growth in 2024, with net profit matching the level of revenue growth.We think 2024 performance growth would be lower than that in 2023.</li>
</ul>


Sanjiu’s 2023 performance was below expectations, mainly due to the VBP of TCM formula granules and the anti-corruption since 23Q3. But dividend payout ratio reached 51.96%, the highest since 2001.
The prescription drug business would be the core of Sanjiu’s performance changes in next two years, especially TCM injection business, which would be benefit from favorable medical insurance reimbursement policy.
Sanjiu’s management expects to achieve double-digit revenue growth in 2024, with net profit matching the level of revenue growth.We think 2024 performance growth would be lower than that in 2023.


China Resources Sanjiu (000999.CH) - 2023 Results Below Expectations; Short-Term Headwinds Remain

Shenyang Xingqi Pharmaceutical / Equity Bottom-Up

<ul>
<li>A document titled "<em>Soliciting Opinions on the Implementation Plan for Supporting the Development of Innovative Drugs throughout the Whole Chain</em>" would completely change the outlook/investment logic of China's innovative drugs.</li>
<li>We predict that due to the early opening of TCM formula granules VBP in some provinces and intensifying competition, the market pattern of TCM formula granules would face reshaping.</li>
<li>After the atropine eye drops is approved by the NMPA, Xingqi’s performance growth will accelerate. Supported by favorable policies, its market value is expected to reach above RMB30 billion.</li>
</ul>


A document titled "Soliciting Opinions on the Implementation Plan for Supporting the Development of Innovative Drugs throughout the Whole Chain" would completely change the outlook/investment logic of China's innovative drugs.
We predict that due to the early opening of TCM formula granules VBP in some provinces and intensifying competition, the market pattern of TCM formula granules would face reshaping.
After the atropine eye drops is approved by the NMPA, Xingqi’s performance growth will accelerate. Supported by favorable policies, its market value is expected to reach above RMB30 billion.


China Healthcare Weekly (Mar.15)- New Policy of Innovative Drug, TCM Formula Granules, Xingqi Pharma

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

<ul>
<li>The FRTIB benchmark switch from the EAFE Index to the ACWI IMI ex-USA ex-China ex-Hong Kong Index will result in a round trip trade of around US$56bn.</li>
<li>The changes for the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-inde" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">CSI 300</a>, <a href="https://www.smartkarma.com/entities/csi-smallcap-500-index-shang" target="_blank" data-smartkarma-citation="entities:35347:1" rel="noopener">CSI 500</a>, <a href="https://www.smartkarma.com/entities/sse-science-and-technology-innovation-board-50-index" target="_blank" data-smartkarma-citation="entities:29279:1" rel="noopener">STAR50</a>, <a href="https://www.smartkarma.com/entities/shanghai-stock-exchange-sse-50-a-share-index" target="_blank" data-smartkarma-citation="entities:31073:1" rel="noopener">SSE50</a> and a bunch of other mainland China indices will be announced after market close on Friday.</li>
<li>Relatively quiet week for ETF flows with no major creations or redemptions during the week.</li>
</ul>


The FRTIB benchmark switch from the EAFE Index to the ACWI IMI ex-USA ex-China ex-Hong Kong Index will result in a round trip trade of around US$56bn.
The changes for the CSI 300, CSI 500, STAR50, SSE50 and a bunch of other mainland China indices will be announced after market close on Friday.
Relatively quiet week for ETF flows with no major creations or redemptions during the week.


Index Rebalance & ETF Flow Recap: FRTIB, Japan, CSI300, CSI500, STAR50, WuXi XDC, Asahi

Tasly Pharmaceutical Group / Event-Driven

<ul>
<li>Based on the new announcement released by CR Sanjiu, due diligence, auditing, evaluation, valuation and verification of material assets reorganization are in progress. Approvals by the SASAC/SAMR haven’t been obtained.</li>
<li>Sanjiu is now facing performance headwinds due to VBP. So, Sanjiu needs new/stable performance increments to alleviate future performance pressure, and completing the acquisition of Tasly becomes even more urgent.</li>
<li>China Resources excels in M&amp;As and has strong internal business integration capabilities.We’re optimistic about the future synergies after the merger. Valuation for Tasly is expected to reach P/E of 30.</li>
</ul>


Based on the new announcement released by CR Sanjiu, due diligence, auditing, evaluation, valuation and verification of material assets reorganization are in progress. Approvals by the SASAC/SAMR haven’t been obtained.
Sanjiu is now facing performance headwinds due to VBP. So, Sanjiu needs new/stable performance increments to alleviate future performance pressure, and completing the acquisition of Tasly becomes even more urgent.
China Resources excels in M&amp;As and has strong internal business integration capabilities.We’re optimistic about the future synergies after the merger. Valuation for Tasly is expected to reach P/E of 30.


