The performance is in line with expectations
The company achieved operating income of 5.853 billion yuan (+27.81%) in the first half of 2018, net profit of 410 million yuan (+14.87%), and net profit of 389 million yuan (+15.22%) after deduction. The performance was in line with expectations.
Consistency evaluation progressed in an orderly manner, and internal and external collaboration showed advantages
As a unified chemical platform under Sinopharm Group, the company has many products, with 1921 drug approval numbers and 918 product regulations for the drugs in production. After the first batch of 0.25g tablets of Sinopharm passed the consistency evaluation, the 0.125 mg specification was also approved in July. The sales volume of this product was about 1.7 billion dollars in 2017, with a share of about 29%. The company carried out a total of 76 product standards, involving 25 large varieties and 16 potential varieties. The consistency evaluation work progressed in an orderly manner based on product sales, competition, etc. Through the sharing and integration of Sinopharm Group's internal resources, the company's efficiency and efficiency will be fully improved; through continuous deepening strategic cooperation with distributors, including Sinopharm Holdings, business strategic collaboration will be achieved, and the advantages of external collaboration will be fully exploited.
The reversal of losses by subsidiaries has accelerated, and the performance promises of the restructuring company have been fulfilled well
In the first half of this year, the subsidiaries Hyundai Haimen and Sinopharm China United accelerated their losses. Since Hyundai Haimen built a new API base, there was a lot of upfront depreciation and financial expenses. Currently, many supplier and customer audits have been accumulated, and it is expected that losses will be turned into wins within the year. With the exception of Sinopharm's 21.24% completion rate gap in the performance promises of the restructuring company, the completion rate of the rest of the companies is doing well. After the company's restructuring and integration, there are great synergies in marketing and R&D. The products of each subsidiary of the company have the same or related products. In terms of marketing, each subsidiary department has different advantages, which can achieve resource sharing and complementary advantages. Previously, many of the subsidiaries had a reserve price sales model. In the context of the comprehensive promotion of the two-ticket system, the company's sales expenses increased significantly, and the share of pharmaceutical revenue also increased from 52% in the same period last year to 61%.
Profit forecasting
The company's net profit for 2018-2020 is estimated to be 629/769/919 million yuan, EPS is 0.60/0.73/0.87 yuan, corresponding PE is 17/14/12 times, maintaining the “increase in holdings” rating.
Risk warning: API price fluctuations, corporate restructuring and integration fall short of expectations
