Daily Brief Equity Bottom-Up: CSPC Pharmaceutical (1093 HK): 1Q22 Result: Double-Digit Revenue Growth; One-Off Charges Drag Profit and more

In today’s briefing:

CSPC Pharmaceutical (1093 HK): 1Q22 Result: Double-Digit Revenue Growth; One-Off Charges Drag Profit
Fast Retailing: Guidance Upgraded, Yet The Upside Seems Limited Due to Stretched Valuations
China Internet Weekly (18Jul2022): Tencent, Alibaba, Kingsoft Office, Miss Fresh

CSPC Pharmaceutical (1093 HK): 1Q22 Result: Double-Digit Revenue Growth; One-Off Charges Drag Profit

CSPC Pharmaceutical Group (1093 HK) reported Q1 results, with revenue growth of 17% y/y to RMB8 billion, driven by a 15% y/y growth in finished drugs revenue.
Oncology, with 34% contribution to finished drug revenue remained the main growth engine. Oncology revenue grew 15% y/y. The company has launched one new innovative oncology drug in Q1.
CSPC’s net profit declined 5% y/y to RMB1.40 billion, dragged by fair-value losses of RMB133 million on its financial assets. Without considering one-off charge, net profit would have increased 10%.

With discounting delayed, Fast Retailing (9983 JP)’s 3QFY22 was a surprise to the upside as its OP grew 36.5% YoY to ¥81.8bn (consensus:¥65.8bn) to exceed the pre-COVID level by 9.7%.
Nevertheless, the upside seems limited in the short-term, with shares already trading at a stretched valuation of 22.2x consensus FY+2 OP, compared to the historical median of 15.5x.
At around ¥290.0bn FY+1 OP, a fair price should be somewhere around ¥58,000-60,000, which implies a downside of around 25%.

Tencent’s games gave only three hours a week to juveniles in school summer vacation.
Tencent and NetEase did not get new game licenses for the third time this year.
Kingsoft censors files on users’ computers, which will benefit Microsoft Office.

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