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Shijiazhuang Yiling Pharmaceutical:TCM preparations likely to see accelerated growth;focus on progress of biochemical drugs segment

发布时间:2016-06-22    研究机构:瑞银证券

Three major prescription cardiovascular drugs likely to see growth pick up.

The competitive landscape is favourable for Yiling's Shensong Yangxin, Qili Qiangxinand Lianhua Qingwen capsules, and there is room for an increase in the number ofhospitals they are sold to. Their revenues are likely to grow at a quicker pace as thedrug tenders progress. For the company's TCM preparations segment, our 2016-18Erevenue growth is 14.2%/13.7%/13.2% and gross profit growth is16%/13.7%/13.2%.

Yiling's main products are under less pressure to reduce prices.

Yiling generates more than 90% of its revenue from oral TCM products to which it hasexclusive rights. It is able to maintain its bid-winning prices at good levels and is underless pricing pressure from tenders. For Shensong Yangxin, Tongxinluo, Qili Qiangxinand Lianhua Qingwen capsules, the difference between the lowest bid-winning priceand the average bid-winning price is only 2.6%/5.6%/3.2%/3.0%. In the current roundof tenders, we expect price reductions for these four products of less than 6%.

Biochemical drugs segment progressing well.

Yiling has received GMP certifications in Europe and the US for its preparation plant.

For chemical drugs, its development of ANDA products is progressing well, with fiveproducts submitted to the FDA for approval. It is also likely to submit 15 productscurrently in R&D for ANDA approval by the end of 2017. We expect the biochemicaldrugs segment to become Yiling's new sales revenue and profit growth driver andbelieve it is likely to contribute 10%/5% of revenue and gross profit in 2018, althoughthe comparison base is currently low.

Valuation: Lowering PT to Rmb23.32; maintain Buy rating.

We maintain our 2016-18E EPS at Rmb0.48/0.56/0.63 and lower the terminal ROICfrom 14% to 12.2%. We derive our PT of Rmb23.32 using a DCF-based methodology(8.1% WACC). Our PT implies 42x 2017E PE. We maintain Buy.

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