Event:
The company announced in the evening of Jan 29, 2010: After preliminary estimation and calculation by finance department, the company’s accumulated actual net profit is ~Rmb195mn-215mn in 2009, and net profit attribute to owners of parent company sees year-on-year growth of ~67%-84%.
Our Analysis and Estimation:
1. Performance is beyond universal market anticipation.
Market estimation on the company’s 2009 EPS is consistently Rmb1.6; however, as shown in the announcement, 2009 EPS will reach Rmb1.72-1.89. It is obvious that growing capacity of the company is still under estimation despite optimistic anticipation.
2. Company performance is beyond expectation owing to manufacturing and operating status.
Company performance is higher than expectation, which is mainly due to 1) operation continued up trend in Q4 2009; 2) main products maintained steady growth; 3) profitability of the company boosted up.
We hold that continuous up trend of manufacturing and operation is mainly owing to sustainable and rapid growth of clopidogrel market.
Currently, domestic clopidogrel market is still dominated by two oligarches, thus the company’s growth is determined; the only problem is growing speed and fast growth duration. Judged from the current situation, acceleration is still beyond expectation; we believe duration will be also beyond expectation.
3. We think that the market holds excessive anxieties for clopidogrel market of next two years.
Market holds a concern that clopidogrel will see large change in market pattern, market share sharply drops and prices dramatically decline, which will affect growth of the company. We believe this opinion is proper, yet with excessive worries.
Investment Suggestion:
According to current information, we slightly increase earnings forecast and will make adjustment after annual report. We forecast 2009-2011E main operating income to be Rmb778.8342mn, 1039.84mn and 1378.829mn respectively; net profit to be Rmb204.232mn, Rmb291.1314mn and Rmb400.534; EPS to be Rmb1.80, Rmb2.57 and Rmb3.53; in addition, CAGR of annual revenue and net profit stands at 37.78% and 50.74% separately.
Competitiveness of segment market strengthens and sees high growth, thus premium valuation is necessary. Given 2010 PE ratio at 50x and corresponding share price of Rmb128.5; DCF (WACC=8.76, g=3%) = Rmb119.07, we hold that rational value to be Rmb119.07-128.50 in 12 months. “Recommended” rating is maintained and we suggest again the company be included as a core portfolio; long-term holding will bring growth benefit.