Positive Profit Warning Suggests In-Line Results

Founder

Kemp Dolliver, CFA

Cherrystone Hill Research

Equity Bottom-Up

China Traditional Chinese Medicine / Equity Bottom-Up

China Traditional Chinese Medicine (570 HK)

<p>China Traditional Chinese Medicine (570 HK) is an intriguing vehicle to participate in both the growth and the consolidation of China's TCM market. The company serves as the platform for China National Pharmaceutical Group Corporation Company (CNPGC) to consolidate the TCM sector. 570:HK should continue to benefit from:</p><ul><li>the growth of the TCM market;</li><li>government support for TCM drugs;</li><li>accretive acquisitions of smaller competitors; and</li><li>the financial and operating support of CNPGC.</li></ul><p>Management's 2017 revenue target of RMB10 billion in 2017 is a tripling of 2015's pro forma revenue estimate of RMB3 billion. &nbsp;The shares' recent 18% run-up reflects some of the near-term benefit of the pending acquisition of Tianjiang Pharmaceuticals, but not long-term trends driving the stock. &nbsp;</p>

China Traditional Chinese Medicine (570 HK) is an intriguing vehicle to participate in both the growth and the consolidation of China's TCM market. The company serves as the platform for China National Pharmaceutical Group Corporation Company (CNPGC) to consolidate the TCM sector. 570:HK should continue to benefit from:the growth of the TCM market;government support for TCM drugs;accretive acquisitions of smaller competitors; andthe financial and operating support of CNPGC.Management's 2017 revenue target of RMB10 billion in 2017 is a tripling of 2015's pro forma revenue estimate of RMB3 billion. &nbsp;The shares' recent 18% run-up reflects some of the near-term benefit of the pending acquisition of Tianjiang Pharmaceuticals, but not long-term trends driving the stock. &nbsp;

Tong Ren Tang Technologies Co, Ltd. (1666 HK)

A Growing Market, Government Backing: What's Not to Like?