jintian pharma (2211 hk)2014/09/04 · dec -13 aug4 hk$ price(lhs) rel. to hsi(rhs) j int...

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Company Research Company update

See the last page of this report for important disclosures

Jintian Pharma (2211 HK) Branded Retailer at a Bargain Jintian Pharma (Jintian) is Northeast China largest healthcare retailer and wholesaler with 5% market share, and its wider-margin’s retail sales derived 47% of 1H14’s revenue. Its management attended our NDR on 29 Aug. On Bloomberg consensus, Jintian trades at 10.7x FY14F PE, below drug distributor sector’s PE mean of 18.8x. Its cheap valuation is due to 1) lack of market’s understanding of its business model and 2) peg to an already low PE’s 10.5x when it was listed.

Recent weakness based on unfounded concerns. We reckon that the recent weakness of the stock was mainly due to 1) its change of CFO; and 2) China local news reporting an investigation on its supplier related to exaggerated advertisement of the Group's related product (御室金丹气血双补丸). We believe the new CFO is more familiar with Hong Kong listing rules and other HK matters while the investigation was the matter of its OEM supplier, which should only be a very minor issue for Jintian. (http://www.21food.cn/html/news/25/1765001.htm)

Wider margin’s retail sales likely to rise At the interim end, the Group had a total of 838 retails shops. On 2 Sept, the Group issued an announcement reiterating its target of acquiring some 150 additional retail shops during 2014. The Group acquired 42 shops in 1H14, and two more retail drugstore chains (in Jilin and Liaoning) comprising a total of 25 shops as of end-Aug. 47% of the Group’s 1H14 revenue was derived from retail revenue, whose gross margin (GPM) stood at 40.0% (1H13: 38.4%), wider than wholesales’ 20.4%. In light of the Group’s acquisition strategy, retail revenue is set to increase.

Good margins also for direct sales. Some 39% of Jintian’s 1H14 revenue (1H13: 26%) was derived from direct sales and marketing of domestic healthcare products, which enjoyed wider 1H14’s GPM of 37.6% (1H13: 38.7%), vs. its overall GPM of 29.7% (1H13: 26.3%). This compares favorably with the 8% for Sinopharm (1099.HK, non-rated). With fewer layers of distribution, major foreign drug direct sales player China Medical System (CMS) (867.HK, non-rated) enjoyed GPM of 53.9% in 1H14. With retail revenue setting to increase, overall GPM is likely to improve further.

Branded retailer at a bargain. Based on Bloomberg consensus, the counter currently trades at 10.7x FY14F P/E, much below the PE mean of 18.8x for HK-listed drug distributors and 26.0x for drug-marketers (vs. CMS’ 26.3x and Sinopharm’s 20.1x). Note that the acquisition of 25% stake of Watson by Temasek early this year valued the healthcare retail chain at 23x FY13PE.

Figure 1: Financial Summary

Year to Dec 31 (RMBmn) 2010A 2011A 2012A 2013A Revenue 859 1,474 2,326 3,323 Operating Profit 161 245 302 519 Reported Profit 123 181 214 355 Underlying Profit 123 181 228 363 Underlying EPS (RMB) 0.06 0.09 0.11 0.18 DPS (RMB) 0.05 0.00 0.00 0.04 BVPS (RMB) 0.09 0.18 0.27 1.18 P/E (x) 37.49 25.46 20.18 12.65 Dividend Yield (%) 2.3 0.0 0.0 1.9 P/B (x) 24.57 12.68 8.38 1.95

Source: Guosen Securities(HK)

China / Health Care 03 September 2014 Non rated Target price N/A Last price (2 Sep 14) HK$2.90 Upside/downside (%) HSI 24749.02 Mkt cap (HK$mn/US$mn) 5,800/748 52 week range (HK$) 1.90 - 3.10 Avg trading volume daily (US$mn) 2.56 Free float (%) 36.7% Source: Bloomberg

Performance

Performance 1M 3M 12M Absolute (%) 23.9 28.9 Absolute (US$, %) 23.9 29.0 Relative to HSI (%) 23.1 21.7 Source: Bloomberg Company background Listed on HKSE in Dec 2013, Jintian is Northeast China largest drugstore retailers and wholesalers with 5% market share, covering 4,900 distribution customers as at end-Jun 2014 and with 838 rental drugstores as self-owned business. Its wider gross margin's (c.37.6%) direct sales derived 39% of the Group's 1H14 revenue. In 1H14, some 22% of Jintian's revenue was from health supplement sales, while the rest came from both over-the-counter's and prescription drug's sales. Source: Bloomberg, company data, Guosen Securities(HK)

Jason Siu, PhD SFC CE No.: AVV237 +852 2899 6747 [email protected]

