Recent situation of the company
On October 18, the company announced that it was considering a spin-off of Jiangsu Bosheng and listing in mainland China. On December 13, the company announced that the Hong Kong Stock Exchange confirmed that the company could continue with the possible spin-off listing.
Comment
Jiangsu doctoral students continue to strengthen the construction of innovation ability. On May 27, the "disposable liquid distribution system multi-layer co-extruded biofilm" developed by Jiangsu Bosheng has been put into production. On July 23, Jiangsu Bosheng announcement cooperated with Shanghai Lechun Biotechnology Co., Ltd in the field of biofilm. We believe that Jiangsu Bosheng has further strengthened its ability to match the downstream products of the industrial chain in the field of pharmaceutical packaging materials such as rubber plugs, infusion membranes and biofilms.
In terms of API business, domestic and international market demand showed restorative growth. The company continues to optimize and improve the production process, transform and improve the environmental treatment capacity, the production capacity has been released quickly, and the product advantages such as cost and quality have been further revealed. In the first half of 2021, caffeine sales of bulk APIs totaled 1111 tons, a substantial increase over the same period last year. The company plans to further accelerate the technology transfer of new products of high value-added characteristic APIs in the future, and the variety of products is expected to continue to enrich.
In terms of large infusion, the company's market share has further improved, mainly due to the company's scale advantage and cost advantage. In the first-third quarter of 2021, intravenous infusion sales increased by 28.4% year-on-year to HK $2.414 billion, and sales increased by 21.0% to 982 million bags per bottle, mainly because the company continued to replace small manufacturers in the market share.
Valuation and suggestion
We basically keep our homing net profit forecasts for 2021 and 2022 unchanged at HK $790 million (YoY 29.0%) and HK $1.164 billion (YoY 47.4%). The current share price corresponds to a price-to-earnings ratio of 14.1 / 9.6 times 2022. We maintain an outperform industry rating and a target price of HK $5.80, corresponding to 22.1 times 2021 earnings and 15.0 times 2022 earnings, which is 56.3% higher than the current share price.
Risk
Sales of new products declined; collection results were lower than expected.