HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

Guangzhou Baiyunshan Pharmaceu / Equity Bottom-Up

<ul>
<li>Baiyunshan is not a typical TCM company. As Great Commerce accounts for the majority of revenue, it clearly drags down the quality of total assets and growth expectation for valuation.</li>
<li>As Jin Ge and Wang Lao Ji are facing different challenges, the overall growth/profitability of Baiyunshan is under pressure.Due to uncompetitive product line, Baiyunshan’s future growth appears to lack momentum.</li>
<li>The valuation of Baiyunshan-A share is still expensive, but Baiyunshan-H share is attractive. After all, the future consumption recovery would be beneficial for boosting Baiyunshan’s valuation. Then, trading opportunity occurs. </li>
</ul>


Baiyunshan is not a typical TCM company. As Great Commerce accounts for the majority of revenue, it clearly drags down the quality of total assets and growth expectation for valuation.
As Jin Ge and Wang Lao Ji are facing different challenges, the overall growth/profitability of Baiyunshan is under pressure.Due to uncompetitive product line, Baiyunshan’s future growth appears to lack momentum.
The valuation of Baiyunshan-A share is still expensive, but Baiyunshan-H share is attractive. After all, the future consumption recovery would be beneficial for boosting Baiyunshan’s valuation. Then, trading opportunity occurs. 


Guangzhou Baiyunshan Pharmaceutical (874.HK) - When Valuation Is Low Enough, Drawbacks Are Tolerable

Equity Capital Markets

Deshengtang Pharmaceutical Co Ltd / Equity Capital Markets

<ul>
<li>Due to COVID-19, the consumption pattern of customers has changed.The rapid development period of pharmacies is coming to an end and the industry has entered a new era of integration.</li>
<li>The essence of Deshengtang's business model is more like traditional retail offline pharmacies, relying heavily on selling drugs. The Company's healthy gross margin gives hope for an early turnaround. </li>
<li>However, no matter from which field to seek expansion, Deshengtang would encounter strong competitors.It remains to see if Deshengtang can survive in the industry rather than be acquired by competitors.</li>
</ul>


Due to COVID-19, the consumption pattern of customers has changed.The rapid development period of pharmacies is coming to an end and the industry has entered a new era of integration.
The essence of Deshengtang's business model is more like traditional retail offline pharmacies, relying heavily on selling drugs. The Company's healthy gross margin gives hope for an early turnaround. 
However, no matter from which field to seek expansion, Deshengtang would encounter strong competitors.It remains to see if Deshengtang can survive in the industry rather than be acquired by competitors.


Pre-IPO Deshengtang Pharmaceutical - Benign Development Momentum, but Still Face Some Risks

<ul>
<li>YSB's business model is closer to that of pharmaceutical distribution enterprises, who could carry out businesses similar to YSB based on huge market share/resource advantages/financial strength. YSB’s moat isn't high.</li>
<li>The business structure of “Self-operation Business + Online Marketplace” of YSB could involve certain policy risks. Given the nature of its business, YSB’s profit margin is difficult to improve significantly.</li>
<li>
<a href="https://www.smartkarma.com/entities/ysb-inc" target="_blank" data-smartkarma-citation="entities:35982:1" rel="noopener">YSB Inc (YSB HK)</a>’s revenue scale could encounter bottlenecks after reaching a certain stage of growth. The valuation of YSB should be lower than that of traditional pharmaceutical distribution enterprises.</li>
</ul>


YSB's business model is closer to that of pharmaceutical distribution enterprises, who could carry out businesses similar to YSB based on huge market share/resource advantages/financial strength. YSB’s moat isn't high.
The business structure of “Self-operation Business + Online Marketplace” of YSB could involve certain policy risks. Given the nature of its business, YSB’s profit margin is difficult to improve significantly.

YSB Inc (YSB HK)’s revenue scale could encounter bottlenecks after reaching a certain stage of growth. The valuation of YSB should be lower than that of traditional pharmaceutical distribution enterprises.