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公司报告公司快讯

研究报告仅代表分析员个人观点，请务必阅读正文之后的免责声明。

金天医药集团股份 (2211 HK) 估值低廉的品牌零售商金天医药(金天)是中国东北地区最大的医疗保健零售和批发商，有

5％的市场份额，而其高毛利率的零售销售在 2014 年上半年占总收入的 47％。其管理层在 8 月 29 日参加了我们的业绩后非交易路演。

彭博综合预测，金天市盈率为 2014 年的 10.7 倍，低于药品分销行业的平均市盈率 18.8 倍。估值便宜的原因是：一）市场缺乏理解

其商业模式和二）在上市时被订于已经很低的市盈率 10.5 倍。

近期疲弱的股价基于毫无根据的担忧。我们认为近期股价的疲弱是由于一）变换财务总监; 二）内地新闻报道表示正调查其供应商替集团的有关品牌产品-御室金丹气血双补丸,所做出的夸大广告。我们相信一）其新财务人选比较熟悉香港上市规则及其他香港财经事务;二）同时该调查主要是代工(OEM)供应商的问题, 对金天集团是

一项小问题。 (http://www.21food.cn/html/news/25/1765001.htm）

高毛利率的零售销售。于中期末集团共有 838 个零售商店。在 9 月 2 日，集团发表了一个声明，重申金天在 2014 年内收购目标,约 150 个新增零售店铺。在 2014 年上半

年已收购了 42 家药店,和在上半年末到八月底为止,集团已另外收购两个零售连锁药店（包括吉林，辽宁）总共 25 家药店。47％的(2014 年上半年)集团收入来自零售,其毛利率在 40.0％ (2013 年上半年: 38.4%), 高于批发的 20.4％。鉴于集团的收购策略，零售收入将可望增加。

良好毛利率的推广直销。 2014 年上半年的直接销售和营销国内产品占总收入的 39% (2013 年上半年: 26%),而其毛利率是 37.6％（2013 年上半年:38.7％），比公司整体毛利率的 29.7％为高。这媲美国药控股（1099.HK，未评级）的 8％为好。随着较少分销商的层数,主要直销推广国外药品商-康哲藥業(867.HK，未评级) 在 2014 年上半年享有 53.9％毛利率。随着零售收入增加，金天的整体毛利率有可能进一步提高。

估值低廉的品牌零售商。据彭博综合预测，金天的 2014 年市盈率为 10.7 倍，比以下所有的平均市盈率为低:一）香港上市药品分销商是 18.8 倍; 二) 香港上市的药物直销推广商是 26.0 倍（分别与康哲藥業的 26.3 倍和与国药控股的 20.1 倍）。注意到今年初淡马锡收购 25%屈臣氏药房权益, 其医疗连锁零售店的估值

为 2013 年市盈率 23倍。

Figure 2: 盈利预测

截至 Dec 31 (人民币百万) 2010A 2011A 2012A 2013A 营业额 859 1,474 2,326 3,323 经营盈利 161 245 302 519 净利润 123 181 214 355 实际盈利 123 181 228 363 每股实际盈利 (RMB) 0.06 0.09 0.11 0.18 每股股息 (RMB) 0.05 0.00 0.00 0.04 每股账面价值 (RMB) 0.09 0.18 0.27 1.18 市盈率 (x) 37.49 25.46 20.18 12.65 股息率 (%) 2.3 0.0 0.0 1.9 市净率 (x) 24.57 12.68 8.38 1.95

资料来源：国信证券(香港)

中国 / 医疗保健

2014 年 9月 3日未评级目标价 N/A 收盘价 (2 Sep 14) HK$2.90 Upside/downside (%) 恒生指数 24749.02 总市值 (HK$/US$mn) 5,800/748 52 周最高/最低 (HK$) 1.90 - 3.10 日均成交额 (US$mn) 2.56 流通量 (%) 36.7% 资料来源: 彭博

股价表现

股票数据 1M 3M 12M

绝对回报 (%) 23.9 28.9 绝对回报 (US$, %) 23.9 29.0 相对 HSI 回报 (%) 23.1 21.7 资料来源: 彭博

公司簡介

于 2013 年 12 月在香港联交所上市,金天医药集团股份有限公司是中国东北地区最大的医疗保健零售和批发商，有

5％的市场份额，覆盖 4,900 分销商和 838 个租用药店为自

有业务。而其高毛利率(37.6%)的直接销售在 2014 年上半

年占总收入的 39％。2014 年上半年,金天收入的 22％来自

保健品销售，其余来自非处方药和处方药的销售。

资料来源: 彭博,公司资料,国信证券(香港)

萧智舜, PhD 证监会中央编号:AVV237 +852 2899 6747 [email protected]

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Jintian Pharma (2211 HK) Jason Siu, +852 2899 6747, [email protected]

Guosen Securities (HK) 3

Good 1H14 Numbers 1H14’s Profit jump 47% y-o-y

In 1H14, Jintian's underlying net profit came in at RMB224m, jumped 47% y-o-y (1H13: 58%). The profit jump was mainly due to: i) a 40% y-o-y revenue increase and ii) a wider gross margin of 29.7% in 1H14 vs. 26.3% in 1H13, which offset higher 1H14's selling expenses to sales ratio of 11.4% vs. 9.5% in 1H13.

