HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

China Traditional Chinese Medicine / Equity Bottom-Up

<ul>
<li>China TCM’s concentrated TCM granules business improved significantly in 22H2, and the total revenue in 22H2 also increased by 42% YoY, indicating that the decline trend has been significantly curbed.</li>
<li>Due to its SOE background+ national standard setters with the largest number of national standards filed, China TCM would be the beneficiary of the industry's transformation during this dividend period.</li>
<li>Due to low base last year, China TCM’s performance would rebound this year. Considering favorable policies and large growth potential in TCM granules, we’re optimistic about its share price performance.</li>
</ul>


China TCM’s concentrated TCM granules business improved significantly in 22H2, and the total revenue in 22H2 also increased by 42% YoY, indicating that the decline trend has been significantly curbed.
Due to its SOE background+ national standard setters with the largest number of national standards filed, China TCM would be the beneficiary of the industry's transformation during this dividend period.
Due to low base last year, China TCM’s performance would rebound this year. Considering favorable policies and large growth potential in TCM granules, we’re optimistic about its share price performance.


China Traditional Chinese Medicine (570.HK) - Looking Forward to a Performance Turnaround in 2023

Thematic (Sector/Industry)

<ul>
<li>The current policy environment determines that TCM is the core asset of pharmaceuticals, not innovative drugs. We think it is necessary to take a fresh look at TCM industry.</li>
<li>TCM formula granules have more opportunities. Exclusive variety of branded OTC TCM has better outlook. TCM medical services also deserve investors’ attention, because hospitals are the main channels for TCM. </li>
<li>China's pharmaceutical industry has its unique features. We recommend investors to leave a place in the portfolio to invest in TCM companies, which could outperform in the current pharmaceutical environment.</li>
</ul>


The current policy environment determines that TCM is the core asset of pharmaceuticals, not innovative drugs. We think it is necessary to take a fresh look at TCM industry.
TCM formula granules have more opportunities. Exclusive variety of branded OTC TCM has better outlook. TCM medical services also deserve investors’ attention, because hospitals are the main channels for TCM. 
China's pharmaceutical industry has its unique features. We recommend investors to leave a place in the portfolio to invest in TCM companies, which could outperform in the current pharmaceutical environment.


China Traditional Chinese Medicine (TCM) Industry - TCM Is Becoming Indispensable in the Portfolio

<ul>
<li>The potential high-priced acquisition proposed by Wepon failed. In fact, Wepon is in a vicious circle. So, terminating the acquisition is not a bad thing for <a href="https://www.smartkarma.com/entities/consun-pharmaceutical-group" target="_blank" data-smartkarma-citation="entities:1261:1" rel="noopener">Consun Pharmaceutical (1681 HK)</a>.</li>
<li>Consun kept positive momentum and its performance was strong in 22H1. Such growth is expected to continue after China reopens as non-COVID related medical demand returns to normal.</li>
<li>Considering its solid business performance and large cash balance, Consun is obviously undervalued. In our view, even without Wepon’s deal as the catalyst, Consun still has investment value.</li>
</ul>


The potential high-priced acquisition proposed by Wepon failed. In fact, Wepon is in a vicious circle. So, terminating the acquisition is not a bad thing for Consun Pharmaceutical (1681 HK).
Consun kept positive momentum and its performance was strong in 22H1. Such growth is expected to continue after China reopens as non-COVID related medical demand returns to normal.
Considering its solid business performance and large cash balance, Consun is obviously undervalued. In our view, even without Wepon’s deal as the catalyst, Consun still has investment value.


Consun Pharmaceutical (1681.HK) - Still Has Investment Value Even Without High-Priced Acquisition

China Shineway Pharmaceutical / Equity Bottom-Up

<ul>
<li>Shineway released good turnover data in 22Q1-Q3. Due to large market demand for COVID-related TCM, 22Q4 performance would remain strong growth momentum, leading to positive outlook of 2022 annual report.</li>
<li>With the peak of respiratory disease outbreak past and COVID-19 also begins to be under control, demand for related TCM would weaken. Accordingly, the pullback of share price could begin.</li>
<li>Strong performance of Shineway's share price may not be sustainable in long term. Shineway is no longer cheap at current valuation. While short-term catalysts remain, future upside may become limited. </li>
</ul>


Shineway released good turnover data in 22Q1-Q3. Due to large market demand for COVID-related TCM, 22Q4 performance would remain strong growth momentum, leading to positive outlook of 2022 annual report.
With the peak of respiratory disease outbreak past and COVID-19 also begins to be under control, demand for related TCM would weaken. Accordingly, the pullback of share price could begin.
Strong performance of Shineway's share price may not be sustainable in long term. Shineway is no longer cheap at current valuation. While short-term catalysts remain, future upside may become limited. 


China Shineway Pharmaceutical (2877.HK) - Some Points Worth the Attention

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>In principle, <a href="https://www.smartkarma.com/entities/jafco-co-ltd" target="_blank" data-smartkarma-citation="entities:8848:1" rel="noopener">Jafco Co Ltd (8595 JP)</a> still wants to be greenmailed to get Murakami-san out. </li>
<li>
<a href="https://www.smartkarma.com/entities/jardine-cycle-carriage-ltd" target="_blank" data-smartkarma-citation="entities:347:1" rel="noopener">Jardine Cycle &amp; Carriage (JCNC SP)</a>i is expensive here - relative to historical values -  and from an implied stub perspective. And the MSCI inclusion event has now passed.</li>
<li>If you think this is a "risk", then you want to be long when the discount is wide and <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> is monetising assets in some way. </li>
</ul>


In principle, Jafco Co Ltd (8595 JP) still wants to be greenmailed to get Murakami-san out. 

Jardine Cycle &amp; Carriage (JCNC SP)i is expensive here - relative to historical values -  and from an implied stub perspective. And the MSCI inclusion event has now passed.
If you think this is a "risk", then you want to be long when the discount is wide and Softbank Group (9984 JP) is monetising assets in some way. 


Last Week in Event SPACE: JAFCO, Jardine Cycle, Softbank, Star Health

Hong Kong

China Traditional Chinese Medicine Co. Limited, through its subsidiaries, manufactures and sells medicine and pharmaceutical products in China.

China Traditional Chinese Medicine (570 HK)

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China Traditional Chinese Medicine (570 HK)