20180828-中国银河国际证券-石四药集团-02005.HK-Bright_and_visible_outlook,maintain_BUY_4页_1mb

SSY Group [2005.HK] Summary

Core Content

SSY Group (2005.HK) has released its 1H2018 results, which were stronger than expected, with a net profit of HK$446m, representing a 54.7% YoY increase. This growth is attributed to volume expansion in IV products and an increase in average selling price (ASP). The results suggest that the worst of the IV industry consolidation phase is over, as the company's performance has improved since 2017.

Main Points

• 1H2018 Performance:

  • Revenue growth for IV products was 59.5% YoY, driven by volume growth (15 ppts), RMB appreciation (8 ppts), and ASP increase (37 ppts).
  • Gross margin improved significantly from ~55% in 1H2017 to ~63% in 1H2018.
  • Non-PVC soft bags accounted for ~48% of the 2018E full year estimate, while upright bags reached ~58% of the full year estimate.

• Future Outlook:

  • SSY aims to add 150m bags capacity to non-PVC (high-end) products.
  • The company is expected to benefit from further ASP increases and improved operating leverage.
  • High-margin soft bags and continued sales growth are anticipated to drive future performance.

• Investment Thesis:

  • The stock is rated BUY with a Target Price of HK$8.4, reflecting a 22.2% increase from the closing price of HK$6.87 on Aug 27, 2018.
  • The analyst believes that the company's solid results and industry consolidation have led to a more favorable outlook for the IV sector.

Key Financials (2016A–2020E)

Financial Ratios

Investment Highlights

• The company is expected to maintain a high gross margin, with potential for further improvement due to economies of scale.
• The stock has shown an attractive valuation post-correction, with a target price of HK$8.4, implying a 22x 2019 PER.
• SSY's strong performance in 1H2018 supports the view that the IV industry is recovering and the company is well-positioned to capitalize on this trend.

Analysts

• Harry He – Analyst, Contact: (852) 3698-6320, Email: harryhe@chinastock.com.hk
• Wong Chi Man, CFA – Head of Research, Contact: (852) 3698-6317, Email: cmwong@chinastock.com.hk

Disclaimer

This report is issued by Galaxy International Securities and is not directed at, or intended for distribution to, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution would be contrary to applicable law. No representation or warranty is made as to the accuracy, correctness, or completeness of the information, opinions, or estimates contained in this report.

Disclosure of Interests

• China Galaxy Securities may have financial interests in the company, potentially equal to or more than 1% of its market capitalization.
• The company may be involved in financing transactions, investment services, or other material interests with China Galaxy International.

Equity Ratings Explanation

• BUY: Indicates that the share price is expected to increase by more than 20% within 12 months.
• SELL: Indicates that the share price is expected to decrease by more than 20% within 12 months.
• HOLD: Indicates no clear catalyst for movement, and the rating may be downgraded pending further signals.

Copyright

No part of this material may be reproduced or redistributed without the prior written consent of China Galaxy International Securities (Hong Kong) Co., Limited.