20210316-招银国际-石药集团-01093.HK-Multiple_innovative_drugs_to_receive_approvals_in_2021_4页_844kb

Summary of CSPC Pharmaceutical (1093 HK) Company Update

Core Content

CSPC Pharmaceutical Group Limited (1093 HK) reported strong financial performance in 2020, with revenue increasing by 12.8% year-over-year (YoY) to RMB24.9bn and attributable net profit rising by 38.9% YoY to RMB5.16bn. This outperformance was driven by one-off gains, including RMB531mn from financial assets and RMB315mn from the disposal of subsidiaries. However, the recurring net profit growth was more modest at 19% YoY. The company's blended gross profit margin (GPM) improved by 2.9 percentage points due to margin recovery in bulk antibiotics. R&D expenses rose by 44.5% YoY to RMB2.89bn, while selling expenses decreased by 1.82 ppts.

Main Points

• Revenue Growth:

  • 2020: RMB24.9bn (+12.8% YoY)
  • 2021E: RMB26.9bn (+8% YoY)
  • 2022E: RMB30.4bn (+13% YoY)
  • 2023E: RMB34.4bn (+13% YoY)

• Net Profit Growth:

  • 2020: RMB5.16bn (+38.9% YoY)
  • 2021E: RMB5.33bn (+3.1% YoY)
  • 2022E: RMB6.5bn (+22% YoY)
  • 2023E: RMB7.77bn (+19.4% YoY)

• Earnings Per Share (EPS):

  • 2020: RMB0.43
  • 2021E: RMB0.45
  • 2022E: RMB0.54
  • 2023E: RMB0.65

• Price Target and Valuation:

  • Current Price: HK$9.44
  • New Price Target: HK$11.03 (+16.82%)
  • P/E Ratio (FY21E): 17.6x
  • DCF-based TP: HK$11.03 (WACC 11.08%, Terminal Growth 3.0%)

• Product Performance:

  • Oncology Drugs: Sales grew by 29.0% YoY to RMB6.29bn, led by Jinyouli (+37.3%), Duomeisu (+41.3%), and Ke'aili (+16.4%).
  • Cardiovascular Drugs: Sales surged by 61.9% YoY to RMB2.36bn.
  • Respiratory Drugs: Sales increased by 54.4% YoY to RMB491mn.

• Price Adjustments:

  • In December 2020, the company faced price cuts for NBP capsule and injection, by 55.6% and 51.3% respectively. These cuts took effect from 1 Mar 2021, but are expected to be offset by volume growth due to better affordability.

• R&D and Licensing:

  • Aggressively investing in both in-house R&D and product licensing.
  • Expected approvals in 2021E: Amphotericin B cholesteryl sulfate complex for injection, Mitoxantrone hydrochloride liposome injection.
  • Expected approvals in 2022E: Duvelisib (PI3K), BPI-7711, and Amphotericin B liposome.
  • Recently completed two in-licensing deals: BPI-7711 (3rd generation EGFR-TKI) from Beta Pharma and CM310 (IL-4Rα antibody) from JMT-BIO.

Key Information

• Market Capitalization: HK$113,032 million

• Average 3-Month Turnover: HK$636.98 million

• 52-Week High/Low: HK$11.16 / HK$6.83

• Total Issued Shares: 11,974 million

• Shareholding Structure:

  • Management: 29.94%
  • Citigroup Inc: 5.87%
  • BlackRock: 4.75%
  • Free float: 59.44%

• Share Performance:

  • 1-Month: +15.7%
  • 3-Month: +30.5%
  • 6-Month: -2.6%

• Catalysts for Growth:

  • Earlier-than-expected launch of new products
  • Stronger-than-expected product sales
  • Successful listing on Sci-Tech Board

• Financial Highlights:

  • Gross Margin: Improved from 72.0% (FY19A) to 77.0% (FY23E)
  • Operating Margin: Increased from 23.85% (FY19A) to 28.07% (FY23E)
  • Net Margin: Rose from 16.8% (FY19A) to 22.6% (FY23E)
  • ROE: Increased from 20.1% (FY19A) to 21.5% (FY23E)
  • P/B Ratio: Declined from 4.8 (FY19A) to 3.5 (FY21E)
  • Yield: Increased from 1.0% (FY19A) to 2.5% (FY23E)

• Investment Activities:

  • Net cash from operating activities increased significantly in FY20A and FY21E.
  • Capex and other investment-related cash flows were negative in FY21E and FY22E, but the company maintained a strong net cash position at the end of the year.

• Analyst Ratings and Recommendations:

  • CMBIS Rating: BUY
  • Target Price: HK$11.03
  • Outperforming the Market: Analysts expect the company to outperform in the coming year due to strong growth drivers in oncology and cardiovascular drugs, as well as new product approvals and improved financial performance.

Conclusion

CSPC Pharmaceutical Group Limited is positioned for growth in 2021E and beyond, supported by its strong performance in oncology and cardiovascular disease drug sales, increased R&D investment, and a robust financial position. The company's improved margins and recurring profit growth, along with the potential for new product approvals, suggest a positive outlook. The updated price target reflects the company's expected performance and valuations, and the BUY rating is maintained based on its growth potential and strong fundamentals.