Consun segment achieved steady growth
　　In FY19, Consun Pharma Group (CPG) achieved revenue of RMB1,728mn, down 6.3% YoY (86.5% of our FY19E expectation); grossprofit margin was 73.0%, a decrease of 2.1 ppt; profit attributable toshareholders down 82.8% YoY to RMB 80mn (16.2% of our FY19Eexpectation). If excluding the impairment of non-cash goodwill andintangible assets of approximately RMB326 mn, the adjusted profitattributable to shareholders would decrease by 13.2% YoY. Theresult is lower than our expectation due to poor performance of Yulinsegment.
　　Consun Pharm segment achieved revenue of RMB 1,403mn, anincrease of 15.1% YoY, accounting for 81.2% of the group's totalrevenue; gross profit margin remained stable at 79.7%. The mainproduct uremic clearance granules (UCG) achieved revenue of RMB1,062mn and accounted for 61.5% of the group's total revenue inFY19, an increase of 14.4% YoY. In terms of women and childrenproducts, income in FY19 was RMB 170mn, an increase of 30.4%YoY. Revenue from gadopentetate dimeglumine injection increased9.2% YoY to 140mn. For imaging products, Iopamidol Injection wasgranted the drug registration approval and Consun is making effortsto expedite the launch of Iopamidol Injection in the market, which isexpected to be a new driver for the group’ s profit growth in 2020. Thegroup said it would try its best to achieve 100 mn sales within twoyears.
　　Weak Yulin segment
　　Yulin Pharm segment contributed RMB 324mn in FY19, a decrease of51.9% YoY, accounting for 17.6% of CPG's total revenue. Grossprofit margin decreased 21.2 ppt YoY to 44.1%, which was mainlydue to rising raw material costs and poor product price maintenance.
　　Management stated that Yulin will complete the restructure of channeland product pricing, and the initial effect of the adjustment has beenseen in 2020.
　　Maintain BUY with new TP HK$6.25
　　We lower CPG's EPS forcast by 10.6%/7.6% in FY20E and FY21E aswe tuned down CPG's sales estimates by 17.7%/16.4% dragged byYulin’s restructure.
　　Consun is currently trading at 5.8x/5.1x FY20E/FY21E PE, comparedwith industry average at 9.8x/8.4x FY20E/FY21E PE. We maintainCPG at BUY with new TP HK$6.25, which translates to 10.0x/8.8xFY20E/FY21E PE (par to peer’s average).