reviews

The transfer of shares in Jinhao Pharmaceutical is beneficial to the internationalization process.

The actual controller of the company before and after this transfer was the Tianjin Municipal State-owned Assets Administration Commission. Ruiyi Holdings is a wholly-owned subsidiary of Jinlian Group Co., Ltd., a Hong Kong window company in Tianjin.

Jinlian Group has always acted as a window company based in Tianjin. It has three companies listed on the Hong Kong Main Board, namely Tianjin Development, Dynasty Liquor, and Tianjin Port Development. Jinlian Group has established a business model with capital operation, asset management, financing and investment as its core business. The Tianjin Municipal Government injected high-quality assets into Jinlian Group in 1997 and 2001 respectively, giving full play to its role as a platform for listing in Hong Kong, and acting as a bridge for subsidiary companies to enter the international capital market.

Investment advice: This transfer of shares to the controlling shareholder is expected to accelerate Lisheng Pharmaceutical's internationalization process. The current valuation is attractive, and the results of the asset consolidation of Tianjin Pharmaceutical Group are worth looking forward to. We forecast earnings per share of $1.79, 2.15, and $2.52 from 2012 to 2014, respectively. We continue to give a “recommended” rating, with a target price of $38.70.

Risk warning

Drug prices have been reduced; the progress of fund-raising projects put into operation has fallen short of expectations.