HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

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

Imeik Technology Development C (300896 CH)

<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

Shanghai Haohai Biological Tec (688366 CH)

<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

<ul>
<li>The reason why Sihuan has received more attention from the market mainly lies in the medical aesthetics segment. However, both hyaluronic acid and botulinum toxin are facing challenges.</li>
<li>Recently, China Resources is rumored to be in talks to privatize <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>, but Sihuan denied it.</li>
<li>Sihuan is undervalued. The reasonable market value should be over RMB20 billion. We recommend investors to follow closely with Sihuan, either for decent upside potential or privatization possibility.</li>
</ul>


The reason why Sihuan has received more attention from the market mainly lies in the medical aesthetics segment. However, both hyaluronic acid and botulinum toxin are facing challenges.
Recently, China Resources is rumored to be in talks to privatize Sihuan Pharmaceutical Hldgs (460 HK), but Sihuan denied it.
Sihuan is undervalued. The reasonable market value should be over RMB20 billion. We recommend investors to follow closely with Sihuan, either for decent upside potential or privatization possibility.


Sihuan Pharmaceutical Hldgs (460.HK)- Privatization Rumor, Upside Potential and Concerns on Business

<ul>
<li>
<a href="https://www.smartkarma.com/entities/huadong-medicine-co-ltd-a" target="_blank" data-smartkarma-citation="entities:18522:1" rel="noopener">Huadong Medicine (000963 CH)</a>’s traditional core businesses are facing great pressure due to VBP and medical insurance negotiation, which is difficult for Huadong to establish its long-term core competitiveness.</li>
<li>Despite the fierce competition in medical cosmetology industry, the entry of medical cosmetology equipment field is a wise step, helping Huadong form the most complete layout among competitors.</li>
<li>In terms of whether Huangdong could achieve business transformation successfully, the future performance of medical cosmetology business is the key breakthrough point.</li>
</ul>



Huadong Medicine (000963 CH)’s traditional core businesses are facing great pressure due to VBP and medical insurance negotiation, which is difficult for Huadong to establish its long-term core competitiveness.
Despite the fierce competition in medical cosmetology industry, the entry of medical cosmetology equipment field is a wise step, helping Huadong form the most complete layout among competitors.
In terms of whether Huangdong could achieve business transformation successfully, the future performance of medical cosmetology business is the key breakthrough point.


Huadong Medicine Co Ltd (000963.CH) - The Medical Cosmetology Business Is the Key Breakthrough Point

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)

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