Share Weakness an Unfounded Concern Recent weakness based on unfounded concerns.

We reckon that the recent weakness of the stock was mainly due to 1) its change of CFO; and 2) a local news reporting an investigation on its supplier related to exaggerated advertisement of the Group's related product (御室金丹气血双补丸). We believe the new CFO is more familiar with Hong Kong listing rules and other HK matters while the investigation was the matter of its OEM supplier, which should only be a very minor issue for Jintian.

(http://www.21food.cn/html/news/25/1765001.htm)

More retail stores with wider margins Wider gross margin’s retail sales likely to rise

On 2 Sept, the Group issued an announcement reiterating that Jintian targets to acquire some 150 additional retail shops during 2014. So far, the Group has acquired 42 shops in 1H14, and two more retail drugstore chains (in Jilin and Liaoning) comprising a total of 25 shops as of end-Aug. In 1H14, Jintian had 838 retail drugstores (+42 new stores in 1H14), of which 688 in Heilongjiang, 101 in Liaoning and 45 in Jilin. We believe that the Group will increase more drugstores in Liaoning, then further to Changchun, enforcing its solid coverage in Northeastern China’s drug market. 47% of the Group’s 1H14 revenue (1H13: 48%) was derived from retail revenue, whose GPM stood at 40.0% (1H13: 38.4%), wider than wholesales’ 20.4%. In light of the Group’s acquisition strategy, retail revenue is set to increase.

E-commerce to move forward in 2015.

The Group will accelerate e-commerce’s development and establish its own e-commerce platform (known as ‘O2O’) in 2015. This work will become the Group’s third major business aside from its retail and distribution revenue.

More on-line advertisement.

We note that, starting in Sept this year, Jintian is likely to intensify its TV advertisement, such as CCTV, On-line TV and Satellite TV.

Good margin also for direct sales Some 39% of Jintian’s 1H14 revenue (1H13: 26%) derived from direct sales and marketing of domestic healthcare products, whose wider 1H14’s GPM stood at 37.6% (1H13: 38.7%), vs. its overall GPM’s 29.7% (1H13: 26.3%). This compares favorably with the 8% for Sinopharm (1099.HK, non-rated). With fewer layers of distribution, major foreign drug direct sales player, CMS enjoyed GPM of 53.9% in 1H14. With retail revenue setting to increase, overall GPM is likely to improve further.

Good 1H14 Numbers

Recent weakness based on unfounded concerns.

On track to add some 150 retail shops in 2014. Wider gross margin’s retail sales likely to rise.

E-commerce to move forward in 2015

Good margin also for direct sales

More on-line advertisement



OEM products and distribution for US milk powder Jintian relies on its OEM suppliers to make its product with the brand from its related party (four in total). Its suppliers then deliver straight to the Group’s logistic centres. Thereafter, Jintian markets and promotes these products to its or other retail drugstores. However, selling them to other wholesalers would give lower margins. The Group now sells 412 licensed products (under the above four main brands) and 1,015 branded products with exclusive distribution rights.

We note that the Group has recently signed a distribution agreement with McJayden, a large US brand for infant organic milk powder. We reckon that this could be a bigger source of revenue in the future.

Pre-IPO investors only CVC stays Pre-IPO investors include CVC, DBS and Advent International. Until now, only CVC has stayed there with 16.1% shareholding, the rest are no longer as substantial shareholders. The Chairman, Mr Jin Dongtao, and a Singapore fund, Target Asset Management, currently hold 45.1% and 5.1% of the Group’s total issued shares respectively.

40% of IPO’s money for M&A The Group targets to spend 40% of its IPO proceed (RMB868m) for M&A. So far, the Group had only spent c.RMB300m mainly for completion of its acquisition on a local drugstore chain company.

