not vested
CSPC Pharmaceutical (1093 HK): Bitter pill to swallow now; focus medium term
CSPC Pharmaceutical Group [1093 HK] posted 3Q18 net earnings of HK$881m, below Bloomberg consensus estimate of HK$994m.
For the 9-month period, gross margin improved from 58.5% to 65.1%.
As 3Q18 were slightly below our expectations, we lowered our FY18 estimates from HK$3,845m to HK$3,625m, down 5.7%.
The China Healthcare sector was recently sold down due to impending policy changes which could affect some products, including 3 from CSPC.
Management has shared that its market shares for these 3 products are small and are unlikely to impact overall group sales.
With the de-rating of the sector, the sector is trading at about 31x 2-year blended earnings.
Earnings growth is projected at 30.8% this year and 25.9% next year.
Our fair value estimate for the stock is HK$20.35.
Source: OCBC