Main points of investment
The internal work of large infusion is solid, and the abduction can be expected: under the influence of the policy of "limited resistance and limited transfusion", the growth rate of the use of large infusion in China has slowed down in recent years, but the clinical demand for large infusion and antibiotics is relatively rigid. In the future, the sales volume of large infusion in China will be in a low-speed growth range. Stone four drugs as an industry leader, sales growth is expected to be higher than the industry average. In the next two or three years, a number of therapeutic infusion products will be put on the market one after another, and the unit price and gross profit margin of these products will be higher. After opening the market, the product structure will be optimized and the infusion sector will grow again. Under the background of injection volume procurement, the company has excellent product quality, rapid consistency evaluation and leading cost, and is expected to increase the quantity quickly with lower cost and expand the market share.
The ampule water needle accumulates abruptly, and the growth stamina is more sufficient: the plastic ampoule has obvious advantages over the glass ampoule, and the upgrading of packing material is the general trend. The company has a leading plastic ampoule production line, which is more in line with the development trend of the industry. Previously, the factors restricting the development of ampoules have been gradually eliminated, sales have increased rapidly quarter by quarter since 2018, and capacity utilization and gross profit margin have begun to return to normal levels. Betastine, bromohexine and other products are expected to relay volume, contributing to the continued growth of performance.
API-preparation integration has been gradually completed, and additional API production can bring performance increments: in recent years, the company has accelerated the layout of APIs to achieve the integration of API-preparation production, while also using additional production capacity to produce and sell caffeine and other APIs. Caffeine was officially produced at 2019Q4, and several other core products were subsequently put into production. With the release of production capacity, the API sector will become a new performance growth point of the company.
The market of multi-layer co-extruded biofilm is growing rapidly, and the import substitution is expected: with the continuous growth of the market scale of biological drugs and the improvement of the permeability of disposable bioreactor, the market scale of multi-layer co-extruded biofilm in China is also growing rapidly. it is expected to reach 6.928 billion yuan in 2030. It is difficult to manufacture multi-layer co-extruded biofilm, and the domestic market has been monopolized by foreign-funded enterprises. At present, Shi Si Yao is the only manufacturer of multi-layer co-extruded biofilm in China, which is expected to break the import monopoly and gradually realize the substitution of imported products.
Profit forecast and valuation: we forecast operating income of HK $59.99,72.20 and HK $8.828 billion for 2021-2023, an increase of 40.79%, 20.37% and 22.27%, respectively, and net profit of HK $8.23,11.53 and HK $1.534 billion respectively, up 34.55%, 40.05% and 33.01% year-on-year. We value the segments of the company's business segments.
Based on the data of September 14, 2021, (1) Pharmaceutical business: the average price-to-earnings ratio of the industry in 2022 is 14.01 times.
Taking into account the secondary growth brought about by the improvement of the product structure of the company's large infusion business, the rapid growth of ampoule water needle business and the contribution of incremental income from API business, the business sector is given a price-to-earnings ratio of 14 times. We forecast a net profit of HK $1.121 billion for the pharmaceutical business in 2022, with a valuation of HK $15.7 billion. (2) Multi-layer co-extruded biological membrane:
The size of the domestic multi-layer coextrusion biofilm market is expected to be HK $8.314 billion in 2030, assuming that the peak market share of Shi Si Pharmaceutical is 30%. In 2030, the business income will be HK $2.494 billion. The average market-to-sales ratio of the industry in 2022 is 6.07 times. The business of stone four drugs multi-layer co-extruded biofilm in 2030 will be given a market sales rate of 6.0x. Calculated at a 10% discount rate, the business segment will be valued at HK $7 billion in 2022. It is estimated that the reasonable market capitalization of the company in 2022 is HK $22.7 billion and the corresponding share price is HK $7.49. With the steady development of the company's business and the continuous realization of its performance, we believe that the company is expected to usher in a valuation repair, giving the company a target price of HK $7.49 and a "prudent overweight" rating.
Risk hints: the price reduction of injection collection exceeds expectations, the risk of price fluctuation of APIs, and the sales of new products are lower than expected.