Key risks 1) Health supplement, derived 22% of its 1H14 total revenue, are normally given out in festive occasion. Its customers may lose appetite of repeating consumption, which may affect the Group's long-term revenue; 2) Over 70% of the Group’s revenue came from drug sales. Foreign drug marketer would normally disclose its supplier’s names and details, where Jintian lacks of this transparency; 3) Uncertainty for the use of its cash. Jintian raised c.RMB845m from its IPO and its net cash (as at end-June 2014) stood at RMB1.7bn. So far, the Group had only spent c.RMB300m mainly for completion of its acquisition on a local drugstore chain company.

Figure 3 Retail drugstores Figure 4 Jintian Pharm’s retail stores numbers

Source: Company data, Guosen Securities(HK) Research Source: Company data, Guosen Securities(HK) Research Figure 5 Jintian’s rental retail drugstore as self-owned business

Source: Company data, Guosen Securities(HK) Research

full-year FY13 1H14Heilongjiang 688 688Jilin 10 45Liaoning 93 101Hong Kong 3 4Total 794 838

40% IPO’s money for M&A

OEM product supply

Pre-IPO investors only CVC stays

Distribution agreement with a large US-brand, McJayden’s milk powder



Figure 6 Jintian’s P&L comparison

Source: Company data and Guosen Securities(HK) Research

Year ended Dec (RMB m) FY10 FY11 1H12 2H12 FY12 1H13 2H13 FY13 1H14

Revenue

Total retail revenue 386.4 526.1 368.5 543.7 912.2 700.8 849.0 1,549.8 963.2

Total distribution revenue 472.2 947.8 606.0 808.1 1,414.1 756.2 1,017.5 1,773.7 1,080.7 (wholesaler)

Total revenue 858.6 1473.9 974.5 1,351.8 2,326.3 1,457.0 1,866.5 3,323.5 2,043.9

Cost of sales (618.9) (1,095.8) (746.4) (1,034.1) (1,780.5) (1,073.3) (1,313.8) (2,387.1) (1,437.5)

Gross profit 239.7 378.1 228.2 317.6 545.8 383.7 552.7 936.4 606.4Retail 147.8 193.9 129.9 189.9 319.8 269.1 336.1 605.2 385.5GPM of retail biz (%) 38.2% 36.9% 35.3% 34.9% 35.1% 38.4% 39.6% 39.1% 40.0%Distribution 92.0 184.2 98.2 127.7 225.9 114.6 216.6 331.2 220.9GPM of distribution biz (%) 19.5% 19.4% 16.2% 15.8% 16.0% 15.2% 21.3% 18.7% 20.4%

Selling and marketing expenses (67.3) (103.0) (77.6) (111.3) (188.9) (137.8) (194.9) (332.7) (233.9)S&M to sales ratio 7.8% 7.0% 8.0% 8.2% 8.1% 9.5% 10.4% 10.0% 11.4%Adminstrative costs (11.6) (30.7) (17.9) (24.1) (42.0) (30.2) (52.8) (83.0) (47.1)Admin cost to sales ratio 1.4% 2.1% 1.8% 1.8% 1.8% 2.1% 2.8% 2.5% 2.3%

Other income 2.2 0.5 0.0 1.1 1.1 0.0 0.3 0.3 0.4Other losses - net (2.1) (0.0) (26.9) 12.6 (14.3) (1.2) (0.3) (1.5) 0.0

Operating profit 160.9 244.8 105.7 196.0 301.8 214.5 305.0 519.5 325.8

Finance income 2.723 5.822 2.813 0.363 3.176 2.425 -2.131 0.294 9.7Finance costs (0.03) (0.08) (0.06) (0.13) (0.19) (0.16) (1.35) (1.51) (5.9)

share of profit of JV 0 0.63 0.557 0.58 1.137 0.808 0.722 1.53 0.63

Profit before income tax 163.6 251.2 109.1 196.8 305.9 217.6 302.2 519.8 330.2tax expenses (41.1) (62.4) (33.8) (44.7) (78.5) (53.5) (81.3) (134.8) (86.0)tax rate 25.1% 24.8% 31.0% 22.7% 25.7% 24.6% 26.9% 25.9% 26.0%

Profit after tax 122.5 180.1 69.3 144.5 213.8 150.8 204.3 355.1 223.8MI 0 8.7 6.0 7.6 13.6 13.3 16.7 30.0 20.4

Adjustment 0 0 26.9 (12.9) 14.1 1.2 8.3 9.5 0

Underlying net profit 122.5 180.1 96.2 131.6 227.8 151.9 212.6 364.5 223.8EPS (RMB/s) 0.061 0.090 0.048 0.066 0.114 0.076 0.106 0.182 0.112DPS (RMB/s) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.022Dividend payout ratio 0% 0% 0% 0% 0% 0% 0% 0% 19.9%

Y-o-y change (%)Total retail revenue 36.1 73.4 90.2 56.2 94.4 37.4Total distribution revenue 100.7 49.2 24.8 25.9 9.6 42.9

