Unjustifiably low valuation despite solid fundamentals
Consun’s Iron Dextran （ID） product, YuanLiKang, has lately entered 2018 EDL. Company expected the product to deliver 30% revenue growth, being the exclusive oral solution, driven by the market share gain from the ID tablets
Meanwhile, we now expect the Yulin products’ ASP hikes to be more gradual than expected, but such effect should hardly affect 2018 earnings
We slightly revised our 2018/19E EPS by -0.1%/+0.7%, and continue to highlight Consun’s attractive valuation （7x 2019 PER vs peer’s average 14x; 15% mkt cap now in cash） and high FY18E dividend yield （4%）； TP unchanged at HK$11.95; maintain BUY
Consun’s exclusive Iron Dextranoral solution entered 2018 EDL
NHC has lately added two administration forms of iron dextran, the injection and the oral solution, to 2018 EDL. According to Menet, China’s ID market size was RMB c.340mn in 2017, which mainly occupied by three players, namely Jiangxi Huatai （41% market share, all in tablets）， Solupharm （34%, all in injection） and Consun （22%, in exclusive oral solution）。 We expect Consun’s ID sales to grow 25% in 2019E （vs 15% before）， on the back of the greater market penetration （now entering the national reimbursement market vs two PRDLs before） and potential market share gain from ID tablets （not in the EDL）。
Yulin’s ASP contributionmore gradual than expected
We now expect the Yulin products’ ASP hikes to be more gradual than expected. We thus trimmed our sales forecast by 2.2%/1.6% in 2018E/19E, but left FY18 adj. NP largely unchanged to reflect the also lowering selling expenses.
Significant valuation upside
Consun is now trading at 7x 2019E PER vs HK listed peers’ 14x, rendering a dividend yield of 4% （mgmt. reaffirmed its 30% of pay-out ratio）。 We also flag its strong capital allocation flexibility for any potential M&A, noting its rich net cash （RMB760mn at end 2018E, 15% of current market cap）。 Our SOTP-based TP at HK$11.95 （16x 2019E PER） suggests 125% upside.