20211119-招银国际-石药集团-01093.HK-Q3_slightly_miss_while_long-term_growth_prospects_remain_intact_4页_467kb

CSPC Pharmaceutical (1093 HK) Company Update Summary

Core Content Overview

CSPC Pharmaceutical Group (1093 HK) reported its 9M21 financial results, with sales and attributable net profit rising by 7.4% and 23.2% YoY, respectively. These figures accounted for 73% and 71% of the full year estimates, indicating strong performance despite a slowdown in 3Q21. The revenue growth decelerated to 2.9% YoY in the third quarter, compared to 9.8% in the first half of 2021, primarily due to a sales decline in NBP and slower growth in oncology drugs. However, the company maintained its long-term growth prospects and continued to invest heavily in R&D, with R&D expenses increasing by 10.7% YoY to RMB2.5bn.

Key Financial Highlights

• Sales and Net Profit:

  • 9M21 sales: RMB20.6bn (+7.4% YoY)
  • 9M21 attributable net profit: RMB4.3bn (+23.2% YoY)
  • Sales mix: Finished drugs (81.8%) and Bulk medicines (18.2%)

• Gross and Operating Margins:

  • Blended GPM: 75.8% (+0.6ppts YoY)
  • OPM: 25.1% (+3.6ppts YoY)

• Earnings Per Share (EPS):

  • 9M21 EPS: RMB0.49
  • 2021E EPS: RMB0.48
  • 2022E EPS: RMB0.54
  • 2023E EPS: RMB0.63

• Price-to-Earnings (P/E) Ratios:

  • 2021E: 21x
  • 2022E: 20x

• Target Price (TP):

  • Revised DCF-based TP: HK$12.33
  • Previous TP: HK$15.20
  • Current Price: HK$8.31
  • TP Up/Downside: +48.38%

Strategic Developments

• NBP Performance:

  • NBP sales: RMB4.69bn (down 11.2% YoY)
  • Actual end-sales growth: 3.2% YoY
  • Price cuts: Over 50% since March 2021
  • Sales volume growth: Significant within the year
  • DOT extension: From 10-20 days to 50-60 days in certain online channels

• Business Development (BD) Deals:

  • Signed several in-licensing agreements
  • Secured three blockbuster candidates:
    • BPI-7711 (3rd generation irreversible EGFR-TKI)
    • CM310 (anti-IL-4Rα mAb)
    • KN026 (HER2 bispecific antibody)
  • Focus areas: Oncology, cardiovascular, autoimmune, and nephropathy

• mRNA Vaccine Progress:

  • Pre-clinical development of multivalent mRNA vaccines against COVID-19 mutants progressing smoothly
  • Leveraging cationic liposome nanotechnology platform

Financial Projections and Revisions

• Revenue Forecasts (RMB mn):

  • FY21E: 27,262
  • FY22E: 30,199
  • FY23E: 33,008
  • Revised down by 3.3% for FY21E and 3.2% for FY22E

• Net Profit Forecasts (RMB mn):

  • FY21E: 5,869
  • FY22E: 6,357
  • FY23E: 7,110
  • Revised down by 3.4% for FY21E and 4.3% for FY22E

• Earnings Summary:

  • FY19A: RMB3,714mn
  • FY20A: RMB5,160mn
  • FY21E: RMB5,869mn
  • FY22E: RMB6,357mn
  • FY23E: RMB7,110mn

Valuation and Ratios

• DCF Valuation (RMB mn):

  • Total PV: RMB111,140mn
  • Equity value: RMB122,575mn
  • DCF per share: HK$12.33

• Key Ratios:

  • Current ratio: 3.1 (FY21E)
  • Inventory turnover days: 109 (FY21E)
  • Trade receivables turnover days: 73 (FY21E)
  • Trade payables turnover days: 295 (FY21E)
  • ROE: 22.2% (FY21E)
  • ROA: 17.0% (FY21E)
  • Net debt to total equity ratio: Net cash

Analyst Recommendation

• Ratings:
  • BUY (Maintain)
  • Target Price: HK$12.33
  • Catalysts:
    • Stronger-than-expected product sales
    • Faster-than-expected clinical development

Share Performance

• Market Cap: HK$99,502mn
• Average 3-month turnover: HK$336.72mn
• 52-week High/Low: HK$12.68 / HK$7.08
• Total Issued Shares: 11,974mn
• Share Performance (3 months): -24.3% (Absolute) / -24.0% (Relative)

Shareholding Structure

• Management: 23.53%
• UBS Group: 7.17%
• Citi Group: 4.99%
• Free float: 64.31%

Summary of Key Points

• CSPC reported solid sales and net profit growth for the first nine months of 2021, although the third quarter saw a slowdown.
• NBP sales declined due to price cuts, but volume growth offset the impact.
• The company has been actively pursuing BD deals, securing three blockbuster drug candidates.
• CSPC is advancing in mRNA vaccine development, leveraging its nanotechnology platform.
• The company maintains a BUY rating with a revised target price of HK$12.33, reflecting adjusted revenue and net profit forecasts.
• Financial health remains strong with improving margins and a robust balance sheet.
• The analyst highlights the potential for strong returns based on future performance and clinical progress.