HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

Sinopharm Group Co Ltd H / Equity Bottom-Up

<ul>
<li>Due to disappointing performance in 24Q1-Q3, both revenue and net profit attributable to the parent company in 2024 could face negative growth, but 2025 is expected to have positive growth.</li>
<li>As pharmaceutical distribution business can just maintain stable but medical device distribution business and retail pharmacies cannot contribute high growth, the overall performance of Sinopharm has lost growth momentum.</li>
<li>Due to longer payment cycles from hospitals and its business characteristics, Sinopharm is facing significant demands for working capital. Insufficient cash flow makes it difficult to increase the dividend rate.  </li>
</ul>


Due to disappointing performance in 24Q1-Q3, both revenue and net profit attributable to the parent company in 2024 could face negative growth, but 2025 is expected to have positive growth.
As pharmaceutical distribution business can just maintain stable but medical device distribution business and retail pharmacies cannot contribute high growth, the overall performance of Sinopharm has lost growth momentum.
Due to longer payment cycles from hospitals and its business characteristics, Sinopharm is facing significant demands for working capital. Insufficient cash flow makes it difficult to increase the dividend rate.  


Sinopharm Group Co Ltd (1099.HK) - Performance May Continue to Miss Expectations

Healthcare Equity Analyst - Emerging & Dev Markets, daaimon

Avien Pillay

Healthcare Equity Analyst - Emerging & Dev Markets

daaimon

daaimon is an independent research company focusing on healthcare and consumer sectors across developed and emerging markets. We produce insightful research which challenges conventional thinking. In particular, we look for new ideas by testing consensus forecasts and markets expectations.

<ul>
<li>Sinopharm will benefit from the strong expected growth in China’s healthcare spend.</li>
<li>There is scope to increase its distribution which will continue to shield the company from short-term volatility.</li>
<li>Pricing pressure in drug prices creates opportunity to optimise range and improve profitability.</li>
</ul>


Sinopharm will benefit from the strong expected growth in China’s healthcare spend.
There is scope to increase its distribution which will continue to shield the company from short-term volatility.
Pricing pressure in drug prices creates opportunity to optimise range and improve profitability.


Sinopharm (1099 HK) - A Compelling Investment Case

Derivatives and Quantitative Strategist

Gaudenz Schneider

China Construction Bank H / Equity Bottom-Up

<ul>
<li>The Hong Kong earnings season enters its final week with at least 17 <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hang Seng Index</a> companies reporting their 2024 results and announcing dividends.</li>
<li>The proportion of companies reporting in the coming week and the week after is significant at an index level, with notable weightings in the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">HSI</a>, <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">HSCEI</a>, and <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">HS TECH </a>indices.</li>
<li>Opportunities to profit from price movement around earnings are manifold and include event-focused trading, statistical arbitrage, hedging, and capitalizing on changes in dividends and implied volatility.</li>
</ul>


The Hong Kong earnings season enters its final week with at least 17 Hang Seng Index companies reporting their 2024 results and announcing dividends.
The proportion of companies reporting in the coming week and the week after is significant at an index level, with notable weightings in the HSI, HSCEI, and HS TECH indices.
Opportunities to profit from price movement around earnings are manifold and include event-focused trading, statistical arbitrage, hedging, and capitalizing on changes in dividends and implied volatility.


Hong Kong Earnings in the Week Commencing March 24

<ul>
<li>2024 would be the low point in performance/valuation of Sinopharm. Due to the low base in 2024, revenue/net profit in 2025 is expected to rebound (e.g. high single-digit positive growth).</li>
<li>Declining financial cost ratio is key driving force for profitability.Since the Fed would cut interest rate, a low interest rate environment helps Sinopharm reduce financial costs, thereby increasing profit margin.</li>
<li>Since China hopes to establish a valuation system with Chinese characteristics, it would help drive up valuation of SOEs.Thus, there’s valuation repair opportunity for Sinopharm (e.g. P/E return to 8).</li>
</ul>


2024 would be the low point in performance/valuation of Sinopharm. Due to the low base in 2024, revenue/net profit in 2025 is expected to rebound (e.g. high single-digit positive growth).
Declining financial cost ratio is key driving force for profitability.Since the Fed would cut interest rate, a low interest rate environment helps Sinopharm reduce financial costs, thereby increasing profit margin.
Since China hopes to establish a valuation system with Chinese characteristics, it would help drive up valuation of SOEs.Thus, there’s valuation repair opportunity for Sinopharm (e.g. P/E return to 8).


