The result is lower than our expectation
In 1H20, Consun Pharma Group （CPG） achieved revenue of RMB766mn, down 18.6% YoY （43.0% of our FY20E expectation）； grossprofit margin was 74.6%, up 1.6 ppt, due to increased revenue fromhigh margin products; profit attributable to shareholders decrease19.9% YoY to RMB 209mn （44.1% of our FY20E expectation）。 Theresult is lower than our expectation due to the influence of COVID-19.
UCG maintain positive growth
Consun segment achieved revenue of RMB 664mn, a decrease of2.5% YoY, accounting for 86.7% of the group's total revenue; grossprofit margin increased 1.5 ppt to 81.4%. The Kidney medicinesachieved revenue of RMB 542mn and accounted for 70.8% of thegroup's total revenue in 1H20, an increase of 4.9% YoY, which mainproduct uremic clearance granules （UCG） is the key driver. Forwomen and children products, income in 1H20 was RMB 66mn, down15.6% YoY. Revenue from Contrast medium decreased 24.9% YoYto 52mn. Iopamidol Injection was officially used in clinical practice inApril this year. In the first three months of 1H20, 24 hospitals boughtIopamidol Injection and sold approximately 5,000 bottles. We expectfurther increase in income through the advantages of the group'smature sales network and quickly enter the front-line of clinical use.
Looking forward to Yulin’s restructuring effectsYulin segment contributed RMB 102mn in 1H20, a decrease of 60.9%YoY （up 57.8% HoH）， accounting for 13.3% of CPG's total revenue.
Gross profit margin decreased 24.8 ppts YoY to 30.2 %. Yulinsegment has been rectifying and implementing the "brand + channel+ terminal" strategy. The sales share of ZHENG GU SHUI inGuangdong and Guangxi increased by 1.38% and 1.45% YoY byplacing ads. Especially, Consun increased the number of first-leveldistributors to the terminal, and retained 2-3 in each province. Onlythe second-level distributors with terminal coverage capabilities wereretained to strengthen the terminal coverage.
Maintain BUY with new TP HK$6.0
We lower CPG's EPS forcast by 8.4%/4.3% in FY20E and FY21E aswe tuned down CPG's sales estimates by 8.7%/7.9% dragged byCOVID-19.
Consun is currently trading at 5.2x/4.5x FY20E/FY21E PE, comparedwith industry average at 10.0x/8.6x FY20E/FY21E PE. We maintainCPG at BUY with new TP HK$6.0, which translates to 10.2x/11.0xFY20E/FY21E PE.