CR Sanjiu (000999CH) To Acquire Tasly (600535CH) Update- The Deal Is Proceeding in an Orderly Manner

China

China Resources Sanjiu Medical & Pharmaceutical Co., Ltd. manufactures and markets medicines, healthcare products, and medical instruments.  Through its subsidiaries, the Company also operates in pharmaceutical trading, printing, food manufacturing, real estate development, and provides medical services.

China Resources Sanjiu Medical & Pharma (000999 CH)

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China Resources Sanjiu Medical & Pharma (000999 CH)

CR Sanjiu (000999.CH) To Acquire Tasly Pharma (600535.CH) - SOEs Have High Enthusiasm for TCM Assets

China Resources Sanjiu to acquire 28% stake in Tasly for RMB6.21 billion, aligning with strategic goals of 14th Five-Year Plan. Market is...

Xinyao (Criss) Wang

China Resources Sanjiu (000999.CH) - 2023 Results Below Expectations; Short-Term Headwinds Remain

Sanjiu’s 2023 results was below expectations. Growth in 2024 would be lower than that in 2023. Whether the performance would turnaround depends on...

Xinyao (Criss) Wang

China Healthcare Weekly (Mar.15)- New Policy of Innovative Drug, TCM Formula Granules, Xingqi Pharma

New policy of innovative drug is a big deal. We've reasons to start being optimistic.The market pattern of TCM formula granules will face...

Xinyao (Criss) Wang

Index Rebalance & ETF Flow Recap: FRTIB, Japan, CSI300, CSI500, STAR50, WuXi XDC, Asahi

This recap highlights Insights covering Asian index rebalances (announcements/ forecasts/ IPO Fast Entry/ M&A driven changes). We also highlight...

Brian Freitas

CR Sanjiu (000999CH) To Acquire Tasly (600535CH) Update- The Deal Is Proceeding in an Orderly Manner

The deal is proceeding in an orderly manner. Facing performance headwinds, CR Sanjiu urgently need new performance increments.We’re optimistic...

Xinyao (Criss) Wang

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

CR Sanjiu (000999.CH) To Acquire Tasly Pharma (600535.CH) - SOEs Have High Enthusiasm for TCM Assets

​China Resources Sanjiu to acquire 28% stake in Tasly for RMB6.21 billion, aligning with strategic goals of 14th Five-Year Plan. Market is...

Xinyao (Criss) Wang

China Resources Sanjiu (000999.CH) - 2023 Results Below Expectations; Short-Term Headwinds Remain

Sanjiu’s 2023 results was below expectations. Growth in 2024 would be lower than that in 2023. Whether the performance would turnaround depends on...

Xinyao (Criss) Wang

China Healthcare Weekly (Mar.15)- New Policy of Innovative Drug, TCM Formula Granules, Xingqi Pharma

New policy of innovative drug is a big deal. We've reasons to start being optimistic.The market pattern of TCM formula granules will face...

Xinyao (Criss) Wang

Index Rebalance & ETF Flow Recap: FRTIB, Japan, CSI300, CSI500, STAR50, WuXi XDC, Asahi

This recap highlights Insights covering Asian index rebalances (announcements/ forecasts/ IPO Fast Entry/ M&A driven changes). We also highlight...

Brian Freitas

CR Sanjiu (000999CH) To Acquire Tasly (600535CH) Update- The Deal Is Proceeding in an Orderly Manner

The deal is proceeding in an orderly manner. Facing performance headwinds, CR Sanjiu urgently need new performance increments.We’re optimistic...

Xinyao (Criss) Wang

China Resources Sanjiu to acquire 28% stake in Tasly for RMB6.21 billion, aligning with strategic goals of 14th Five-Year Plan. Market is...