Sinopharm Group (1099.HK) - Don't Waste the Low Point of Performance, Valuation Will Bounce Back

Global Healthcare Analyst

Tina Banerjee

<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> reported YoY and sequential growth in revenue and net profit in 4Q23. However, outlook for the sector remains bleak in near-term.</li>
<li>Last year, Sinopharm’s distribution business was impacted by anti-corruption campaign. The momentum of the campaign continues in this year also. This lowers conviction toward improving performance in 1H24 at least.</li>
<li>Despite of mid-single digit revenue growth, Sinopharm’s margin remains stagnant or is declining. Sinopharm still earns more than 70% revenue from low margin earning pharmaceutical distribution business.</li>
</ul>



Sinopharm Group Co Ltd H (1099 HK) reported YoY and sequential growth in revenue and net profit in 4Q23. However, outlook for the sector remains bleak in near-term.
Last year, Sinopharm’s distribution business was impacted by anti-corruption campaign. The momentum of the campaign continues in this year also. This lowers conviction toward improving performance in 1H24 at least.
Despite of mid-single digit revenue growth, Sinopharm’s margin remains stagnant or is declining. Sinopharm still earns more than 70% revenue from low margin earning pharmaceutical distribution business.


Sinopharm Group (1099 HK): Sequential Recovery in 4Q23; Bleak Near-Term Outlook

China

Sinopharm Group Co Ltd is a pharmacy distribution company. The Company also owns several pharmacy enterprise groups in different industries such as logistics, retail stores, pharmaceutical manufacturing, and chemical testing.

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Sinopharm Group Co Ltd H (1099 HK)

Sinopharm Group Co Ltd (1099.HK) - Performance May Continue to Miss Expectations

Sinopharm's disappointing results in 2024Q1-Q3 may see negative growth for the whole year, but 2025 is expected to rebound. Pain points lies in...

Xinyao (Criss) Wang

Sinopharm (1099 HK) - A Compelling Investment Case

Sinopharm is well positioned to benefit from China’s expected strong growth in healthcare spend. The investment case is further strengthened by a...

daaimon

Hong Kong Earnings in the Week Commencing March 24

The Hong Kong earnings season wraps up with 17 Hang Seng Index companies reporting 2024 results and dividends, offering various profit...

Gaudenz Schneider

Sinopharm Group (1099.HK) - Don't Waste the Low Point of Performance, Valuation Will Bounce Back

Sinopharm's performance would rebound in 2025 due to low base in 2024, driven by declining financial cost ratio/SOE valuation repair...

Xinyao (Criss) Wang

Sinopharm Group (1099 HK): Sequential Recovery in 4Q23; Bleak Near-Term Outlook

Sinopharm reported revenue and profit growth in 4Q23, but sector outlook remains bleak due to anti-corruption campaign. Subdued revenue growth and...

Tina Banerjee

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Sinopharm Group Co Ltd (1099.HK) - Performance May Continue to Miss Expectations

​Sinopharm's disappointing results in 2024Q1-Q3 may see negative growth for the whole year, but 2025 is expected to rebound. Pain points lies in...

Xinyao (Criss) Wang

Sinopharm (1099 HK) - A Compelling Investment Case

Sinopharm is well positioned to benefit from China’s expected strong growth in healthcare spend. The investment case is further strengthened by a...

daaimon

Hong Kong Earnings in the Week Commencing March 24

​The Hong Kong earnings season wraps up with 17 Hang Seng Index companies reporting 2024 results and dividends, offering various profit...

Gaudenz Schneider

Sinopharm Group (1099.HK) - Don't Waste the Low Point of Performance, Valuation Will Bounce Back

​Sinopharm's performance would rebound in 2025 due to low base in 2024, driven by declining financial cost ratio/SOE valuation repair...

Xinyao (Criss) Wang

Sinopharm Group (1099 HK): Sequential Recovery in 4Q23; Bleak Near-Term Outlook

​Sinopharm reported revenue and profit growth in 4Q23, but sector outlook remains bleak due to anti-corruption campaign. Subdued revenue growth and...

Tina Banerjee

Sinopharm's disappointing results in 2024Q1-Q3 may see negative growth for the whole year, but 2025 is expected to rebound. Pain points lies in...

The Hong Kong earnings season wraps up with 17 Hang Seng Index companies reporting 2024 results and dividends, offering various profit...

Sinopharm's performance would rebound in 2025 due to low base in 2024, driven by declining financial cost ratio/SOE valuation repair...

Sinopharm reported revenue and profit growth in 4Q23, but sector outlook remains bleak due to anti-corruption campaign. Subdued revenue growth and...