德银-中国-医疗保健行业-血浆名称的模型修正-20171219-10页_798kb

Document Summary: China Healthcare Industry Analysis (December 2017)

Core Content

This document provides an analysis of the China healthcare industry, with a focus on China Biologic Products (CBPO.OQ) and Hualan Biological Engineering (002007.SZ), two key players in the pharmaceuticals and biotechnology sector. The report discusses revenue and profit forecasts, valuation metrics, key risks, and model revisions due to reimbursement budget controls and market dynamics.

Main Points

1. Reimbursement Control Impact

• Reimbursement budget control is expected to affect volume growth in the plasma-derived therapeutics market.
• IVIG products, in addition to albumin, have been placed under MDL (monitored drug list), which may increase the exposure risk for companies involved in these products.
• CBPO and Hualan have both revised their estimates for revenue and core profit due to the reduced sales growth of albumin and IVIG.

2. Forecast Revisions

• CBPO.OQ (China Biologic Products)

  • 4Q17: Revised revenue and core profit growth to 7% / 7% from previous estimates, representing a -2% / -1% change.
  • 2018: Revised revenue and core profit growth to 14% / 15%, with a -1% / -1% variance from prior estimates.
  • 2018–2020: Projected CAGR of 4% for albumin and IVIG.
  • Target Price: Reduced from USD130 to USD116 based on 21x 2018E forward EPS.
  • Key Risks: M&A integration, price erosion, disruption in plasma collection, cost inflation, and delays in product launches.

• 002007.SZ (Hualan Biological Engineering)

  • 4Q17: Revised revenue and core profit growth to 13% / -2% from previous estimates, representing a -3% / -1% change.
  • 2018: Revised revenue and core profit growth to 13% / 14%, with a -2% / -5% variance from prior estimates.
  • 2018–2020: Projected CAGR of 7% for albumin and 11% for IVIG.
  • Target Price: Reduced from CNY26.00 to CNY24.70 based on 28x 2018E EPS.
  • Upside Risk: Smaller-than-expected ASP (average selling price) cuts.
  • Downside Risk: Cost inflation and higher-than-expected ASP cuts.

3. Valuation Metrics

• CBPO.OQ

  • P/E (DB): 15.9 to 12.6
  • P/BV: 7.86 to 2.61
  • EV/Sales: 4.7 to 3.9
  • EV/EBITDA: 9.6 to 8.6
  • FCF Yield: 6.4% to 5.7%
  • Net debt/equity: -6.2% to -50.8%
  • ROE: 31.0% to 18.5%

• 002007.SZ (Hualan)

  • P/E (DB): 36.4 to 28.5
  • P/BV: 5.59 to 4.51
  • EV/Sales: 12.7 to 8.7
  • EV/EBITDA: 24.5 to 20.1
  • FCF Yield: 2.2% to 4.2%
  • Net debt/equity: -18.5% to -26.8%
  • ROE: 16.6% to 18.5%

4. Financial Performance

• CBPO.OQ

  • Sales Revenue (USDm): 243 to 432
  • Gross Profit (USDm): 163 to 291
  • EBITDA (USDm): 119 to 196
  • EBIT (USDm): 111 to 173
  • Net Profit (USDm): 70 to 144
  • DB Net Profit (USDm): 74 to 176

• 002007.SZ (Hualan)

  • Sales Revenue (CNYm): 1,243 to 2,862
  • Gross Profit (CNYm): 769 to 1,765
  • EBITDA (CNYm): 644 to 1,239
  • EBIT (CNYm): 531 to 1,105
  • Net Profit (CNYm): 538 to 1,023
  • DB Net Profit (CNYm): 447 to 923

5. Key Company Metrics

• CBPO.OQ

  • Sales Growth (%): 19.6% to 9.9%
  • DB EPS Growth (%): 36.4% to 8.7%
  • EBITDA Margin (%): 48.9% to 45.4%
  • EBIT Margin (%): 45.7% to 40.0%
  • ROE (%): 31.0% to 18.5%
  • Capex/sales (%): 9.0% to 8.0%
  • Net debt/equity (%): 6.2% to -50.8%

• 002007.SZ (Hualan)

  • Sales Growth (%): 11.3% to 11.9%
  • DB EPS Growth (%): 7.3% to 10.9%
  • EBITDA Margin (%): 51.8% to 43.3%
  • EBIT Margin (%): 42.7% to 38.6%
  • ROE (%): 16.6% to 18.5%
  • Capex/sales (%): 11.2% to 12.0%
  • Net debt/equity (%): -18.5% to -26.8%

Key Risks

• CBPO.OQ: M&A integration, price erosion, disruption in plasma collection, cost inflation, and delays in product launches.
• 002007.SZ (Hualan): Cost inflation and higher-than-expected ASP cuts.

Equity Ratings

• CBPO.OQ: Buy with a target price of USD76.08.
• 002007.SZ (Hualan): Hold with a target price of CNY24.70.

Analyst Information

• Jack Hu, Ph.D.: Research Analyst at Deutsche Bank.
• Megan Xu: Research Associate at Deutsche Bank.
• Contact: +852-2203 6208 (Jack Hu), +852-2203 5928 (Megan Xu).

Summary of Key Changes

Conclusion

The report highlights the impact of reimbursement control on the plasma-derived therapeutics sector, particularly affecting CBPO and Hualan. The forecast revisions reflect a conservative outlook due to lower sales growth expectations for albumin and IVIG. Both companies are under valuation review, with CBPO being recommended for a Buy and Hualan being Hold. Key risks include cost inflation, price erosion, and regulatory changes.

Additional Notes

• Source: Deutsche Bank.
• Model Updated: 13 December 2017.
• Disclosures: Available on Deutsche Bank's website.
• Analyst Certification: The views expressed reflect the personal views of the lead analyst.