20171220-招商证券_香港_-绿叶制药-02186.HK-Strong_3Q_results__reviving_up_M_A_momentum_6页_1mb

报告摘要

Luye Pharma (2186 HK) Summary

Core Content

Luye Pharma (2186 HK) reported strong third-quarter results, with domestic sales growth accelerating to 25% (up from 11% in the first half) and net profit (NP) growth reaching 41% (up from 9% in the first half), surpassing expectations. As a result, the company's 2017/18e adjusted net profit was revised upwards by 2% for both years. The report maintains a BUY rating, citing favorable risk/reward and potential M&A catalysts.

The company is also planning to issue up to RMB1.8 billion in short-term notes (STN) and RMB2 billion in medium-term notes (MTN), which is expected to provide RMB4.4 billion in cash firepower for future acquisitions in China, particularly in the oncology and CNS sectors. The estimated interest cost for this borrowing is around 5%-6%.

Key Financials

Metric	2015	2016	2017E	2018E	2019E
Revenue (RMB mn)	2,563	2,918	3,659	3,772	3,982
Adj. Net Profit (RMB mn)	754	932	1,023	1,061	1,105
Adj. EPS (RMB)	0.28	0.31	0.31	0.32	0.33
P/E (x)	25.3	18.4	15.8	15.5	14.9
P/B (x)	3.4	2.7	2.3	2.1	1.9

Key Points

Strong 3Q Results: Domestic sales and NP growth significantly outperformed expectations, indicating a positive trend in the company's performance.
M&A Momentum: The company is actively pursuing acquisitions in China, with a focus on oncology and CNS areas. The issuance of STN and MTN is expected to provide substantial financial flexibility.
Earnings Growth: The report expects Luye's 2017 earnings to exceed market's conservative expectations by 10%.
Share Price: Despite the rally, the share price does not yet reflect any M&A premium.
Catalysts for 2018: The report anticipates several R&D milestones, including Phase II results for Ansofaxine and a US NDA filing for Risperidone, which may drive growth.
Risks: Concerns remain regarding the full impact of Lipusu losing PRDL coverage, which will be known in 1Q2018. Post-2018, Lipusu's sales may be influenced by competitors' pricing and reimbursement strategies.

Financial Ratios

Metric	2015	2016	2017E	2018E	2019E
Gross Margin (%)	81.4%	81.7%	78.3%	78.2%	78.0%
Adj. Net Profit Margin (%)	29.4%	32.0%	28.0%	28.1%	27.7%
ROE (year end)	13.3%	13.9%	13.5%	13.5%	12.7%
ROA	10.7%	9.7%	9.6%	9.9%	9.6%
Net Gearing (%)	-27.0%	-2.0%	-7.7%	-14.8%	-20.5%
FCF (RMB mn)	202	178	904	936	952

Share Structure

Luye Pharmaceutical Investment: 45.7%
Ping An Asset: 16.5%
CITIC: 5.9%
Free float: 31.9%

Price Performance

Metric	1m	6m	12m
2186 HK	-2.4%	18.9%	17.8%
Hang Seng Index (HSI)	0.2%	12.8%	34.0%

Key Data

52-week range (HK$): 3.95 - 5.88
Market cap (HK$ mn): 19,528
Avg. daily volume (mn): 12.73
BVPS (HK$): 1.94

Investment Rating

Rating	Definition
BUY	Expect stock to generate 10%+ return over the next 12 months
OVERWEIGHT	Expect sector to outperform the market over the next 12 months
NEUTRAL	Expect sector to perform in-line with the market over the next 12 months
UNDERWEIGHT	Expect sector to underperform the market over the next 12 months

Risks and Catalysts

Catalysts: Expected R&D validation points, including Ansofaxine's Phase II results and Risperidone's US NDA filing.
Risks: The full impact of Lipusu losing PRDL coverage will only be known in 1Q2018. Post-2018, Lipusu's sales may be influenced by competitors' strategies.

Conclusion

The report maintains a BUY rating for Luye Pharma due to its strong financial performance, potential M&A activity, and favorable risk/reward profile. The company's share price has moved closer to the target price (TP), but the TP does not yet reflect any M&A premium. The financials suggest continued growth, with adjusted net profit expected to rise by 2% in 2018 and 2019. The report also highlights the company's financial flexibility and potential for further expansion through strategic acquisitions.

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