Daily BriefsHealthcare

Daily Brief Health Care: Chugai Pharmaceutical, Otsuka Holdings, Micro-Tech Nanjing Co Ltd, Concord Healthcare Group and more

In today’s briefing:

  • TOPIX July Rebalance: Good Performance, Low Progression, Should Trade Right Way
  • Otsuka Holdings (4578 JP): Revenue Guidance Raise and New Products Line-Up Enhance Conviction
  • Micro-Tech Nanjing (688029.CH) – Potential for Reversals Despite Short-Term Pressure on Performance
  • Concord Healthcare Group (CHG HK) Pre-IPO: Accumulated Loss and Cash Burn Cloud Growth Prospects

TOPIX July Rebalance: Good Performance, Low Progression, Should Trade Right Way

By Travis Lundy

  • The TOPIX Free-Float Rebalance for July will be executed tomorrow at the close. 
  • There should be about US$3.5bn to trade one-way with 150+ names down-weighted, 36 names up-weighted, and one inclusion – Mercari Inc (4385 JP).
  • The trade has performed well so far, and excess volume appears limited in most cases. It appears uncrowded.

Otsuka Holdings (4578 JP): Revenue Guidance Raise and New Products Line-Up Enhance Conviction

By Tina Banerjee

  • Otsuka Holdings (4578 JP) has raised revenue guidance for H1FY23 by 6%, due to continued strong performance of its four global brands, which contribute more than 35% of total revenue.
  • However, the company has cut operating and net profit guidance for H1FY23, mainly due to one-off charge related to elimination of unrealized gains on inventories caused by yen depreciation.
  • Otsuka received positive CHMP opinion for lupus nephritis drug, Lupkynis. This will pave the way for gaining marketing approval of the drug in Europe.

Micro-Tech Nanjing (688029.CH) – Potential for Reversals Despite Short-Term Pressure on Performance

By Xinyao (Criss) Wang

  • The main logic of Micro-Tech’s performance growth is import substitution, but the Company is facing some challenges in the short term, such as centralized procurement, pandemic, inflation, etc.
  • Micro-Tech will face lower-than-expected performance growth in 2022. Since the whole series of products would be covered by centralized procurement, the valuation of Micro-Tech should be lower than Mindray.
  • However, there are possibilities for Micro-Tech to achieve a turnaround (with bottom-fishing opportunity) if it could make a breakthrough in internationalization and product innovation. We recommend investors follow Micro-Tech closely.

Concord Healthcare Group (CHG HK) Pre-IPO: Accumulated Loss and Cash Burn Cloud Growth Prospects

By Tina Banerjee

  • Concord Healthcare Group (CHG HK), the second largest private oncology healthcare company in China, has submitted application proof for an IPO on the HK Stock Exchange in May 2022.  
  • The company has an accumulated loss of RMB1.7 billion during the last three years, with current net debt-to-capital ratio of 170.1%. Its finance cost account for 92.5% of total revenue.
  • Concord has a cash balance of just RMB136 million, which makes it hard to grab the growth opportunities in China’s capital-intensive oncology healthcare services segment.

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