• REITERATE BUY Entry – 21.5 Target – 25 Stop Loss – 20
  • Guangzhou Baiyunshan Pharmaceutical Holdings Co Ltd is engaged in the pharmaceutical and healthcare industry. The Company’s segments are Great Southern TCM, Great Commerce, Great Health and Great Medical Care. The Company’s Great South TCM includes research, development, manufacturing and sales for Chinese and western medicine, chemical raw medicine, natural drug, biological medicine and intermediates of chemical raw medicine. The Company’s Great Health segment includes the research, development, manufacturing and sales of beverages, foods, health products and other products. The Company’s Great Commerce segment includes wholesale, retail, import and export for western medicine, Chinese medicine and medical apparatus and instruments. The Great Medical segment is engaged in medical services, traditional Chinese medicine health preservation, modern pension and medical equipment industry.
  • The year-end rally of the TCM sector shall continue. The sector in A-share recognised an average 25% rally from November to December 2021. Several catalysts are in play: 19 provinces announced the TCM procurement list, paving the path for centralized procurement of TCM in 2022. TCM makers hiked the retail drug prices due to the increase in raw material prices. Favourable policies including increasing new drug approvals and supporting more facilities establishments are expected to continue in 2022.
  • Sector valuation at historically low levels. TMC sector is at 10x to 20x PER as of the end of 2021. The situation of the ageing population in China in the mid-and-long term is a key factor to uphold the sector valuation as older people are more prone to take TCM. The Baiyunshan’s PE is trading at lows currently, and hence, the risk-reward is more attractive now. 
  • The updated market consensus of EPS growth in FY22/23 are 4.26%/1.46% YoY respectively, which translates to 8.0x/7.9x forward PE. Current PER is 8.3x. Bloomberg consensus average 12-month target price is HK$23.70.

Baiyunshan’s 10-year PER record

  • The updated market consensus of EPS growth in FY22/23 are 4.26%/1.46% YoY respectively, which translates to 8.0x/7.9x forward PE. Current PER is 8.3x. Bloomberg consensus average 12-month target price is HK$23.70.
874 HK (Source: Bloomberg)