Global Healthcare Analyst

Tina Banerjee

Equity Bottom-Up

Sinopharm Group Co Ltd H / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sinopharm-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:32:1" rel="noopener">Sinopharm Group Co Ltd H (1099 HK)</a> remains a beneficiary of both VBP and China reopening. Consensus expects double-digit revenue and earnings growth for the company in 2023 and 2024.</li>
<li>SinoPharm’s acquisition of VBP varieties constantly stood in the leading position in the industry. Through June 2022, China carried out seven batches of VBP, with 294 categories being included.</li>
<li>With China gradually re-opening, SinoPharm should record accelerated growth in its pharma distribution business. With subsiding COVID-19 cases in Q3, SinoPharm reported 10% YoY and 8% QoQ revenue growth.</li>
</ul>



Sinopharm Group Co Ltd H (1099 HK) remains a beneficiary of both VBP and China reopening. Consensus expects double-digit revenue and earnings growth for the company in 2023 and 2024.
SinoPharm’s acquisition of VBP varieties constantly stood in the leading position in the industry. Through June 2022, China carried out seven batches of VBP, with 294 categories being included.
With China gradually re-opening, SinoPharm should record accelerated growth in its pharma distribution business. With subsiding COVID-19 cases in Q3, SinoPharm reported 10% YoY and 8% QoQ revenue growth.


Sinopharm Group (1099 HK): Industry Tailwind and China Reopening To Drive Growth

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

China Resources Pharmaceutical / Equity Bottom-Up

<ul>
<li>The distribution business is stable, but it’s difficult to achieve high growth/profits due to industry trend. Therefore, the valuation of this business is hard to increase.</li>
<li>The performance of pharmaceutical manufacturing business is important, which largely determines the overall profit margin. But it actually depends on what the subsidiaries can contribute, who are facing different challenges.</li>
<li>China Resources Pharmaceutical may need to improve its vision of asset selection and its ability to judge and grasp the long-term trend of the industry. The current valuation isn’t attractive.</li>
</ul>


The distribution business is stable, but it’s difficult to achieve high growth/profits due to industry trend. Therefore, the valuation of this business is hard to increase.
The performance of pharmaceutical manufacturing business is important, which largely determines the overall profit margin. But it actually depends on what the subsidiaries can contribute, who are facing different challenges.
China Resources Pharmaceutical may need to improve its vision of asset selection and its ability to judge and grasp the long-term trend of the industry. The current valuation isn’t attractive.


China Resources Pharmaceutical (3320.HK) - Here Are the Concerns

Shanghai Pharmaceuticals Holding / Equity Bottom-Up

<ul>
<li>The majority revenue of Shanghai Pharmaceuticals comes from pharmaceutical distribution business, but the pharmaceutical manufacturing business has much higher gross margin,which drives up the overall profit margin of the Company.</li>
<li>Due to VBP, profit margin is under pressure. Weak demand for COVID-19 vaccines, decreasing long-term profitability and concerns on synergistic effect of cooperation with Yunnan Baiyao cast doubt on outlook.</li>
<li>Compared with peers, the valuation of Shanghai Pharmaceuticals doesn’t show decent upside potential. High valuation expectations cannot be supported due to industry trend. Its share prices could underperform.</li>
</ul>


The majority revenue of Shanghai Pharmaceuticals comes from pharmaceutical distribution business, but the pharmaceutical manufacturing business has much higher gross margin,which drives up the overall profit margin of the Company.
Due to VBP, profit margin is under pressure. Weak demand for COVID-19 vaccines, decreasing long-term profitability and concerns on synergistic effect of cooperation with Yunnan Baiyao cast doubt on outlook.
Compared with peers, the valuation of Shanghai Pharmaceuticals doesn’t show decent upside potential. High valuation expectations cannot be supported due to industry trend. Its share prices could underperform.


