HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Thematic (Sector/Industry)

<ul>
<li>While AI has had a profound impact in image recognition,there has been little comparable progress in drug discovery, far from the current levels of investment and expectations in this sector.</li>
<li>The success of license-in model must be based on the appropriate valuation level. The ultimate parameter to measure a drug company based on license-in model is its cash flow status.</li>
<li>Pet medical equipment is not subject to the negative policy impact of centralized procurement. Together with high demand, it is expected to become the second growth curve of enterprises.</li>
</ul>


While AI has had a profound impact in image recognition,there has been little comparable progress in drug discovery, far from the current levels of investment and expectations in this sector.
The success of license-in model must be based on the appropriate valuation level. The ultimate parameter to measure a drug company based on license-in model is its cash flow status.
Pet medical equipment is not subject to the negative policy impact of centralized procurement. Together with high demand, it is expected to become the second growth curve of enterprises.


China Healthcare Weekly (Aug.12)-AI Drug Discovery, License-In Mode Valuation, Pet Medical Equipment

Equity Bottom-Up

Sihuan Pharmaceutical Hldgs / Equity Bottom-Up

<ul>
<li>The disposal of generic drug segment would bring one-time cash flow. Together with the cash on hand, <a href="https://www.smartkarma.com/entities/sihuan-pharmaceutical-hldgs" target="_blank" data-smartkarma-citation="entities:33:1" rel="noopener">Sihuan Pharmaceutical Hldgs (460 HK)</a> is undervalued based on its current market value. </li>
<li>In the context of its innovative drug segment facing long-term losses, and the decreasing profit margins of medical beauty segment due to increasing competition, Sihuan’s prospects are no brighter.</li>
<li>Due to the concerns on outlook and its development mode, Sihuan’s upside potential could be lower than expected, and the share price could fluctuate largely. </li>
</ul>


The disposal of generic drug segment would bring one-time cash flow. Together with the cash on hand, Sihuan Pharmaceutical Hldgs (460 HK) is undervalued based on its current market value. 
In the context of its innovative drug segment facing long-term losses, and the decreasing profit margins of medical beauty segment due to increasing competition, Sihuan’s prospects are no brighter.
Due to the concerns on outlook and its development mode, Sihuan’s upside potential could be lower than expected, and the share price could fluctuate largely. 


Sihuan Pharmaceutical (460.HK) - The Potential Disposal of Generic Drug Business and the Outlook

Huadong Medicine Co Ltd A / Equity Bottom-Up

<ul>
<li>The most recent two quarters have maintained positive growth. It is of great significance for Huadong, who once suffered a significant decline and now in a critical period of transformation.</li>
<li>The large growth potential of medical cosmetology and industrial microbiology would be important driver for future development. It’s also wise to strike a balance between current performance and future strategy.</li>
<li>Huadong’s revenue growth would be above 10% in next few years. It would have higher valuation than Imeik. Investors are advised to follow Huadong. It could be a “dark horse”.</li>
</ul>


The most recent two quarters have maintained positive growth. It is of great significance for Huadong, who once suffered a significant decline and now in a critical period of transformation.
The large growth potential of medical cosmetology and industrial microbiology would be important driver for future development. It’s also wise to strike a balance between current performance and future strategy.
Huadong’s revenue growth would be above 10% in next few years. It would have higher valuation than Imeik. Investors are advised to follow Huadong. It could be a “dark horse”.


Huadong Medicine Co Ltd (000963.CH) - A “Dark Horse” to Reverse Performance Dilemma

Imeik Technology Development C / Equity Bottom-Up

<ul>
<li>Imeik keeps its outstanding financial performance in 2021/2022Q1. On the surface, it looks prosperous, but its development strategy, product layout and resilience in front of risks would bring many uncertainties.</li>
<li>Considering the pandemic/lockdown and a slowing economy in China, the revenue growth in 2022 could fall to about 50%, then to about 40% and 30% in 2023 and 2024 respectively.</li>
<li>Imeik’s valuation is “unreasonably high”, which is expected to be lower than Bloomage in the future. Anything that deviates from fundamentals would inevitably return to the origin. </li>
</ul>


Imeik keeps its outstanding financial performance in 2021/2022Q1. On the surface, it looks prosperous, but its development strategy, product layout and resilience in front of risks would bring many uncertainties.
Considering the pandemic/lockdown and a slowing economy in China, the revenue growth in 2022 could fall to about 50%, then to about 40% and 30% in 2023 and 2024 respectively.
Imeik’s valuation is “unreasonably high”, which is expected to be lower than Bloomage in the future. Anything that deviates from fundamentals would inevitably return to the origin. 


Imeik Technology Development (300896.CH) - Superficial Prosperity Hardly Masks Underlying Risks

Shanghai Haohai Biological Tec / Equity Bottom-Up

<ul>
<li>Haohai's development is fuelled by a series of acquisitions, which help Haohai establish the existing diversified businesses, but we haven’t seen any growth point with high certainty.</li>
<li>Compared with Bloomage and Imeik, Haohai has no competitive advantage in the field of medical aesthetics. It’s also difficult for Haohai to make a substantial breakthrough without obvious product advantages.</li>
<li>Although Haohai’s PE/TTM is significantly lower than its peers, due to centralized procurement, Haohai’s valuation could be further lower. Considering the risks, we choose to stay cautious on Haohai.</li>
</ul>


Haohai's development is fuelled by a series of acquisitions, which help Haohai establish the existing diversified businesses, but we haven’t seen any growth point with high certainty.
Compared with Bloomage and Imeik, Haohai has no competitive advantage in the field of medical aesthetics. It’s also difficult for Haohai to make a substantial breakthrough without obvious product advantages.
Although Haohai’s PE/TTM is significantly lower than its peers, due to centralized procurement, Haohai’s valuation could be further lower. Considering the risks, we choose to stay cautious on Haohai.


Shanghai Haohai Biological Technology (688366CH)- Diversified Business Layout Doesn't Secure Outlook

China

Huadong Medicine Co., Ltd. wholesales and retails medicines, pharmaceutical preparations, biological products, and medical instruments.  Through its subsidiaries, the Company also manufactures antibiotic medicines and biochemical products.

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Huadong Medicine Co Ltd A (000963 CH)

China Healthcare Weekly (Aug.12)-AI Drug Discovery, License-In Mode Valuation, Pet Medical Equipment

AI drug discovery is far from meeting the current investment level and expectations. The success of license-in mode must be based on appropriate...

Xinyao (Criss) Wang

Sihuan Pharmaceutical (460.HK) - The Potential Disposal of Generic Drug Business and the Outlook

The medical aesthetics/innovative drug business face various challenges.Though Sihuan is undervalued,concerns on outlook/development mode will...

Xinyao (Criss) Wang

Huadong Medicine Co Ltd (000963.CH) - A “Dark Horse” to Reverse Performance Dilemma

The outstanding performance and promising outlook of medical cosmetology and industrial microbiology will help Huadong reverse performance dilemma,...

Xinyao (Criss) Wang

Imeik Technology Development (300896.CH) - Superficial Prosperity Hardly Masks Underlying Risks

Imeik’s valuation is unreasonably high. The risks related to development strategy, product layout, R&D, etc. will bring many uncertainties.There's...

Xinyao (Criss) Wang

Shanghai Haohai Biological Technology (688366CH)- Diversified Business Layout Doesn't Secure Outlook

Haohai builds diversified business via M&A,but none is growth point with high certainty. Its medical aesthetics has no obvious advantage and the...

Xinyao (Criss) Wang

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