Co.’s five A-share listed subsidiaries combined continued to deliver a solid results in 3Q （aggregated attributable NP +27% yoy）
But we noted these subsidiaries had mixed performance in 3Q
We revised down SOTP TP at HKD8.5. Valuation still attractive with solid FY22E growth & M&A potential. Maintain BUY
　　Mixed 3Q results across its A-share subsidiaries
　　Co.’s major manufacturing arms, mainly including five A-share listed subsidiaries, delivered an aggregate of RMB1,262mn attributable NP （+27% yoy） in 3Q. We calculated the aggregate NP attributable to CR Pharmaceutical was ~RMB600mn （+23% yoy）。 The solid earnings growth was mainly driven by robust aggregate revenue growth （+19% yoy to ~RMB8.7bn, o/w 9% from Boya consolidation）。 But these individual subsidiaries had mixed results in 3Q. Dong-E-E-Jiao （000423 CH, 3Q rev/core profit +7%/46% yoy） and CR Sanjiu （000999 CH, 3Q rev/core profit +11%/27% yoy） delivered a strong growth underpinned by recovery of consumer healthcare products and OTC drugs, while CR Double Crane （600062 CH, 3Q rev/core profit +0%/-15% yoy）， CR Jiangzhong （600750 CH, 3Q rev/core profit +45%/-26% yoy） and CR Boya （300294 CH, 3Q rev/core profit -5%/-13% yoy） as a result of near term COVID impacts and ongoing VBP headwinds. We revised down Co.’s manufacturing revenue to grow 16% yoy from 18% yoy in FY22E due to the mixed 3Q results and COVID uncertainty during winter season.
　　Remain in M&A mode; Innovation on track
　　We believe Co. is well positioned to leverage its SOE strength to pursue more M&A and BD opportunities （such as Genuine agreement and Boya acquisition）。 Meanwhile, Co. continued to advance its innovative transformation, such as a new joint laboratory for innovative drug research co-founded by CR Double Crane and the Institute of Materia Medica at Chinese Academy of Medical Sciences, and a comprehensive strategic cooperation between CR Biopharmaceutical and Biocytogen for the development of multiple target antibody drugs.
　　Valuation remains attractive, maintain BUY
　　We cut FY22E/23E earnings estimates by 5%/8% to reflect unfavourable trend of HKD/RMB rate （-~5% since end-Jun） and downward earnings revision. SOTP TP is revised down to HKD8.5 from HKD9.7. Co. now trades at ~7x 23E PER, near the lowest quantile in its historical PER band. Investment risks: lower-than-expected sales, etc.