Daily Brief Health Care: Shenzhen New Industries Biomedical Engineering-A, UMP Healthcare, Pharmaessentia Corp and more

In today’s briefing:

CSI300 Index Rebalance Preview: Potential Adds Outperforming Despite ETF Inflows
UMP Medical (722 HK): Slow H124, Deep Value, Execution Remains Key
Pharmaessentia Corp (6446 TT): Readying for Next Growth Phase with Besremi’s Continued Traction

CSI300 Index Rebalance Preview: Potential Adds Outperforming Despite ETF Inflows

With 85% of the review period complete, we see 11 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) in June.
We estimate one-way turnover of 1.2% at the rebalance leading to a one-way trade of CNY 7.3bn (US$1bn). There are a lot of stocks with multiple days ADV to trade.
The potential adds have outperformed the potential deletes despite large flows from the National Team into ETFs tracking the CSI 300 Index. That support for the potential deletes will reverse.

UMP Healthcare (722 HK) delivered a slow start to FY24, with revenues up 2.3% YoY and profits down 63% YoY, due to sluggish demand in Hong Kong.
The company cut dividend for H1 FY24 by 25% to 1.3 HKD cents/share. Net cash on the balance sheet remained healthy at 265 mn HKD representing 64% of market capitalization.
The company is implementing stringent cost control and we believe that a slow turnaround and a 9-10% dividend yield is very probable at these levels.

Pharmaessentia Corp (6446 TT) starts 2024 on a strong note, with revenue for first two months rising 103% YoY to NT$1.1B. The company is expected to become profitable this year.
China approval of Besremi, which is expected this year, can be a major near-term catalyst. Indication expansion of Besremi in the U.S. is anticipated in next year.
Pharmaessentia’s revenue is forecast to grow at an average rate of 55% per annum over the next two years. The company’s pipeline is progressing, thereby enhancing visibility beyond Besremi.

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