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Friday, 31 March 2017

Tianjin Zhongxin Pharmaceutical Group

31/3/2017
Accumulate:
  1. Attractive valuation PE ~12 for level of growth
  2. Decent dividend yield ~3.5%
  3. Established TCM business in China with strong products, coupled with Western Pharma exposure
Metrics
  • Last done (as of 31/3/2017): S$0.99
  • PE ~12, PB ~1.33
  • Revenue CAGR ~10%, Earnings CAGR ~12%
  • Total Debt to Equity 13.66%
  • Dividend yield 3.5%, Dividend CAGR ~8%
  • ROE 13.4%, ROA 7.9%
Operations
  • Traditional China medicine focused manufacturer and developer - 60% TCM and 30% western pharmaceutical products through cooperation with foreign companies
  • Owns 560 varieties of preparations in 17 types, 587 certificates of approval for preparations, and 9 certificates of approval for crude drugs. Among them, 4 Chinese medicines have been honored as National Treasure-like creations
  • Products have also been exported to more than 30 countries
  • R&D focused - The Company completed application of 38 invention patents, 9 utility model patents and 9 exterior design patents during the year and 11 invention patents were approved in the year 2015
Growth story
  • No concrete growth strategy stated other than more medicinal innovation
Risks
  • RMB depreciation - profits in RMB
  • Products lose demand, competition etc.
  • Western pharmaceutical segment affected by geopolitical factors 
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