20210129-招银国际-泰格医药-300347.SZ-Better_business_recovery_outlook_in_2021E_4页_874kb

Tigermed (300347 CH) Company Update Summary

Core Content Overview

Tigermed, a clinical research organization (CRO) in China, reported a strong earnings performance in 2020, surpassing expectations. The company is expected to benefit from a better business recovery outlook in 2021E, driven by the easing of the pandemic and the expansion of its global operations.

Main Points

Earnings Performance in 2020

• Net Profit: Tigermed's attributable net profit for 2020 is estimated to have increased by 100–115% YoY to RMB1,683–1,810 million, higher than the initial estimate of 90% YoY growth.
• Recurring Net Profit: Attributable recurring net profit grew 20–33% YoY to RMB670–742 million, versus an estimated 23% YoY growth.
• One-off Gains: The company recognized RMB1.0–1.1 billion in one-off fair value gains and investment gains in 2020, compared to RMB283 million in 2019.

Revenue Growth in 2020

• Revenue Growth: Tigermed is expected to grow revenue by 27% YoY in 2H20E, accelerating from 9% YoY in 1H20E.
• Revenue Forecast: Total revenue for 2020E is estimated at RMB3,320 million, with growth expected to continue at 29.92% YoY in 2021E and 27.93% YoY in 2022E.

Impact of the Pandemic

• The pandemic initially disrupted operations in the first half of 2020, but clinical trial operations normalized from 2Q20 in China, leading to a recovery in domestic revenue.
• Overseas Operations: Despite the normalization in China, the pandemic remained serious in overseas regions, negatively affecting overseas CRO demand such as data management and services for Frontage's BIO, CMC, DMPK.

Global Expansion Strategy

• Tigermed is expanding its global operations, focusing on international pharmaceutical companies and Chinese biotech firms aiming to enter overseas markets.
• The company already has a presence in the Asia Pacific, with the US market as a potential next focus area.

Investment Rating and Target Price

• Maintain BUY rating with a target price of RMB187.23, up from RMB146.43.
• The target price is expected to rise by +11.51% from the current price of RMB167.90.

Key Financial Information

Revenue and Profit Trends

• Revenue: RMB2,301 million (FY18A), RMB2,803 million (FY19A), RMB3,320 million (FY20E), RMB4,313 million (FY21E), RMB5,517 million (FY22E)
• Net Profit: RMB472 million (FY18A), RMB842 million (FY19A), RMB1,729 million (FY20E), RMB1,370 million (FY21E), RMB1,839 million (FY22E)
• EPS: RMB0.94 (FY18A), RMB1.13 (FY19A), RMB1.98 (FY20E), RMB1.57 (FY21E), RMB2.11 (FY22E)

Financial Ratios

• Gross Margin: 43% (FY18A), 46% (FY19A), 48% (FY20E), 48% (FY21E), 48% (FY22E)
• Net Margin: 21% (FY18A), 30% (FY19A), 52% (FY20E), 32% (FY21E), 33% (FY22E)
• ROE: 17% (FY18A), 18% (FY19A), 11% (FY20E), 8% (FY21E), 10% (FY22E)
• P/E: 177.86 (FY18A), 148.58 (FY19A), 84.71 (FY20E), 106.92 (FY21E), 79.65 (FY22E)
• P/B: 31.47 (FY18A), 29.78 (FY19A), 9.33 (FY20E), 8.76 (FY21E), 8.09 (FY22E)

Shareholding and Performance

• Shareholding Structure: Management holds 37.11%, Temasek holds 2.92%, and free float is 59.97%.
• Share Performance:
  • 1-month: +2.5%
  • 3-month: +40.0%
  • 6-month: +64.3%
• Market Cap: RMB142,981 million
• Avg 3 mths t/o: RMB910.24 million
• 52-week High/Low: RMB193.20 / RMB62.68

Cash Flow Summary

• Operating Cash Flow: RMB522 million (FY18A), RMB528 million (FY19A), RMB947 million (FY20E), RMB873 million (FY21E), RMB1,238 million (FY22E)
• Net Change in Cash: RMB173 million (FY18A), RMB1,339 million (FY19A), RMB9,497 million (FY20E), RMB-400 million (FY21E), RMB-35 million (FY22E)

Analyst and Disclaimer Information

• Analyst Certification: The research analyst certifies that all views expressed accurately reflect personal opinions and has no financial interest in the securities.
• Disclaimers:
  • CMBIS or its affiliates have investment banking relationships with the issuers in the preceding 12 months.
  • This report is for informational purposes only and is not investment advice.
  • Information is not guaranteed for accuracy, completeness, or timeliness.
  • CMBIS may issue other reports with different information or conclusions.

CMBIS Ratings

• BUY: Potential return of over 15% over next 12 months.
• HOLD: Potential return of +15% to -10% over next 12 months.
• SELL: Potential loss of over 10% over next 12 months.
• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
• MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.
• UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.

Important Disclosures

• There are risks involved in transacting in any securities.
• The report is not tailored to individual investors and should not be relied upon for investment decisions.
• CMBIS is not liable for any loss or damage incurred from reliance on the report.
• The report is intended for specific recipients in the UK, US, and Singapore, with restrictions on distribution.

Conclusion

Tigermed is positioned for strong recovery in 2021E and long-term growth through global expansion. Despite challenges from the pandemic in 2020, the company showed resilience and improved financial performance. The BUY rating reflects confidence in its future earnings potential and recovery prospects. Investors are advised to consult with financial advisors and consider the risks associated with the securities.