Event: Recently, Harbin Pharmaceutical Group proposed the 3rd round of share structure reform, which was overwhelmingly approved with 82.67% participated shareholders and 95.79% approval rate. The company released its interim report on Aug 30; in the first half, it realized operating revenue of core business, operating profit and net profit of Rmb5.20356bn, Rmb506.42mn and Rmb376.67mn respectively, representing yoy increment of 18.32%, 102.11% and 85.9%, EPS stood at Rmb0.30. Harbin Pharmaceutical Group will relist on Sep 4 after its three-year share reform.
Our analysis and estimation: Interim earnings enjoyed rapid growth. Operating profit increased 102.11% yoy, which was closely correlated with enhanced penicillin industry and the company’s advantageous industrial chains. Viewed from quarterly performance, EPS of Q4 2007 reached the stage summit of Rmb0.23. The company also showed worries on product price after penicillin industry capacities recovery in China; however, as an industries bellwether, structural adjustment and enlarged export would help increase earnings.
Organizational gambling entered into new stage. According to 2007 annual report, top ten circulating shares of the company occupied 64.85% of issued A shares, being number one in 106 listed pharmaceutical companies; share price of Harbin Pharmaceutical Group has become a directional indicator of the industry. Calculated by interim funds report, 31 holders held ~108.68mn shares (6.15mn shares by end 2007) and funds of average 4mn shares. Future development of the company will determine integrated long-term earnings of investors.
Earnings forecast and rating: We forecast 2008-2010E turnover be Rmb9.21bn, Rmb10.04bn and Rmb10.85bn respectively and net profit of Rmb705mn, Rmb765mn and Rmb831mn, translating into EPS of Rmb0.57, Rmb0.61 and Rmb0.67. Maintain “Cautious” rating for the counter.