3 new biopharmaceutical drugs to be acquired The company has signed agreement to acquire 3 biopharmaceutical drugs from Beijing National Vaccine & Serum Institute (BNVSI). The agreement has been approved by NVSI’s parent company China National Biotech Group (CNBG). The final approval is needed from CNBG’s paren t company China National Pharmaceutical Group Corp. We expect the acquisition to be completed by the end of 2012.
TP and valuation We have revised our FY14- 15 EPS forecasts to HK$ 0.25/0.32 (prev. HK$ 0.24/0.30). We have also revised up EBIT margin assumption as we believe the launch of more biopharmaceutical drugs will increase GPM and EBIT margin. We have revised our TP to HK$ 2.60 (prev. HK$ 2.21). The stock is trading at only 12.1x FY13E P/E, which is undervalued relative to an FY13 -15 earnings CAGR of 28.8% (excluding one- time gain/loss) and sector average of 17.4x. Valuation is very attractive, maintain Buy.
Key assumptions Sales volume for human placenta blood albumin during FY14- 16 is 150,000/450,000/750,000 vials respectively.
How we differ from the market
New drug human placenta blood albumin holds large potential Among the 3 biopharmaceutical drugs to be acquired, we believe human placenta blood albumin holds large market potential and is likely to become a blockbuster drug soon after launch considering albumin has a market of more than RMB 7B with growth of over 30% in China in 2011 and high demand for albumin in hospitals and the shortage of blood supply in China. So far the factory for manufacturing human placenta blood albumin has completed roof-capping and orders for equipments have been placed, we estimate th e drug will be launched and start contributing profit in 2HFY14. The initial production capacity is 1M vials per year, based on management’s guidance, we expect sales volume of 150,000/450,000/750,000 vials during FY14-16, representing sales of HK$45M/135M /225M and net profit of HK$13.5M/40.5M/67.5M respectively during FY14- 16.
Catalysts Acquisition of 3 biopharmaceutical drugs is completed by the end of 2012.
Risks Acq