20181030-中国银河国际证券-国药控股-01099.HK-Strong_earnings_recovery_in_Q3_2018__Maintain_BUY_4页_671kb
报告摘要
SinoPharm [1099.HK] Summary
Core Content
SinoPharm reported strong Q3 2018 earnings, surpassing expectations with both top- and bottom-line growth. The company is maintaining a BUY rating, with a target price of HK$43.1, reflecting a +17% increase from the current price of HK$36.85. The share price performance in October was relatively resilient, declining by 3.8%, outperforming the Hang Seng Index, which fell by 10.7%.
Main Points
Q3 2018 Results Highlights
- Top-line growth accelerated to 11.2% YoY, up from 6.2% in Q1 and 7.9% in Q2.
- Net profit rose by 39% YoY, marking a significant improvement from a -32.7% decline in Q1 and a +21.4% increase in Q2.
- Gross margin improved to 9.1% in Q3 from 8.7% in 1H 2018, driven by direct sales to hospitals and high-margin product sales.
- SG&A costs declined from 4.4% of revenue in 1H 2018 to 3.7% in Q3, contributing to stronger profitability.
Earnings Visibility
- The negative impact of the two-invoice-system is diminishing, with the policy's total top-line impact of ~RMB13bn largely absorbed by 9M 2018.
- Distribution business is expected to maintain above-average growth, while retail and medical device distribution are showing strong revenue growth.
Profitability and Growth Projections
- Core net profit for 9M 2018 reached RMB3.92bn, +7.2% YoY, which is 71.1% of Bloomberg consensus and 70.4% of the 2018E full-year estimate.
- Gross margin is projected to stabilize at 8.8% - 8.9%, due to the high proportion of direct sales and the limited room for further improvement.
- Operating margin is expected to rise from 4.3% in 2017 to 4.6% in 2018, and core net profit margin to increase to 1.9% in 2018 from 1.8% in 2017.
Key Financials
Revenue
- 2016A: RMB258,388m
- 2017A: RMB277,717m
- 2018E: RMB303,478m
- 2019E: RMB332,971m
- 2020E: RMB366,972m
Core Net Profit
- 2016A: RMB4,647m
- 2017A: RMB5,283m
- 2018E: RMB5,811m
- 2019E: RMB6,620m
- 2020E: RMB7,657m
Core EPS
- 2016A: RMB1.68
- 2017A: RMB1.91
- 2018E: RMB2.10
- 2019E: RMB2.39
- 2020E: RMB2.77
Dividend
- 2016A: RMB0.500
- 2017A: RMB0.570
- 2018E: RMB0.628
- 2019E: RMB0.716
- 2020E: RMB0.828
Payout Ratio
- Consistently at 30.0% across 2016A to 2020E.
Financial Ratios
Gross Margin
- 2016A: 8.00%
- 2017A: 8.31%
- 2018E: 8.80%
- 2019E: 8.85%
- 2020E: 8.90%
Operating Margin
- 2016A: 4.0%
- 2017A: 4.3%
- 2018E: 4.6%
- 2019E: 4.8%
- 2020E: 4.8%
EBITDA Margin
- 2016A: 4.4%
- 2017A: 4.7%
- 2018E: 4.9%
- 2019E: 5.2%
- 2020E: 5.2%
Core Net Profit Margin
- 2016A: 1.8%
- 2017A: 1.9%
- 2018E: 1.9%
- 2019E: 2.0%
- 2020E: 2.1%
ROE
- 2016A: 15.0%
- 2017A: 15.7%
- 2018E: 15.5%
- 2019E: 15.7%
- 2020E: 16.2%
EV/EBITDA
- 2016A: 9.3x
- 2017A: 8.6x
- 2018E: 7.7x
- 2019E: 6.9x
- 2020E: 6.5x
Peer Comparison
| Company | Ticker | Price (HK$) | Market Cap (HK$m) | PER (2017A) | PER (2018E) | PER (2019E) | PBR (2017A) | PBR (2018E) | PBR (2019E) | ROE (2017A) | ROE (2018E) | ROE (2019E) | EV/EBITDA (2017A) | EV/EBITDA (2018E) | EV/EBITDA (2019E) |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SinoPharm-H | 1099 | 36.85 | 101,967 | 17.0 | 15.5 | 13.6 | 2.5 | 2.3 | 2.0 | 15.7 | 15.5 | 15.7 | 9.3 | 8.6 | 7.7 |
| Shanghai Pharm-H | 2607 | 16.52 | 56,408 | 11.3 | 10.0 | 8.8 | 1.2 | 1.1 | 1.0 | 10.6 | 11.1 | 11.2 | 9.9 | 8.8 | 7.4 |
| China Medical Sy | 867 | 8.75 | 21,763 | 11.4 | 9.8 | 8.6 | 2.6 | 2.2 | 1.9 | 24.5 | 24.5 | 23.7 | 9.6 | 8.1 | 6.9 |
| Yestar Healthcare | 2393 | 2.04 | 4,437 | 13.9 | 12.1 | 9.8 | 3.6 | 2.8 | 2.1 | 21.2 | 21.4 | 18.1 | 6.3 | 5.8 | 4.7 |
| China Resources | 3320 | 11.30 | 71,015 | 20.9 | 17.3 | 14.7 | 1.6 | 1.2 | 1.1 | 8.2 | 8.0 | 8.3 | 9.3 | 7.7 | 6.9 |
Balance Sheet Highlights
Current Assets
- 2016A: RMB132,760m
- 2017A: RMB144,843m
- 2018E: RMB175,818m
- 2019E: RMB187,771m
- 2020E: RMB207,867m
Total Assets
- 2016A: RMB157,712m
- 2017A: RMB169,539m
- 2018E: RMB202,905m
- 2019E: RMB217,017m
- 2020E: RMB239,161m
Total Liabilities
- 2016A: RMB113,179m
- 2017A: RMB118,269m
- 2018E: RMB144,474m
- 2019E: RMB150,370m
- 2020E: RMB162,981m
Shareholders’ Equity
- 2016A: RMB31,811m
- 2017A: RMB35,451m
- 2018E: RMB39,684m
- 2019E: RMB44,565m
- 2020E: RMB50,241m
Key Insights
- Distribution business remains the main driver of profit, accounting for ~90% of total earnings.
- Retail business is expected to grow at >20%, benefiting from the zero price mark-up policy and hospital-to-pharmacy prescription flows.
- SG&A and finance expenses are under control, contributing to better margin expansion.
- Working capital management is stable, with days receivable remaining around ~111 days.
- The company's earnings visibility is improving as the two-invoice-system's impact is fading.
- ROE is expected to rise to 16.2% in 2020, showing strong return on equity performance.
- EV/EBITDA is projected to decline from 9.3x in 2016 to 6.9x in 2020, indicating potential undervaluation.
Conclusion
SinoPharm's Q3 2018 results demonstrate a strong earnings recovery, with both revenue and net profit showing significant growth. The company is well-positioned for continued performance due to its stable gross margins, cost control, and expansion into lower-tier markets. The BUY rating is maintained with a target price of HK$43.1, suggesting a +17% potential increase in the next 12 months.
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