Performance is in line with expectations
Shanghai Kaibao announced its 2016 results: operating income was 1.497 billion yuan, up 7.3% from the same period last year; net profit attributed to the parent company was 283 million yuan, up 0.3% from the same period last year, corresponding to earnings per share of 0.34 yuan. That's what we expected.
Trend of development
The increasing pressure of Tanreqing injection is great. The single-quarter income of 4Q in 2016 was 304 million, up 21.45%, and improved quarter by quarter, with net profit of 22.66 million, down 16.63%, mainly due to an increase of 55% in sales expenses compared with the same period last year. Tanreqing injection, the company's main product, is expected to grow by more than 8% in 2016, mainly driven by new hospitals, but considering that the new catalogue limits the use of critically ill patients in secondary and above medical institutions, the growth pressure is expected to increase in the future.
Deeply tap the potential of general medicine and realize the diversification of varieties. At present, Banlangen granule and Shengmai Yin have been put into production, and all preparations for Yinhuang granule, Xiaoer Kechuanling granule, Xiongdan dropping pill and other products will be completed and put into production in 2017, gradually changing the pattern of the company's single product structure.
The echelon of oral preparation products has been initially formed. At present, Dinggui Oil soft capsule (for irritable bowel syndrome), Shufeng Zhitong capsule (for migraine), Huadan Anshen mixture (anti-insomnia), Tanreqing oral liquid (new dosage form), Duranamine for injection (anti-tumor, national class 1.1 new anti-tumor biological drug), paclitaxel micelle for injection (new broad-spectrum anti-cancer, national class 2.2 new drugs) are currently in phase Ⅲ clinical research. Phase Ⅱ clinical research includes Youxinding capsule (antidepressant, 1.1 new traditional Chinese medicine); preclinical research has the technology of cultivating bear bile powder in vitro; product echelon is gradually formed, which is expected to break the single product structure in the future, form a more diversified product line around the big health field, and enhance profitability.
Profit forecast
Taking into account the increasing pressure on the growth of traditional Chinese medicine injection, we have lowered our earnings per share forecast for 2017 and 2018 by 12% and 16% from 0.39 yuan and 0.41 yuan respectively to 0.34 yuan and 0.34 yuan.
Valuation and suggestion
Currently, the company's share price is 30 times that of 2017's Pamp E. Considering that the company is actively seeking extension development opportunities to enhance the competitiveness of the product group, but short-term performance is under pressure, we maintain the recommended rating, but lower the target price by 10.71% to 12.50 yuan, which is 20.08% upside from the current share price.
Risk.
The risk of product price reduction; the launch of new products is lower than expected; the progress of extension is lower than expected.