Items:
(1) Li's big pharmaceutical company released its three-quarter report on November 29th: in the first three quarters of 2018, the company realized revenue of HK $867 million, an increase of 15.6% over the same period last year, a gross profit of HK $573 million, an increase of 13.7% over the same period last year, and a net profit of HK $197 million, an increase of 5.7% over the same period last year. In the third quarter of 2018, the company achieved HK $299 million in revenue, an increase of 8.8 per cent over the same period last year, a gross profit of HK $194 million, an increase of 5.2 per cent, and a net profit of HK $72 million, an increase of 16.0 per cent.
(2) Li's Pharmaceutical Company announcement on November 29: associated company Powder Pharmaceuticals, Incorporated (PPI, Puller Pharmaceutical) issued a briefing at the 18th Annual Diabetes Technical Conference in the United States in 2018, saying that its new percutaneous light continuous glucose sensor achieved good clinical test results.
(3) announcement of Li's Pharmaceutical Company on November 29: Lee's International, a wholly-owned subsidiary of the company, entered into a shareholder loan agreement with PPI (associated company Puller Pharmaceutical). Accordingly, Lee's International agreed to advance the shareholder loan to PPI with a principal amount of HK $4000000 and an interest rate of 4% per annum. The shareholder loan will last for one year from the date of advance.
Guoxin point of view:
Li's Big Pharmaceutical Co., Ltd. is an excellent biopharmaceutical enterprise with an international vision and guided by innovation and R & D. it has been operating in China's pharmaceutical industry for more than 20 years. It has established a solid and expanding drug research and development, drug manufacturing and hospital prescription drug sales team and system in China. At the same time, the company has established extensive cooperative relations with about 30 international enterprises, occupying the commanding heights among Chinese pharmaceutical companies with an international perspective. At present, there are more than ten kinds of products sold in the Chinese market, including "Ke Yineng", "Li Mai Qing", "Fipley" and other well-known brands. Li's big pharmaceutical factory has more than 50 kinds of products under research covering cardiovascular, oncology, ophthalmology, dermatology, obstetrics and gynecology, nephrology and other six major fields. From the medium to long-term point of view, the company has a steady and sustainable growth space.
As the company enters the harvest period in its blockbuster product line, the company is expected to usher in the second take-off Guoxin Securities issued in December 2015 in-depth report "0950.HK: expanding China's Biopharmaceutical Industry with Global Resources, facing inflection and revaluation (2017-12-15)" judgment: 2007-2014 is the company's first round of rapid growth, after the consolidation investment period of 2017-2017. 2018 will be the turning point of the company-the original products will resume growth, at the same time, with the early layout and investment in the research products frequently, the company will enter a new round of growth period. If the anti-liver cancer oncolytic immune drugs Pexa-Vec, PD-L1 monoclonal antibody and other global innovative products are approved to market, the company will usher in a second take-off, the market value is expected to get huge room for improvement.
Investment advice: maintain the "buy" investment rating
Considering the higher-than-expected R & D investment at this stage and the impact of the planned spin-off listing of the tumor subsidiary, this report slightly lowered the company's performance forecast. It is estimated that the company's revenue for 2018-2020 will be HK $11.53 billion, respectively. The growth rate is 15.3 billion Hong Kong dollars, and the growth rate is 16.8 percent. (the original forecast is 1.1543 billion Hong Kong dollars, 13.6 plus 15.3pm). The net profit was HK $2.31 million, with a growth rate of 13.7% and 14.3% respectively (the original forecast was 2.40 pm 2.81 / 328 million HK $16.7%). The homed net profit was HK $2.46 trillion 279max, up 15.5% from a year earlier (the original forecast was HK $2.75 pm, HK $316 million, an increase of 14.8%); EPS was HK $0.42, 0.47, 0.54 (HK $0.47, 0.61, respectively). The current share price of HK $6.25 corresponds to PE of 15.02, 13.25 and 11.47x respectively. Although we have lowered the company's performance forecast, it should be noted that the trend of accelerating the company's performance growth in the next three years is still in line with our earlier definition of "facing the inflection point of business development". At present, due to the intensive introduction of key products under development into clinical practice and the need for heavy R & D investment (the total R & D investment has reached 20.9% of sales revenue) The decline in apparent performance caused by higher-than-expected R & D investment does not affect the improvement of the intrinsic value of the company. The results of the products under research from 2019 to 2020 will be released one after another, especially the clinical progress of innovative drugs such as oncolytic immunopharmaceuticals and immune checkpoint inhibitors. The company's future performance growth certainty and market capitalization space are expected to increase significantly, giving PE20-22x in 2020 and adjusting the reasonable valuation to HK $10.90-11.99 in the next two years (the original target valuation is HK $14.0-HK $15.7). Maintain a "buy" investment rating.