HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Capital Markets

<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

Equity Bottom-Up

China Resources Pharmaceutical Group / Equity Bottom-Up

China Resources Pharmaceutical Group (3320 HK)

<ul>
<li>2022 was a turning point for China Resources Pharmaceutical (CRP), because performance of core subsidiaries saw a historic improvement.After China reopens, CRP is expected to achieve double-digit growth in 2023.</li>
<li>CRP’s development history indicates that its current scale/industry position are mainly due to continuous M&amp;A based on SOE resource advantages/background, but holding platform companies have valuation discounts in secondary market.</li>
<li>Different business models lead to different valuation logic. But Sinopharm/SH Pharma/CRP all enjoy SOE background dividends+valuation system with Chinese characteristics. If investors mainly focus on industry trend, they can all be invested.  </li>
</ul>


2022 was a turning point for China Resources Pharmaceutical (CRP), because performance of core subsidiaries saw a historic improvement.After China reopens, CRP is expected to achieve double-digit growth in 2023.
CRP’s development history indicates that its current scale/industry position are mainly due to continuous M&amp;A based on SOE resource advantages/background, but holding platform companies have valuation discounts in secondary market.
Different business models lead to different valuation logic. But Sinopharm/SH Pharma/CRP all enjoy SOE background dividends+valuation system with Chinese characteristics. If investors mainly focus on industry trend, they can all be invested.  


China Resources Pharmaceutical (3320.HK) - Growth Recovery and SOE Advantages Improve the Outlook

Shanghai Pharmaceuticals Holding / Equity Bottom-Up

Shanghai Pharmaceuticals Holding (601607 CH)

<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

Global Healthcare Analyst

Tina Banerjee

Shanghai Pharmaceuticals / Equity Bottom-Up

<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 16% YoY revenue growth to RMB66B in 1Q23, driven by 17% YoY growth in pharmaceutical service segment, which contributed 88% of revenue.</li>
<li>During the quarter, the company recorded net profit of RMB1.5B, up 21% YoY. Net margin expanded 9bps to 2.29%, driven by margin expansion in pharmaceutical manufacturing segment.</li>
<li>Consolidating position in pharma distribution business, surging pharmaceutical manufacturing business, late-stage innovative drug pipeline, and accelerating internationalization strategy enhance conviction on SPH’s ability to maintain double-digit growth through 2025.</li>
</ul>



Shanghai Pharmaceuticals Holding (2607 HK) reported 16% YoY revenue growth to RMB66B in 1Q23, driven by 17% YoY growth in pharmaceutical service segment, which contributed 88% of revenue.
During the quarter, the company recorded net profit of RMB1.5B, up 21% YoY. Net margin expanded 9bps to 2.29%, driven by margin expansion in pharmaceutical manufacturing segment.
Consolidating position in pharma distribution business, surging pharmaceutical manufacturing business, late-stage innovative drug pipeline, and accelerating internationalization strategy enhance conviction on SPH’s ability to maintain double-digit growth through 2025.


Shanghai Pharmaceuticals (2607 HK/601607 CH): Strong Start of 2023; Outlook Continues to Be Positive

<ul>
<li>The margins of pharmaceutical circulation B2B business is low. If there’s not enough incremental space of terminal customers, the simple B2B trading model is difficult to form a leapfrog growth.</li>
<li>Based on YSB’s business model, if terminal customers choose to use other platforms like JD Health/Alibaba Health, etc., YSB would face the risk of losing upstream and downstream users.</li>
<li>So far, we haven’t seen that YSB has established core competitiveness or moat to secure the terminal customers pool, casting doubts on its business model, investment logic and outlook.</li>
</ul>


The margins of pharmaceutical circulation B2B business is low. If there’s not enough incremental space of terminal customers, the simple B2B trading model is difficult to form a leapfrog growth.
Based on YSB’s business model, if terminal customers choose to use other platforms like JD Health/Alibaba Health, etc., YSB would face the risk of losing upstream and downstream users.
So far, we haven’t seen that YSB has established core competitiveness or moat to secure the terminal customers pool, casting doubts on its business model, investment logic and outlook.


Pre-IPO YSB Inc (YSB.HK) - The Business Model Is Facing Challenges

China

Sinopharm Group is a leading Chinese distributor and retailer of pharmaceutical and healthcare products, medical devices, and a supply chain service provider. The company also engages in the production and sale of pharmaceutical products, chemical reagents, and laboratory supplies. It was incorporated in January 2003 and is headquartered in Shanghai, China.

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Sinopharm Group (1099 HK)

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

China Resources Pharmaceutical (3320.HK) - Growth Recovery and SOE Advantages Improve the Outlook

China Resources Pharmaceutical is expected to achieve double-digit growth in 2023. Its SOE resource advantage/background are in line with China's...

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

Shanghai Pharmaceuticals (2607 HK/601607 CH): Strong Start of 2023; Outlook Continues to Be Positive

SPH recorded 16% and 21% revenue and net profit growth in 1Q23. Going ahead, macro tailwind, China re-opening, and strong pharmaceutical...

Tina Banerjee

Pre-IPO YSB Inc (YSB.HK) - The Business Model Is Facing Challenges

Terminal customers are key resources for YSB’s all businesses, but YSB hasn't built core competitiveness/moat to secure terminal customer pool....

Xinyao (Criss) Wang

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