Total revenue 71.7 57.8 49.5 38.1 42.9 40.3Gross profit 57.7 44.3 68.2 74.0 71.6 58.0Profit before income tax 53.6 21.8 99.5 53.5 69.9 51.8Underlying net profit 47.0 26.5 57.9 61.5 60.0 47.3

% to total revenueTotal retail revenue 45.0 35.7 37.8 40.2 39.2 48.1 45.5 53.4 47.1Total distribution revenue 55.0 64.3 62.2 59.8 60.8 51.9 54.5 46.6 52.9

Total revenue 100 100 100 100 100 100 100 100 100Gross profit 27.9 25.7 23.4 23.5 23.5 26.3 29.6 28.2 29.7Selling and marketing expenses 7.8 7.0 8.0 8.2 8.1 9.5 10.4 10.0 11.4Adminstrative costs 1.4 2.1 1.8 1.8 1.8 2.1 2.8 2.5 2.3Profit before income tax 14.3 12.2 7.1 10.7 9.2 10.3 10.9 10.7 10.9Underlying net profit 14.3 12.2 9.9 9.7 9.8 10.4 11.4 11.0 10.9Sources : Compa n y da ta a nd Guos en Securi tie s (HK)



Figure 7 Average rental cost for retail drugstores (as of 2010)

Source: Company data, South Medicine Economic Research Institute, Guosen Securities(HK) Research

Figure 8 Jintian’s direct sales model (left) versus distributor-oriented wholesale model (right)




Figure 9 Jintian’s direct sales revenue and its gross profit breakdown


Figure 10 Jintian’s retail and wholesale distribution revenue and its respective gross profit


380.9

793.6

2013 1H 2014 1H

Gross Margin of Direct Sales vs. Overall

Revenue of Direct Sales Revenue of Direct Sales as a % of Total

2014 1H

38.7% 37.6%

26.3%29.7%

2013 1H 2014 1H

Direct Sales Groass Profit MarginOverall Gross Profit Margin

26%

2013 1H

Direct Sales Others

39%

38%

2013 1H

Direct Sales Others

49%

2014 1HGross Profit of Direct Sales as a % of Total

Source: Company information, 2013 Annual Report and 2014 interim Report

(RMB in millions)

108.4%

700.8

2013 1H 2014 1H

963.2

38.4%39.1%

40.0%

2013 1H 2013 2014 1H

Revenue of Retail Gross Margin of Retail

(RMB in millions)

756.2

1,080.7

2013 1H 2014 1H

Revenue of Distribution

(RMB in millions)

15.2%

18.7%20.4%

2013 1H 2013 2014 1H

Gross Margin of Distribution

Source: Company information, 2013 Annual Report and 2014 interim Report

42.9%

37.4%



Figure 11 Jintian’s post-IPO forward PE (12-month) band

Source: Bloomberg data, Guosen Securities(HK) Research

Figure 12 Comparable tables (HK-listed) for Jintian Pharm


Figure 13 Comparable tables (HK-listed) for Jintian Pharm


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Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14

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+2SD = 14.2x

+1SD = 11.3X

Mean = 8.4x

-1SD = 6.3x

-2SD = 4.1x

C o m pa n y T i c k e r P r i c eM k t c a p ( U S $ m )

3 - m t h a v g t / o

( U S $ m )P ER H i st

( x )P ER

FY1 ( x )P ER

FY2 ( x )

EP S F Y1

Yo Y%EP S FY2

YoY%

3 - Yr EP S

C a gr ( %)

P EG ( x )

D i v y l d H i st ( %)

D i v y l d FY1 ( %)

P / B H i st ( x )

P / B FY1 ( x )

Jint ian Pharmace 2 2 11 HK 2 .9 0 74 8 2 .4 10 .5 10 .7 8 .7 ( 2 . 3 ) 2 3 .3 11.5 0 .9 N / A 0 .0 1.9 5 1.6 6

HSI 2 4 ,74 9 10 .8 11.4 10 .5 ( 5.6 ) 8 .6 4 . 0 2 .8 3 3 .7 3 .5 1.4 2 1.3 7

C SI3 0 0 2 ,3 8 6 10 .6 9 .6 8 .3 10 . 7 14 .8 13 .5 0 .71 2 .5 2 .8 1.55 1.3 9

D rug - market ers

A d just e d sect o r avg * 3 1.3 2 6 .0 2 0 .2 18 . 9 2 9 .0 2 4 . 3 1.0 7 1.4 1.6 5.4 2 5.6 8

China Pio neer Ph 13 45 HK 6.30 1,063 2.1 21.7 20.9 15.8 2 .2 31.9 19.6 1.07 2.2 2.6 5.65 5.02

