Advertisements

Moving to half yearly reporting

• Company will not release quarterly earnings for 3Q21 and will instead provide half and full year results, to accommodate Sinovac’s request.
• Quarterly reporting is expected to be reinstated after the vaccine situation stabilizes.
• During the recent investor update sessions, the firm shared that 8M21 top line yoy growth momentum has improved from 1H21 while the oncology segment continues to be a key growth driver.
• Fair value is reduced to HKD9.10. Valuations are undemanding, while growth should continue to be driven by its pipeline of new drugs as impact from the pandemic and volume-based procurements gradually improve.

Advertisements

Investment thesis

Headquartered in Hong Kong and Beijing, Sino Biopharmaceutical (中国生物制药有限公司, SBP) is a leading drug manufacturer in China with a competitive drug portfolio, strong sales force and promising pipeline. FY20 revenue contributors by major disease areas: oncology 32.2%, hepatitis ~15.9%, orthopedic 8.8%, respiratory system 6.2%, anti-infectious medicines 5.6%
and others 31.3%. SBP is the industry leader for liver diseases drugs, a segment with annual sales revenue exceeding CNY 1bn and accounts for about a quarter of the overall sales of the liver disease market in China. While ongoing healthcare reforms focusing on price and quality controls should weigh on margins and may continue to trigger occasional volatility in sector share prices, following Covid-19, there should also be greater policy support for domestic drug innovation, which benefits pharmas (such as SBP) with strong R&D focus and growing pipelines. SBP has a 15.03% equity stake in vaccine maker Sinovac Life Sciences, a subsidiary of Sinovac. Management targets for over USD10bn revenue by 2030E, with half from ex-China market and 80% from innovative products