Sihuan Pharma is currently focusing on five business platforms, which provide short- to long-term growth logic. 1) Sihuan Pharma is expected to speedily become a competitive player in China’s medical aesthetics industry, as it has already laid out mainstream injectables, supplemented with in-licensing of other advanced technologies and products. 2023 revenue/ net profit is expected to exceed RMB3 billion/ RMB1 billion, respectively, mainly supported by Botulinum toxin A (Letybo). 2) Innovative drugs and biologics will soon enter the harvest period and support medium- to long-term growth.
Innovative drugs such as PPI, CDK4/6i, sglt-2i and aminoglycoside antibiotics and third-generation insulins are expected to contribute revenue as early as in 2022, whose combined peak sales are expected to exceed RMB10 billion.3) Generic drug business is the major profit generating unit currently, which is expected to deliver double-digit growth in 2021-2023, supported by i) ramp-up of new products like Huineng, ii) new indication approval for Kelinao, iii) marketing of non-PVC solid-liquid double chamber bag products, and iv) 53 generic drugs with high-tech barriers to be launched in the near future, etc. 4) Sihuan Pharma is incubating APIs/ CDMO and industrial hemp business, bringing more growth potential in the future.
Adjust EPS projections for 2021-2023 to RMB0.094/ RMB0.149/ RMB0.253, respectively, primarily to update pipeline landscape and progress of all platforms. Lift TP to HK$4.33, which is based on SOTP valuation comprising innovative pipeline value of HK$1.06, generic pipeline value of HK$1.10, medical aesthetics and other business value of HK$1.70 and net cash value of HK$0.47; investment rating upgraded to "Buy".