China M edical Sy 86 7 HK 11.6 2 3,627 3.5 35.2 26.3 21.2 33 .9 24.6 27.4 0.96 1.3 1.3 6.25 5.89

Lee'S Pharm 950 HK 10.4 8 738 0.3 36.9 30.7 23.5 20 .7 30.6 26 .0 1.18 0.7 0.8 N/A 6.13

China Nt Pharma 10 11 HK 1.0 6 148 0.2 N/A N/A N/A N/A N/A N/A N/A N/A N/A 4.36 N/A

D rug d i st r ib ut o rs

A d just e d sect o r avg * 2 3 .3 18 .8 15.7 2 2 . 8 19 .5 18 . 6 1.0 5 1.5 1.6 2 .56 2 .3 0

Sinopharm-H 10 99 HK 27.80 9,212 12.4 24.8 20.1 16.8 23 .3 19.5 20 .9 0.96 1.2 1.4 2.59 2.16

Baiyunshan Ph-H 874 HK 26.65 5,455 4.7 27.5 22.0 17.6 23 .8 24.8 2 3.1 0.95 1.4 1.0 3.75 3.45

Shanghai Pharm-H 26 07 HK 17.0 6 6,031 4.6 16.3 14.6 12.8 12 .0 13.8 11.9 1.22 1.9 1.6 1.37 1.30

Kingworld 1110 HK 2.34 188 0.8 24.5 18.6 15.5 31.9 20.0 N/A N/A 1.6 2.2 2.53 N/A

* Out l iners and " N / A " ent r ies are in red and excl . f ro m t he c alculat io n o f aver ag es

C o mp anyR e v H i st ( US $ m )

R e v FY1 ( U S $ m )

N P H i st ( U S $ m )

N P FY1 ( U S $ m )

N e t ge a r i ng H i st ( %)

N e t ge a r ing FY1 ( %)

U n l e v be t a

Gr oss m a r g i n

H i st ( %)

N e t m a r g i n

H i st ( %)

N e t m a r g i n FY1 ( %)

R OE H i st ( %)

R OE FY1 ( %)

S h px 1- m t h %

S h px 3 - m t h %

Jint ian Pharmace 54 1 714 58 72 0 .0 N / A N .A 2 8 .2 10 .7 10 .0 2 4 .5 16 .9 2 3 .9 2 8 .9

HSI 13 .2 12 .0 0 .9 7.2

C SI3 0 0 14 .6 14 .5 2 .4 10 .7

D rug - market ers

A d just ed sect o r avg * 8 9 .6 0 .0 0 .10 4 8 .9 ( 5.2 ) 2 2 .4 ( 2 2 .0 ) 2 3 .0 16 .0 3 1.9

China Pioneer Ph 207 267 39 51 0.0 0.0 N.A 30.4 18.7 19.2 34.8 25.2 21.7 53.7

China M edical Sy 363 472 103 133 0.0 0.0 0.12 54.5 28.3 28.1 22.3 22.8 22.3 27.6

Lee'S Pharm 90 122 19 24 0.0 0.0 0.07 72.2 21.6 19.9 N/A 21.0 3.5 17.1

China Nt Pharma 123 N/A (110) N/A 358.5 N/A N.A 38.3 (89.3) N/A (123.1) N/A 16.5 29.3

D rug d ist r ib ut o rs

A d just ed sect o r avg * 19 .1 2 2 .0 0 .3 0 19 .2 4 .6 3 .4 11.9 13 .1 11.5 14 .1

Sinopharm-H 27,143 32,449 366 454 75.0 43.9 0.38 8.0 1.3 1.4 12.0 12.6 24.9 32.1

Baiyunshan Ph-H 2,840 3,309 159 196 0.0 N/A 0.82 32.4 5.6 5.9 15.5 16.8 (1.5) 10.2

Shanghai Pharm-H 12,724 14,561 365 405 0.0 0.0 0.35 12.8 2.9 2.8 9.2 9.4 17.5 17.0

Kingworld 90 N/A 8 11 1.5 N/A (0.35) 23.6 8.5 N/A 10.7 13.5 4.9 (2.9)



Summary financial statements Profit & Loss (RMBmn) 2010A 2011A 2012A 2013A Financial Ratios 2010A 2011A 2012A 2013A Revenue 859 1,474 2,326 3,323 Revenue growth (%) 0.0 71.7 57.8 42.9

Cost of sales (619) (1,096) (1,781) (2,387) Operating profit growth (%) 0.0 52.2 23.2 72.2

