Event
The pre-increase announcement of the results of the China Daily was announced on June 30. the net profit in mid-2018 was 1.48-182 million yuan, an increase of 30-60 percent over the same period last year, corresponding to earnings per share of 0.11-0.14 yuan.
Transfer 10% equity of Chinese antibody to increase investment income
As a result of the company's transfer of 10% equity in China Antibody Pharmaceutical Co., Ltd., the investment income has been obtained and the profit has increased by about 97.56 million yuan. The history is as follows: in 2013, the company bought a 40% stake in China Antibody for $9.9 million, or about 64.35 million yuan. As of May 2018, the company held a 31.01% stake in China Antibody and announced that it had sold a 10% stake in China Antibody at a price of 100 million yuan. By the end of this transaction, the shareholding ratio had dropped to 21.01%. Although the proceeds of this transfer can greatly increase the performance, it is not sustainable.
Major asset restructuring has not yet been approved and is still being actively promoted
The company has been suspended from trading for more than half a year since the end of November 2017, and major asset restructuring has been actively promoted. The Shenzhen Stock Exchange has given a "letter of inquiry" on the reorganization of the company. The company is actively organizing intermediaries, target companies and other relevant companies to respond to the questions involved in the "inquiry letter". After the company implements the approval of this major asset restructuring by the Shenzhen Stock Exchange, it will resume trading in time. This asset restructuring plans to acquire 100% stake in Qili Pharmaceutical in cash mode, at a price of 2.142 billion yuan, with no performance commitment.
Investment strategy
According to the usual practice, the company has a high probability of loss in the fourth quarter, so we expect earnings per share from 2018 to 2020 to be 0.1,0.17 and 0.24 yuan respectively, corresponding to 126,76 and 54 times PE respectively, with a high valuation and a neutral rating temporarily.
Risk hint
Policy risk; new product research and development risk; medical safety incident, etc.