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1、Deutsche Bank Markets Research Asia China Health Care Health Care Industry China Health Care Date 27 October 2012 Results 3Q12 preview: Expect a quarter of delivery Anticipating solid fundamentals in 3Q12 _ Deutsche Bank AG/Hong Kong All prices are those current at the end of the previous trading se
2、ssion unless otherwise indicated. Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware th
3、at the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 072/04/2012. Jack Hu, Ph.D Resear
4、ch Analyst (+852) 2203 6208 Top picks Sino Biopharmaceutical (1177.HK),HKD2.95 Buy The United Laboratories (3933.HK),HKD4.10 Buy Mindray Medical (MR.N),USD33.91 Buy WuXi PharmaTech (WX.N),USD14.36 Buy Companies Featured Sino Biopharmaceutical (1177.HK),HKD2.95 Buy 2011A 2012E 2013E P/E (x) 20.119.2
5、16.3 EV/EBITDA (x) 8.98.26.9 Price/book (x) 3.03.43.1 The United Laboratories (3933.HK),HKD4.10 Buy 2011A 2012E 2013E P/E (x) 121.221.317.0 EV/EBITDA (x) 19.68.97.6 Price/book (x) 1.11.01.1 Mindray Medical (MR.N),USD33.91 Buy 2011A 2012E 2013E P/E (x) 16.818.816.7 EV/EBITDA (x) 11.512.410.6 Price/bo
6、ok (x) 2.63.02.6 WuXi PharmaTech (WX.N),USD14.36 Buy 2011A 2012E 2013E P/E (x) 12.010.89.6 EV/EBITDA (x) 7.05.34.3 Price/book (x) 1.51.71.4 We expect most companies to meet Street consensus for this earnings season, as demand growth continues to be strong. We anticipate revenue upside for Sino Bioph
7、arm and slight weakness for Biosensors. We highlight our Buy-rated names, including Sino Biopharm (1177.HK), Shineway (2877.HK), Mindray Medical (MR.N) and Wuxi PharmaTech (WX.N). Mindray: solid name, export weakness expected, but could be partially offset We anticipate USD264M/0.440 for revenue/EPS
8、, respectively, for 3Q12, vs. USD262M/0.442 for Street consensus, respectively. We highlight that 1) strong demand growth at the hospital level is likely to support domestic growth momentum for MR, which may partially offset the expected weakness in exports, as domestic profitability is higher than
9、exports; 2) export weakness is expected due to weak Shenzhen custom data; and 3) stable OPM vs. 2Q12 is expected, according to management guidance. Sino Biopharm: expecting 3Q12 upside We anticipate HKD2,095M/0.042 for revenue/EPS, respectively, for 3Q12, vs. HKD1,985/0.042 for Street consensus, res
10、pectively. We highlight that 1) our due diligence suggested better growth in 3Q12 vs. 2Q12 for four primary revenue drivers, including Kaishi, Mingzhen, Ganmei and Runzhong; and 2) the RDL tender is back on track after a five-month delay; however, we expect modest price erosion in the mid-single-dig
11、its to low teens. Expecting stock performance to diverge Trading at 16x Deutsche Bank 2013E EPS for our coverage universe, we believe stock performance is likely to diverge, as we model 13% growth for 2013E EPS. We also increase our target price for United Lab to HKD 4.4 from HKD 4.10, based on 18x
12、2013E EPS. For the near term, we anticipate relatively weaker fund inflow into healthcare vs. 1H earning season, as sentiment for China growth has improved. For long-term investors, we highlight our top picks for solid fundamentals, including Mindray, Shineway and Sino Biopharm. Industry risks relat
13、e mainly to government policies and regulatory changes in China, in particular healthcare reforms, which could negatively affect pricing, volume and reimbursements. Additional risks generally relate to rising raw material costs and over-exposure to the EDL and RDL. 27 October 2012 Health Care China
14、Health Care Page2 Deutsche Bank AG/Hong Kong Table Of Contents 3Q12 sector preview 3 Healthy top-line growth; margin erosion likely to continue . 3 Risk/reward still favors a long position 3 3Q12/2H12 sector review . 4 Company preview summary 5 27 October 2012 Health Care China Health Care Deutsche
15、Bank AG/Hong Kong Page3 3Q12 sector preview Healthy top-line growth; margin erosion likely to continue We anticipate better YoY revenue growth in 3Q12 than 2Q12 for the pharmaceutical and medical device sectors, primarily because of robust demand growth YTD. We anticipate better YoY revenue growth i
16、n 3Q12 than 2Q12 for the pharmaceutical and medical device sectors, primarily because of robust demand growth YTD. Notably, inpatient and outpatient volume growth was 18% and 12%, respectively, for YTD August 2012, vs. 4% and 11% YoY for the same period in 2011. We believe demand growth will continu
17、e to materialize as drug/medical consumable/device growth. In addition, 3Q could be a light season for selective subsectors, such as antibiotics and medical device exports. For 3Q12, we highlight the possibility that drug manufacturers will increase ex-manufacturing prices for products that are sold
18、 through third-party marketers. As such, we advise investors to delineate top-line growth. In an ideal world, we would compare drug growth at the end-user level (hospital drug sales) vs. reported growth, to gauge growth sustainability. Operating margin erosion is likely to continue, due to continuou
19、s pricing pressure and increasing spending on sales and marketing. Operating margin erosion is likely to continue, due to continuous pricing pressure and increasing spending on sales and marketing. On an apple-to-apple basis, we think 3Q12 is likely to be the last quarter for significant GM erosion.
