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.

Equity Bottom-Up

Sinopharm Group Co Ltd H / Equity Bottom-Up

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.

<ul>
<li>We expected growth to improve, however, on the contrary growth has slowed, and there seem to be limited short to medium term positive catalysts.</li>
<li>Pricing pressure is still a problem, and competition is intense especially in the fragmented medical device market.</li>
<li>Given the relatively low growth outlook, and the fact that Sinopharm is largely a distribution model, we see limited opportunity for the company to re-rate from the current level.</li>
</ul>


We expected growth to improve, however, on the contrary growth has slowed, and there seem to be limited short to medium term positive catalysts.
Pricing pressure is still a problem, and competition is intense especially in the fragmented medical device market.
Given the relatively low growth outlook, and the fact that Sinopharm is largely a distribution model, we see limited opportunity for the company to re-rate from the current level.


Sinopharm Group (1099 HK) – Downgrade to a Sell

Daiichi Sankyo Co, Ltd is a holding company established through merger of Sankyo and Daiichi pharmaceutical. The Group manufactures pharmaceuticals for human/veterinary use and medical tools and equipment. It also researches and promotes products through related companies throughout the world. The Group also produces food, food additives, livestock feeds, and agrochemicals.

<ul>
<li>We were correct not buying at a 51 FPE (at the top), despite our bullish view on their oncology portfolio of drugs.</li>
<li>With hindsight, we were early at the end Oct 2024 at 39 FPE – numbers disappointed and the counter derated significantly.</li>
<li>At a 16.5 FPE, expectations are very different. Enhertu has moved from strength to strength and has just achieved its first billion dollar quarter.</li>
</ul>


We were correct not buying at a 51 FPE (at the top), despite our bullish view on their oncology portfolio of drugs.
With hindsight, we were early at the end Oct 2024 at 39 FPE – numbers disappointed and the counter derated significantly.
At a 16.5 FPE, expectations are very different. Enhertu has moved from strength to strength and has just achieved its first billion dollar quarter.


Daiichi Sankyo (4568 JP) – Were We Too Early in Oct 2024?

Celltrion Inc. produces and sells biosimilar products and also provides consignm ent processing service for other companies.  The Company's main product is Abata cept which is for arthritis treatment

<ul>
<li>Celltrion Inc has significant underperformed over the last year and experienced a big derating.</li>
<li>Good results, but the numbers fell short of expectations due to the large biosimilar hype.</li>
<li>Outlook over the next five years is very promising, with its revenue target market value expected to almost double.  </li>
</ul>


Celltrion Inc has significant underperformed over the last year and experienced a big derating.
Good results, but the numbers fell short of expectations due to the large biosimilar hype.
Outlook over the next five years is very promising, with its revenue target market value expected to almost double.  


Celltrion Inc Update – Is It Time to Go Long (068270 KS)

The United Laboratories International Holdings Limited / Equity Bottom-Up

The United Laboratories International Holdings Limited produces and distributes pharmaceutical products. The Company's products include finished products, APIs, intermediates, and capsules.

The United Laboratories International Holdings Limited (3933 HK)

The United Laboratories International Holdings Limited

<ul>
<li>Despite its 96% price appreciation since our initiation, United Laboratories is still trading on a 8.7 FPE, and a 5.5 EV/EVITDA.</li>
<li>A US FDA GLP-1 approval and a potential $ 1.8bn deal with Novo Nordisk demonstrates its successful diabetes and obesity strategy.</li>
<li>With over 80 drugs in the pipeline to be delivered over the next five years, we believe that TUL is about to experience a very material increase in topline growth.</li>
</ul>


Despite its 96% price appreciation since our initiation, United Laboratories is still trading on a 8.7 FPE, and a 5.5 EV/EVITDA.
A US FDA GLP-1 approval and a potential $ 1.8bn deal with Novo Nordisk demonstrates its successful diabetes and obesity strategy.
With over 80 drugs in the pipeline to be delivered over the next five years, we believe that TUL is about to experience a very material increase in topline growth.


The United Laboratories International Holdings (TUL) Ltd (3933 HK) - Retain Buy

China Medical System Holdings Limited manufactures pharmaceutical and medical products primarily in China.

<ul>
<li>Since our <a href="https://www.smartkarma.com/insights/update-china-medical-system-cms-867-hk-a-cheap-play-on-china-s-pending-health-care-crisis" target="_blank" rel="noopener">initiation on 5 June 2024</a>, China Medical Sytem’s share price is up 113% and the FPE has moved from less than 8 to close to 16 times.</li>
<li>The gap valuation between US drug companies and CMS has largely closed with CMS trading at a premium to a number of US counterparts.</li>
<li>The earnings outlook is largely flat since the initiation, implying the share price appreciation has been driven by a re-rating.</li>
</ul>


Since our initiation on 5 June 2024, China Medical Sytem’s share price is up 113% and the FPE has moved from less than 8 to close to 16 times.
The gap valuation between US drug companies and CMS has largely closed with CMS trading at a premium to a number of US counterparts.
The earnings outlook is largely flat since the initiation, implying the share price appreciation has been driven by a re-rating.


China Medical System (867 HK) – From an 8 to a 16 FPE

A multi-skilled investment professional with 20+ years’ experience in the developed and emerging markets across all sectors, and a strong focus on healthcare. Most of my time has been spent as a buyside and independent equity analyst. My approach is a combination of bottom-up and top-down analysis, with a strong bias to qualitative analysis.