Event

Liu Xicheng, the actual controller, voluntarily launched an offer to acquire 133 million shares. The scope of the offer is 10% of the total share capital except the shares held by Nanfang Tongzheng, accounting for 10% of the total share capital. The offer price is 14.5 yuan per share, and the capital required is 1.94 billion yuan. The duration of the offer is 30 natural days, that is, 30 natural days from the first trading day when the full report of the offer is announced.

The purchase price of this offer is higher than the market price, which shows that the major shareholders are confident that the company will complete the private placement in September 2016. the offering price is 12.23 yuan per share, and the major shareholder Nantong is subscribing for 1.6 billion yuan, with a participation ratio of more than 50% of the additional shares and locked up for three years. After half a year, the actual controller offered 14.5 yuan per share higher than the market price, and the acquisition ratio was 10%, which further enhanced the control over marine pharmaceuticals, indicating that the major shareholders are full of confidence in the future development of the company.

Bidding and price reduction erodes the profits of the original business. The company's existing products are mainly concentrated in the fields of chemical API intermediates, cephalosporins and gastrointestinal drugs. The competition is fierce. In order to maintain the market, the expense rate is relatively high, which greatly erodes profits. According to the disclosure of sub-products in the China News, the income of cephalosporin preparations was 206 million yuan, up 9.76% from the same period last year; the income from intermediates of chemical raw materials was 248 million yuan, down 17.68% from the same period last year; and that of gastrointestinal drugs was 119 million yuan, up 12.45% from the same period last year. The company strives to seek a breakthrough, increase the layout of the medical field, acquire 51% of the shares in the East Hospital of Chenzhou first people's Hospital, and bid for 100% of Ezhou Hospital. Although the short-term performance is difficult to improve greatly, the fundamentals of the company are developing in a good direction.

Investment strategy

We estimate that the earnings per share from 2016 to 2018 will be 0.1,0.13 and 0.15 yuan respectively, corresponding to 149,112 and 95 times of PE, respectively.

Risk hint

Policy risk; new product research and development risk; medical safety incident, etc.