Gross profit 240 378 546 936 Underlying profit growth (%) 0.0 47.2 26.2 59.5

Other income/(expense) 0 0 (13) (1) Underlying EPS growth (%) 0.0 47.2 26.2 59.5

Operating expenses (79) (134) (231) (416) Gross profit margin (%) 27.9 25.7 23.5 28.2

Operating profit 161 245 302 519 Operating profit margin (%) 18.7 16.6 13.0 15.6

Other non operating inc/(exp) 0 0 0 0 Underlying profit margin (%) 14.3 12.3 9.8 10.9

Finance income 3 6 3 2 Net debt/equity (%) (57.2) (197) (105) (66.8)

Finance expenses 0 0 0 (4) Net debt/total assets (%) (39.8) (57.9) (38.0) (57.3)

Associates & JCE 0 1 1 2 Current ratio (%) 322 133 127 831

Profit before taxation 164 252 306 520 Dividend payout (%) 86.8 0.0 0.0 23.6

Taxation (41) (62) (79) (135) Inventory Turnover days 45.8 43.1 43.8 39.8

Non-controlling interests 0 (9) (14) (30) Acct Receivable Turnover days 24.5 25.7 25.2 20.5

Net profit 123 181 214 355 Acct Payable Turnover days 28.7 23.1 19.0 14.1

Other Adjustments on UP 0 0 14 8 Dupont Analysis 2010A 2011A 2012A 2013A Underlying Profit 123 181 228 363 Tax burden (%) 74.9 71.7 69.9 68.3 Source: Guosen Research estimates Interest burden (%) 102 103 101 100

Operating profit margin (%) 18.7 16.6 13.0 15.6

Asset turnover (x) 6.4 2.0 1.7 1.6

Leverage ratio (x) 1.4 2.7 3.0 1.5

ROA (%) 91.2 24.1 15.6 16.7

ROE (%) 131 65.7 46.9 24.5

Source: Guosen Research estimates

Balance Sheet (RMBmn) 2010A 2011A 2012A 2013A Cashflow (RMBmn) 2010A 2011A 2012A 2013A Fixed assets 2 19 47 76 Operating profit 164 251 306 516

Associates & JCE 0 3 0 0 Depreciation & amortization 0 0 0 0

Others 4 111 370 462 Interest income 3 6 3 3

Non-current assets 6 132 417 538 Change in working capital (18) (76) (87) (39)

Inventories 81 178 249 272 Tax paid (39) (51) (81) (120)

Debtors & prepayments 75 210 274 362 Other operating cashflow (2) (8) 20 27

Bank deposits & cash 107 713 575 1,573 Operating activities 107 122 162 387

Others 0 0 0 0 Purchase of non-current assets (Capex) (1) (12) (15) (43)

Current assets 263 1,101 1,099 2,206 Free cash flow 106 110 147 344

Bank & other borrowings 0 0 0 0 Disposal of non-current assets 0 0 0 0

Trade & payables 70 801 832 217 Associates & JCE (net) 0 (2) 0 0

Taxation 0 0 0 0 Interest received 3 1 2 2

Others 12 26 30 49 Dividends received 0 0 0 0

Current liabilities 82 827 862 265 Other investing cashflow 34 (166) (311) (13)

Bank & other borrowings 0 0 0 0 Investing activities 36 (179) (323) (53)

Others 0 5 25 23 New loans raised 0 673 0 24

Non-current liabilities 0 5 25 23 Repayment of loans 0 0 (41) 0

Net assets 187 401 628 2,456 Dividends paid (106) 0 0 (86)

Share capital 0 0 0 12 Other financing cashflow 1 (9) 65 726

Premium & reserves 187 362 549 2,343 Financing activities (106) 664 24 664

Shareholders' funds 187 362 549 2,355 Inc/(dec) in cash 37 607 (138) 998

Non-controlling interests 0 39 79 101 Cash at beginning of year 70 107 713 575

Total equity 187 401 628 2,456 Foreign exchange effect 0 0 0 (1) Source: Guosen Research estimates Cash at end of year 107 713 575 1,573

Source: Guosen Research estimates



Information Disclosures Stock ratings, sector ratings and related definitions

Stock Ratings:

Buy: A return potential of 10 % or more relative to overall market within 6 – 12 months.

Neutral: A return potential ranging from -10% to 10% relative to overall market within 6 – 12 months.

Sell: A negative return of 10% or more relative to overall market within 6 –12 months.

Sector Ratings:

Overweight: The sector will outperform the overall market by 10% or higher within 6 –12 months.

Neutral: The sector performance will range from -10% to 10% relative to overall market within 6 –12 months.

Underweight: The sector will underperform the overall market by 10% or lower within 6 – 12 months.

