Brief comment on performance
ST* baihua realized operating income of 287 million in the first half of the year, down 17.5% from the same period last year, deducting a loss of 145 million, an increase of 26.52 million over the same period last year. The results in the first half of the year did not merge with Huawei Pharmaceutical, all of which were the performance of the original coal assets.
Business analysis
1. Major asset restructuring in the first half of the year, the purchase of coal assets into the CRO business: listed companies bought assets including the company's 66 per cent stake in Hongji Coking Co., Ltd., 51 per cent stake in Yuxin Coal, 100 per cent stake in natural products and claims on the 101 coal mine; into Huawei Pharmaceutical, which had previously focused on preclinical CRO business, resulting in high growth in the company's historical performance. At present, it is strategically cut into the clinical CRO plate and CMO plate, and the extension of the industrial chain brings the diversification of income structure. With the improvement of the layout of the industrial chain, the company will have the strength to provide customers with "one-stop service", which is in line with the development of the international leading CRO company.
two。 Warwick Pharmaceuticals benefits from the increased industry concentration brought about by the verification policy and the incremental market opportunities brought about by generic drug consistency evaluation:
(1) since the storm of self-examination and verification of clinical trial data that began last year, the national GLP (Drug Laboratory Management Standard) and GCP (Drug Clinical trial Management Standard) have become increasingly stringent. Verification is bad for the CRO industry in the short term, but it is good for the leading CRO company in the long run.
(2) generic drug conformance evaluation brings incremental market to CRO industry. According to our estimation, the market size of 289 base drugs that need to complete conformance evaluation before 2018 is 15.8 billion, which is expected to be allocated to CRO industry 6.3 billion; the market increment brought by the conformance evaluation of all drugs is more than 75 billion, and the CRO industry is expected to get 30 billion incremental market.
(3) the CRO industry is a fine molecule industry in the field of medical services that we are optimistic about in the future. From the industry point of view, please refer to our in-depth report on CRO industry released in March, "the rise of CRO Industry Convergence, Sunrise Industry ushering in New opportunities". Huawei Pharmaceutical, as an excellent CRO leading enterprise in China, we continue to be optimistic about the future development of the company.
3. Strategic investors will help the company develop on the platform in the future: on January 2, 2016, the State-owned Company of the sixth Division signed the Strategic Cooperation Agreement with Liyi Investment and Ruidong Capital.
(1) in the agreement, Liyi Investment undertakes to promote the high-quality pharmaceutical projects invested by its funds in a market-oriented manner, giving priority to Baihua Village, and continue to help Baihua Village implement outsourcing services in pharmaceutical research and development and mergers and acquisitions in the biopharmaceutical industry (including genetics, cell therapy, targeted drugs, etc.).
(2) Ruidong Capital promises to seek high-quality biomedical projects at home and abroad in a market-oriented way, and choose the opportunity to load it into baihua Village.
The company's major asset restructuring was conditionally approved by the China Securities Regulatory Commission on June 8, 2016 and formally approved by the China Securities Regulatory Commission on August 1. At present, it is still in the period of asset delivery, so the results in the first half of the year have not yet merged with Warwick Pharmaceutical.
The specific situation of Huawei Pharmaceutical can refer to the company's in-depth report "significant asset restructuring meeting, layout CRO platform development" released in June.
Profit forecast
We expect the net profit of the parent company from 2016 to 2018 to be 110 million, 130 million and 153 million respectively. If we estimate according to the profit of the new assets, the corresponding listed companies EPS 0.24,0.29,0.34 yuan.
Risk hint
Related risks of profit forecast; transaction approval risk; new classification risk of chemical registration; progress of asset integration; progress of asset injection.