Pre IPO YSB Inc (PHIP Updates) - Low Margins Are Inevitable; Valuation Upside Potential Is Limited

Shanghai Pharmaceuticals Holding / Equity Bottom-Up

<ul>
<li>Different from peers whose pharmaceutical assets are scattered in different listed companies, all assets/resources of SH Pharma are integrated within the Company. The intrinsic value of this model is greater.</li>
<li>SH Pharma is in a traditional industry, facing weak profitability and negative policy impacts, Thus, the Company lacks attractiveness and imagination space for investors, leading to long-term undervaluation. </li>
<li>Considering the transformation to more high-margin businesses, SH Pharma’s performance/profitability would improve. Since China hopes to establish a valuation system with Chinese characteristics, there’s valuation repair opportunity for SH Pharma.</li>
</ul>


Different from peers whose pharmaceutical assets are scattered in different listed companies, all assets/resources of SH Pharma are integrated within the Company. The intrinsic value of this model is greater.
SH Pharma is in a traditional industry, facing weak profitability and negative policy impacts, Thus, the Company lacks attractiveness and imagination space for investors, leading to long-term undervaluation. 
Considering the transformation to more high-margin businesses, SH Pharma’s performance/profitability would improve. Since China hopes to establish a valuation system with Chinese characteristics, there’s valuation repair opportunity for SH Pharma.


Shanghai Pharmaceuticals Holding (601607.CH/2607.HK) - The Situation of Undervaluation Would Change

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

TSE Tokyo Price Index TOPIX / Technical Analysis

<ul>
<li>There continues to be little traction above $93 on the MSCI ACWI (ACWI-US), which remains the top-end of our anticipated 2023 trading range.</li>
<li>At the same time, we cannot get too bearish until there is a break below $90.50 short-term support.</li>
<li>EURO STOXX 50 pulling back to 4100-4200 buy area. TOPIX holding above 2120 support. Buy ideas within Technology, Construction Materials, gold miners, Utilities, other defensives.</li>
</ul>


There continues to be little traction above $93 on the MSCI ACWI (ACWI-US), which remains the top-end of our anticipated 2023 trading range.
At the same time, we cannot get too bearish until there is a break below $90.50 short-term support.
EURO STOXX 50 pulling back to 4100-4200 buy area. TOPIX holding above 2120 support. Buy ideas within Technology, Construction Materials, gold miners, Utilities, other defensives.


Japan Remains Leadership; Actionable Pullback in Europe; Downgrading China/Hong Kong

China

China Resources Pharmaceutical Group Ltd. operates as a pharmaceutical company. The Company researches and develops, manufactures, and distributes pharmaceuticals. China Resources Pharmaceutical Group provides products and services involving chemicals, biologics, health products, medical appliances, and others. 

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China Resources Pharmaceutical (3320 HK)

Guangzhou Baiyunshan Pharmaceutical (874.HK) - When Valuation Is Low Enough, Drawbacks Are Tolerable

Due to the special "positioning" of Baiyunshan's business, the market's enthusiasm for the company is not high. But when its valuation is low...

Xinyao (Criss) Wang

Pre-IPO Deshengtang Pharmaceutical - Benign Development Momentum, but Still Face Some Risks

Deshengtang has hope for an early turnaround if benign development momentum could continue. But its business model does not have a high moat, so...

Xinyao (Criss) Wang

Pre IPO YSB Inc (PHIP Updates) - Low Margins Are Inevitable; Valuation Upside Potential Is Limited

YSB's business doesn't have high moat.It mainly compete for the small market not covered by SOE pharmaceutical distributors,with limited growth...

Xinyao (Criss) Wang

Shanghai Pharmaceuticals Holding (601607.CH/2607.HK) - The Situation of Undervaluation Would Change

SH Pharma is not attractive due to low profitability/negative policies, but its business transformation will pay off. Since China hopes to drive up...

Xinyao (Criss) Wang

Japan Remains Leadership; Actionable Pullback in Europe; Downgrading China/Hong Kong

#Japan #Nikkei 225 and #TOPIX above base supports at 30,800 and 2120, respectively. We've discussed buying pullbacks to 1950-2000 on TOPIX, but it...

Vermilion Research

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