Main points of investment
Event: the company released its semi-annual report for 2017. the operating income and return net profit in the first half of the year were 150 million yuan and 27.26 million yuan respectively, with a year-on-year growth rate of 0.6% and-33.1%, respectively.
The sales income of Agandin and he Ganding has shrunk, affecting the performance obviously. The company's 2017Q2 realized revenue and net profit of 67.5 million yuan and 6.86 million yuan respectively, which was the same as that of 2016Q2, and the growth rate of net profit was-45.3% compared with the same period last year. 2017H1, the company's performance decline is mainly due to the continued decline in revenue of Agandine and Heganding and the increase of expenses during the period. In the first half of the year, the sales income of Agandin, he Ganding and Enganding was 26.21 million yuan, 11.89 million yuan and 110 million yuan respectively, with year-on-year growth rates of-20.5%,-11.5% and 9.2%, respectively. The income of Argandine and Heganding declined significantly, mainly because the market share of traditional anti-hepatitis B drugs such as entecavir and tenofovir continued to decline due to the further increase in the market share of first-line drugs of entecavir and tenofovir. With the price reduction of entecavir and the listing of domestic imitation of tenofovir, the future sales income of aganidine and tenofovir have a further downward trend. During the 2017H1 period, the expense rate increased significantly, with the sales expense rate and management expense rate being 39.8% and 28.9% respectively, an increase of 6.3% and 4.5% over the same period last year. The main reasons for the increase in expense rate during the period are: 1) the approval of tenofovir listing led to a substantial increase in academic promotion costs; 2) R & D expenses increased by 44% in the first half of the year, resulting in a significant increase in management costs.
Tenofovir has won the first imitation of hepatitis B indications in China, which may greatly improve the performance of the company. The company obtained the production approval of tenofovir (forganding) in May, which became the first imitation drug for the indication of hepatitis B in China, and was put on the market in early July. Tenofovir is still the most mainstream combination of anti-HIV drugs, with sales of single and compound preparations exceeding $11 billion in 2016. Tenofovir is a national drug price negotiation variety in 2016, and the original research has dropped by as much as 67%. We believe that under the strong promotion of the price reduction of the original drug, the domestic market for HBV indications of tenofovir is expected to achieve entecavir-like rapid growth, and market sales are expected to peak at 5 billion yuan. The first imitation can bring the market first-mover advantage to the company, and it is expected that the peak sales of Tinofovir will reach 1 billion yuan after listing, contributing about 300 million yuan, which will greatly improve the company's performance.
Profit forecast and investment advice. Affected by the decline in income of Agandin and he Ganding, it is estimated that the EPS from 2017 to 2019 is 0.43,0.58,0.96 yuan respectively (the original EPS is 0.61,0.82,1.21 yuan respectively), and the corresponding PE is 85 times, 63 times and 39 times respectively. We are optimistic about the development prospect of the company for a long time, and the approval of the first imitation of tenofovir hepatitis B indication is expected to achieve rapid volume, which will greatly improve the company's performance in the future. The company is affected by the shrinking income of Agandin and Heganding in the short term, and its performance has declined significantly, so we temporarily downgraded to "overweight" rating.
Risk hint: the risk of drug price decline and the lower than expected risk of new product sales on the market.