not vested
CSPC: Best Chinese Pharmaceutical Stock?
By Isabella Zhong
Shares of CSPC Pharmaceutical Group (1093.HK) have rallied 35% over the past year but there could room for further upside.
Jefferies analyst Eugene Huang initiated coverage of the Hong Kong-based drug maker today with a buy rating and a HKD13 a share target price, which implies 31% upside.
CSPC is one of the first Chinese pharma leaders to transform from an API producer to a new drug innovator, and is well placed to reap the benefits.
Our Buy rating is based on strong EPS growth visibility led by NBP, oncology drugs, Vitamin C, and potential blockbusters like rE4 from 18/19.
We find CSPC well positioned with multiple policy benefits and an R&D pipeline to support long-term growth. We estimate 29% CAGR EPS growth in 16-19E with HK$13 target price.
Huang is the most bullish among analysts who cover CSPC although the stock is well-loved with an average buy rating.
Sales of CSPC’s oncology – or cancer – drugs grew 22% last year.
Huang expects the pace to pick up to an average 57% annually between 2017 and 2019 after drugs Jinyouli (PEG-rHG-CSF) and Nuolining (imatinib) were added to China’s national reimbursement drug list (NDRL) – a list of government-subsidized medications – earlier this year.
CSPC’s innovative NBP (butylphthalide) drug, which is used for treating acute ischemic strokes, is expected to continue to grow strongly.
Vitamin C has been a drag in CSPC’s earnings in recent years but the market is poised to recover on easing competition, tougher environmental restrictions in Hebei and improving exports.
CSPC is also set to deliver strong long-term growth given its impressive R&D pipeline, argues Huang.
CSPC has an extensive R&D pipeline with over 170 candidates, including 15 Class 1 drugs. Moreover, CSPC is also tapping into mAb research in the US.
We expect potential blockbuster drugs like albumin-bound paclitaxel and rE4 (GLP-1) to be launched in 18/19. We estimate new drugs to contribute HK$150m/300m sales in 18/19E.
CSPC shares are up 0.5% this morning against a 0.85% fall by the Hang Seng Index. The stock trades at 21 times forward earnings, which is in line with its five-year average.
Source: Barron's Asia
http://blogs.barrons.com/asiastocks/201 ... cal-stock/