Interest disclosure statement

The analyst is licensed by the Hong Kong Securities and Futures Commission. Neither the analyst nor his/her associates serves as an officer of the listed companies covered in this report and has no financial interests in the companies.

Guosen Securities (HK) Brokerage Co., Ltd. and its associated companies (collectively “Guosen Securities (HK)”) has no disclosable financial interests (including securities holding) or make a market in the securities in respect of the listed companies. Guosen Securities (HK) has no investment banking relationship within the past 12 months, to the listed companies. Guosen Securities (HK) has no individual employed by the listed companies.

Disclaimers

The prices of securities may fluctuate up or down. It may become valueless. It is as likely that losses will be incurred rather than profit made as a result of buying and selling securities.

The content of this report does not represent a recommendation of Guosen Securities (HK) and does not constitute any buying/selling or dealing agreement in relation to the securities mentioned. Guosen Securities (HK) may be seeking or will seek investment banking or other business (such as placing agent, lead manager, sponsor, underwriter or proprietary trading in such securities) with the listed companies. Individuals of Guosen Securities (HK) may have personal investment interests in the listed companies.

This report is based on information available to the public that we consider reliable, however, the authenticity, accuracy or completeness of such information is not guaranteed by Guosen Securities (HK). This report does not take into account the particular investment objectives, financial situation or needs of individual clients and does not constitute a personal investment recommendation to anyone. Clients are wholly responsible for any investment decision based on this report. Clients are advised to consider whether any advice or recommendation contained in this report is suitable for their particular circumstances. This report is not intended to be an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned.

This report is for distribution only to clients of Guosen Securities (HK). Without Guosen Securities (HK)’s written authorization, any form of quotation, reproduction or transmission to third parties is prohibited, or may be subject to legal action. Such information and opinions contained therein are subject to change and may be amended without any notification. This report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject Guosen Securities (HK) and its group companies to any registration or licensing requirement within such jurisdiction.



信息披露

公司评级、行业评级及相关定义

公司评级

买入：我们预计未来 6-12 个月内，个股相对大盘涨幅在 10%以上；

中性：我们预计未来 6-12 个月内，个股相对大盘涨幅介于-10%与 10%之间；

减持：我们预计未来 6-12 个月内，个股相对大盘跌幅大于 10%。

行业评级

超配：我们预计未来 6-12 个月内，行业整体回报高于市场整体水平 10%以上；

中性：我们预计未来 6-12 个月内，行业整体回报介于市场整体水平-10%与 10%之间；

低配：我们预计未来 6-12 个月内，行业整体回报低于市场整体水平 10%以上。

利益披露声明

报告作者为香港证监会持牌人士，分析员本人或其有联系者并未担任本研究报告所评论的上市法团高级管理人员，也未持有其任何财务权益。

本报告中，国信证券（香港）经纪有限公司及其所属关联机构（合称国信证券（香港））并无持有该公司须作出披露的财务权益(包括持股)，在过去 12 个月内与该公司并无投资银行关系，亦无进行该公司有关股份的庄家活动。本公司员工均非该上市公司的雇员。

免责条款

证券价格有时可能非常波动。证券价格可升可跌，甚至变成毫无价值。买卖证券未必一定能够赚取利润，反而可能会招致损失。

本研究报告内容既不代表国信证券（香港）的推荐意见，也并不构成所涉及的个别股票的买卖或交易要约。国信证券（香港）或其集团公司有可能会与本报告涉及的公司洽谈投资银行业务或其它业务（例如配售代理、牵头经办人、保荐人、包销商或从事自营投资于该股票）。国信证券（香港）不排除其员工有个人投资于本报告内所提及的上市法团。

报告中的资料均来自公开信息，我们力求准确可靠，但对这些信息的正确性、公正性及完整性不做任何保证。本报告没有考虑到个别客户特殊的投资目标、财务状况或需要，并不构成个人投资建议，客户据此投资，责任自负。客户在阅读本研究报告时应考虑报告中的任何意见或建议是否符合其个人特定状况。本报告并不存在招揽或邀约购买或出售任何证券的企图。

本报告仅向特定客户传送，未经国信证券香港书面授权许可，任何人不得引用、转载以及向第三方传播，否则可能将承担法律责任。研究报告所载的资料及意见，如有任何更改，本司将不作另行通知。在一些管辖区域内，针对或意图向该等区域内的市民、居民、个人或实体发布、公布、供其使用或提供获取渠道的行为会违反该区域内所适用的法律或规例或令国信证券（香港）受制于任何注册或领牌规定，则本研究报告不适用于该等管辖区域内的市民、居民或身处该范围内的任何人或实体。

jintian pharma (2211 hk)2014/09/04 · dec -13 aug4 hk$ price(lhs) rel. to hsi(rhs) j int...

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