Shanghai Pharmaceuticals (2607.HK)- Low Profitability Is Big Problem; Share Price Would Underperform

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shanghai-pharmaceuticals-holding" target="_blank" data-smartkarma-citation="entities:228:1" rel="noopener">Shanghai Pharmaceuticals Holding (2607 HK)</a> reported strong result for the first nine months of 2022, with revenue increasing 8.5% to RMB174.6B. Notably, total revenue growth accelerated to 13% in 3Q22.</li>
<li>With a leading market positioning and nation-wide distribution network, the company is well-positioned to benefit from the sector tailwinds. Easing of restrictions will provide a major impetus to the company.</li>
<li>The company has been improving its innovative drug pipeline. It has 42 innovative products in its pipeline, six of which are in pivotal studies.</li>
</ul>



Shanghai Pharmaceuticals Holding (2607 HK) reported strong result for the first nine months of 2022, with revenue increasing 8.5% to RMB174.6B. Notably, total revenue growth accelerated to 13% in 3Q22.
With a leading market positioning and nation-wide distribution network, the company is well-positioned to benefit from the sector tailwinds. Easing of restrictions will provide a major impetus to the company.
The company has been improving its innovative drug pipeline. It has 42 innovative products in its pipeline, six of which are in pivotal studies.


Shanghai Pharmaceuticals (2607 HK): Stable Core Business; New Drug Approvals to Accelerate Growth

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>There are 28 changes for the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-index" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX)</a> at the upcoming rebalance that will be implemented at the close of trading on 9 June.</li>
<li>We had forecast nearly all the changes, though the index committee seems to have used discretion in deciding not to add three Distillers to the index, leading to other changes.</li>
<li>There's a large sector skew with Industrials, Information Technology and Materials stocks taking 17 more spots in the index, while Health Care and Financials lose 9 and 5 spots respectively.</li>
</ul>


There are 28 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 9 June.
We had forecast nearly all the changes, though the index committee seems to have used discretion in deciding not to add three Distillers to the index, leading to other changes.
There's a large sector skew with Industrials, Information Technology and Materials stocks taking 17 more spots in the index, while Health Care and Financials lose 9 and 5 spots respectively.


CSI300 Index Rebalance: Big Sector Shift with 28 Changes

China

Shanghai Pharmaceuticals Holding Co., Ltd. manufactures, retails, and wholesales a variety of pharmaceuticals including biopharmaceuticals, chemical and Chinese traditional medicines, and healthcare products. The Company also invests in new medicine development and provides related services.

Shanghai Pharmaceuticals Holding (2607 HK)

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Shanghai Pharmaceuticals Holding (2607 HK)

Sinopharm Group (1099 HK): Industry Tailwind and China Reopening To Drive Growth

SinoPharm’s acquisition of VBP varieties is in the leading position in the industry. As depicted by accelerating revenues in the first three...

Tina Banerjee

China Resources Pharmaceutical (3320.HK) - Here Are the Concerns

Pharmaceutical manufacturing business is the key to drive valuation,but the subsidiaries face challenge.CR Pharma should improve its vision of...

Xinyao (Criss) Wang

Shanghai Pharmaceuticals (2607 HK): Stable Core Business; New Drug Approvals to Accelerate Growth

SPH reported accelerated double-digit revenue growth in Q3. Sector tailwinds, easing of COVID restrictions, and rich pipeline of innovative drugs...

Tina Banerjee

CSI300 Index Rebalance: Big Sector Shift with 28 Changes

The June rebalance of the CSI300 Index will have 28 changes, a large sector skew, one-way turnover of 4.11% and a one-way trade of CNY 10bn. The...

Brian Freitas

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Sinopharm Group (1099 HK): Industry Tailwind and China Reopening To Drive Growth

SinoPharm’s acquisition of VBP varieties is in the leading position in the industry. As depicted by accelerating revenues in the first three...

Tina Banerjee

China Resources Pharmaceutical (3320.HK) - Here Are the Concerns

Pharmaceutical manufacturing business is the key to drive valuation,but the subsidiaries face challenge.CR Pharma should improve its vision of...

Xinyao (Criss) Wang

Shanghai Pharmaceuticals (2607.HK)- Low Profitability Is Big Problem; Share Price Would Underperform

Due to VBP, Shanghai Pharmaceuticals will face low margin. Weak COVID vaccine demand/uncertain synergistic effect of cooperation with Yunnan Baiyao...

Xinyao (Criss) Wang

Shanghai Pharmaceuticals (2607 HK): Stable Core Business; New Drug Approvals to Accelerate Growth

SPH reported accelerated double-digit revenue growth in Q3. Sector tailwinds, easing of COVID restrictions, and rich pipeline of innovative drugs...

Tina Banerjee

CSI300 Index Rebalance: Big Sector Shift with 28 Changes

The June rebalance of the CSI300 Index will have 28 changes, a large sector skew, one-way turnover of 4.11% and a one-way trade of CNY 10bn. The...

Brian Freitas