20150713-申万宏源研究_香港_-石药集团-01093.HK-业内翘楚_再翻新篇_32页_1mb

CSPC Pharmaceutical Group Summary

Core Content

CSPC Pharmaceutical Group (1093:HK) is a leading pharmaceutical developer and manufacturer in China, known for its strong performance in the pharmaceutical industry. The company was established in 1997 as a state-owned enterprise and was privatized in 2007 through an acquisition by Legend Holdings. In 2015, the company underwent a significant ownership restructuring, with chairman and CEO Dongchen Cai becoming the largest shareholder, holding 19.25% of the shares, and the management team collectively holding 10.75%.

The company has successfully transformed its business from bulk medicine manufacturing to the development and manufacturing of finished drugs. By the end of 2014, finished drugs accounted for 90% of total EBIT, marking a significant shift in its business model.

Main Points

Financial Performance

• Revenue: Increased from HK$9,949.10 million in 2013 to HK$15,326.34 million in 2017E.
• Net Income: Grew from HK$972.75 million in 2013 to HK$2,436.67 million in 2017E.
• EPS: Rose from HK$0.17 in 2013 to HK$0.41 in 2017E.
• ROE: Improved from 13.02% in 2013 to 21.40% in 2017E.
• Dividend Yield: Increased from 2.06% in 2013 to 2.48% in 2017E.
• Valuation Metrics:
  • PE (2015E): 26.85x
  • PB (2015E): 4.88x
  • EV/EBITDA (2015E): 15.78x

Investment Highlights

• Outperform Rating: The company is initially covered with an Outperform rating, based on strong growth in its flagship products and oncology drugs.
• Target Price: HK$8.90, implying a 19% upside from the closing price of HK$7.48 on July 10, 2015.
• Growth Forecasts:
  • 2015E: Earnings growth of 30%
  • 2016E: Earnings growth of 23%
  • 2017E: Earnings growth of 20%

Key Products and Growth

Flagship Drugs

1. NBP (Butylphthalide):

   • Treats ischemic stroke.
   • Soft capsule launched in 2005, injection in 2010.
   • Included in NRDL and multiple PRDLs.
   • Sales in 2014: HK$1,413 million (21% of total finished drug sales).
   • Forecasted sales growth:
     • 2015E: 35%
     • 2016E: 11.68%
     • 2017E: 12.40%
   • Three-year CAGR: 29%
   • Combined sales forecast: HK$1.9 billion in 2015E, HK$2.4 billion in 2016E, HK$3.1 billion in 2017E.

2. Oulaining (Oxiracetam):

   • Treats dementia and brain trauma.
   • Capsule launched in 2003, injection in 2010.
   • Sales in 2014: HK$789 million (11.7% of total finished drug sales).
   • Forecasted sales growth:
     • 2015E: 20%
     • 2016E: 23.39%
     • 2017E: 19.99%
   • Three-year CAGR: 16%
   • Combined sales forecast: HK$947 million in 2015E, HK$1.1 billion in 2016E, HK$1.2 billion in 2017E.

3. Xuanning (Levamlodipine Maleate):

   • Treats hypertension.
   • Sales in 2014: HK$329 million (4.9% of total finished drug sales).
   • Forecasted sales growth:
     • 2015E: 25%
     • 2016E: 23.39%
     • 2017E: 19.99%
   • Three-year CAGR: 20%
   • Combined sales forecast: HK$411 million in 2015E, HK$494 million in 2016E, HK$568 million in 2017E.

Oncology Drugs

• Duomeisu (Doxorubicin Hydrochloride Liposome Injection): Treats various cancers, including lymphoma and breast cancer. Sales in 2014: HK$141 million (2.1% of total finished drug sales). Forecasted sales growth: 120% in 2015E.

• Jinyouli (PEG-rhG-CSF Injection): Prevents leucopenia and infection from chemotherapy. Sales in 2014: HK$40 million (0.6% of total finished drug sales). Forecasted sales growth: 150% in 2015E.

• Ailineng (Elemene Injection): Treats nerve glioma and malignant effusion. Sales in 2014: HK$31 million (0.5% of total finished drug sales). Forecasted sales growth: 120% in 2015E.

• Nuolining (Imatinib Mesylate Tablet): Treats Ph+ CML, Ph+ ALL, and GIST. Launched in 2015, it is a third-to-market generic. Sales in 2015E: HK$20 million. Forecasted sales growth: 100% in 2015E.

• Oncology Drug Sales Growth: Combined sales forecast for 2015E, 2016E, and 2017E: HK$498 million, HK$879 million, and HK$1,361 million respectively, with a three-year CAGR of 86%.

Research and Development Pipeline

• In-Development Drugs: Over 170 drugs in development, covering oncology, diabetes, cardiovascular, central nervous system, and anti-infective areas.
• Key New Drugs:
  • SKLB1028: Tyrosine kinase inhibitor for cancer treatment, included in CFDA's priority review list.
  • rE-4: GLP-1 receptor agonist for diabetes treatment, also included in CFDA's priority review list.
• Peak Sales Forecast: Key drugs in development are expected to reach peak sales of HK$11–19 billion by 2025, equivalent to 1–2 times CSPC's current sales.

Market Position and Competitive Landscape

• NBP Market: Dominates the peripheral vasodilator drug segment in China, with 43% market share in sample hospitals in 2014.
• Oulaining Market: Holds 31% market share in sample hospitals, second to Guangdong Sencee (34%).
• Xuanning Market: Holds a stable 25% market share, with a low cost and high reimbursement rate.
• Oncology Market: CSPC's oncology drugs are expected to grow rapidly due to the increasing prevalence of cancer and the company's strong product portfolio.

Conclusion

CSPC Pharmaceutical Group is well-positioned for growth, driven by its strong flagship products, a diverse and growing oncology portfolio, and a robust R&D pipeline. The company's recent ownership restructuring has solidified Dongchen Cai's leadership and aligns shareholder interests with the company's long-term success. With a target price of HK$8.90 and an Outperform recommendation, CSPC is seen as a promising investment opportunity in the pharmaceutical sector.