Mgmt. expects Yulin’s years-long inventory destocking cycles likely to end in 2021E, preparing for regaining growth
　　Co. maintains its share buyback program and dividend policy, underpinned by rich net cash position （RMB1.1bn at YE21E）
　　We updated TP to HKD8.8 from HKD7.7. Maintain BUY on its inexpensive valuation, attractive div. yld. and share buyback plan
　　Kidney segment remains the key driver in 2021E
　　Mgmt. expects kidney segment will maintain a robust mid-teen growth in 2021E, thanks to its well-established chronic kidney disease （CKD） franchise in China and minimum GPO risk of its major kidney product, uremic clearance granules （UCG）。 Co. explained UCG is an exclusive TCM product and has not been included in the national and provincials’ key watch list for medical costs containment. In addition, Co. has completed evidence-based study for CKD patients with positive results, adding support to minimize the potential policy risks. Meanwhile, we forecast a broad sales recovery across its remainder of segments, adding more recovery strength in 2021E.
　　Legacy Yulin turnaround on track in 2021E
　　Legacy Yulin has improved its OTC channel inventory to 9mo in 2020 from 15mo in 2019. Mgmt. reaffirmed the channel inventory level remains on track to turn healthy during 2021E after year-long destocking efforts. Meanwhile, Co. has completed marketing restructuring in Legacy Yulin and extended its OTC channel reach through collaboration with major pharmacy chains and adoption of e- commerce for sale. We reckon the Yunlin turnaround will be the major re-rate catalyst in 2021E.
　　SOTP-based TP updated to HKD8.8; maintain BUY
　　We revised up FY21E/22E adj. EPS by 3%/3% to reflect the shrinking share base due to ongoing share repurchases. We lifted TP to HKD8.8 from HKD7.7 as we rolled forward 21E valuation base. We maintain BUY on Consun for its inexpensive valuation （6x/5x 21E/22E PER）， rich net cash position （RMB1.1bn at YE21E, ~30% of current mkt cap） and attractive capital allocation to shareholders （6% FY21E dividend yield and stock repurchase program）。