1H21 revenue rebounded, reiterating "buy" and target price HK $6.66 1H21 revenue of Stone four Pharmaceutical Group was HK $2.44 billion (+ 37.0%yoy), mainly due to the recovery of core business. Net profit was HK $276 million (+ 11.6%yoy), the growth rate was lower than revenue, mainly due to: 1) the company recognized HK $67 million in incentive fees (1H21 adjusted net profit of HK $343 million, + 39%yoy), and 2) the gross profit margin decreased (1H2 fell 3.8% year-on-year to 60.2%), mainly due to increased income contribution from the low-margin API sector. We expect that the 21-year infusion / API / ampoule is expected to be further recovered.
Considering that the growth rate of the low gross margin sector is faster than that of the large infusion sector, the gross profit margin may decline, so we downgrade the 22nd EPS forecast to HK $0.37pm 0.47pm 0.57 (previous value: 0.43pm 0.53 EPS 0.62), with a target price of HK $6.66 (previous value: HK $6.02), based on 18 times the expected PE for 2021 (the average expected average of domestic comparable companies Wind). Keep buying.
Large infusion: optimistic about the sustained recovery of income, therapeutic infusion is expected to volume 1H21 infusion income of 1.53 billion Hong Kong dollars (an increase of 29.1% over the same period last year), but still lower than the level of 1H19, mainly due to: 1) the outbreak of COVID-19 epidemic in 1H21 Shijiazhuang, 2) low flow of outpatients in the grass-roots market, and 3) low sales of moxifloxacin. However, we expect revenue growth in this sector to reach more than 30% in 2021, and sales are expected to reach about 1.4 billion bottles / bags, of which: 1) non-PVC soft bags / upright soft bags are expected to grow by more than 35% in 2021 (1H21 is expected to grow by 76.3%); 2) plastic bottle / glass bottle sales are expected to grow by more than 15% in 2021 (1H21 growth rate is + 21.5%). 3.2%) 3) Therapeutic infusion is expected to maintain a strong growth momentum (it is expected to account for 25% of total infusion sales in 2021), and blockbuster products such as peritoneal dialysate are expected to increase volume (1H21 sales are 46800 bags).
Small water needle / API: strong growth momentum or sustained
1H21 small water needle rapid volume (revenue of HK $487 million, an increase of 66% over the same period last year). We expect that with the rapid increase in sales of blockbuster products such as doxophylline, ambroxol and betastine, sales are expected to reach about 1.2 billion yuan in 2021. 1H21 in the API sector generated revenue of HK $247 million (up 147 per cent year-on-year). Considering that API sales are expected to recover when the epidemic recedes (for example, we expect caffeine / azithromycin sales to reach 3500000,330 tonnes in 2021), we expect sales to reach about RMB700m in 2021.
Multi-layer biological co-extruded film: launched in 2021, sales or climbing multi-layer biological co-extruded film in 2022-2023 as a new revenue / profit growth driving force for stone four drugs, designed and produced by the subsidiary Jiangsu Bosheng, with an annual production capacity of 1000 million square meters and 4 million square meters in-hand orders. The management directs that the production capacity will be increased by 8 million / 1200 million square meters by the end of 2021 / 2H22. We expect the sales volume of 2021112022max to be less than 1 million / 7 million / 1500 million square meters respectively in 2022, and the income will be more than 15 million / 200 million yuan / 500 million yuan respectively.
Risk hint: the recovery of the large infusion plate is slower than expected, and the API erodes the profit margin.