20、 Going into 4Q12, we may have a relatively stable margin or less GM erosion due to an easy comp. On OP margin, it is unlikely operating efficiency improvement could offset GM erosion. In addition, as more drug companies have started to increase ex-manufacturing prices, near-term GM improvement and f
21、urther OP margin erosion is likely. As such, we would exercise caution on this front in 3Q12 and the following few quarters. We expect the quality of the earnings to continue to deteriorate, as AR becomes more challenging to manage. With healthcare reform being pushed further, we anticipate most pol
22、icies will lead to AR prolongation, as hospital revenue generation faces unprecedented pressure. Risk/reward still favors a long position We believe the risk/reward continues to favor a long position on the sector. We think investors are likely to gain more conviction on the sector upon 3Q12 deliver
23、y, as 1H12 only signified the return of confidence after a temporary setback due to policy pressure. However, we think the sector is unlikely to appreciate significantly upon 3Q12 results as it did in 1H12 earning season, given 1) the Street has largely raised estimates for 3Q12 and 2013; 2) it has
24、a relatively rich valuation at present; and 3) the potential fund outflow from the healthcare sector due to the most recent signals for the China recovery. We highlight our Buy-rated stocks, including Sino Biopharm (1177.HK), Shineway (2877.HK), Mindray Medical (MR.N) and Wuxi PharmaTech (WX.N). Chi
25、na Health Care Health Care 27 October 2012 Page4 Deutsche Bank AG/Hong Kong 3Q12/2H12 sector review Figure 1: 2H12/3Q12 earnings preview Company Name Company Name Ticker Ticker Mkt Cap Mkt Cap (LC mn) (LC mn) Rating Rating Revenue Revenue (mn) (mn) EPS EPS What to focus on for 3Q/2H What to focus on
26、 for 3Q/2H 3Q / 2H DBe 3Q / 2H Consensus 3Q / 2H DBe 3Q / 2H Consensus Sihuan Pharmaceutical 0460.HK 15,784 Buy 1,944 1,665 0.101 0.100 1. Tender progress for Oudimei, as well as inventory destocking; 2. Organic growth for key franchises Kelinao and Anjieli; 3. Sustainability for cardio-cerebral vas
27、cular drugs beyond 2012, including GM1, Oudimei, and Oudejing at end user level. United Laboratories 3933.HK 6,947 Buy 3,904 3,750 0.080 0.070 1. 6-APA/7-ACA prices; 2) antibiotic sector recovery progress; 3. Working capital requirement for 2H12 and 2013; 4. Ramp up schedule for Inner Mongolia capac
28、ity expansion; 5. Margin improvement (OPM) in 2H12. Sino Biopharmaceutical 1177.HK 14,429 Buy 2,095 1,985 0.042 0.042 1. Growth sustainability for four largest products, as we have seen better growth in 3Q12 vs. 2Q12 at hospital level; 2. Pricing pressure on Kaishi, Ganmei, Mingzheng, as RDL tender
29、is back on track; 3. Pipeline progress and launch schedule; 4. ROI on sales force expansion. China Shineway 2877.HK 10,238 Buy 1,177 1,128 0.430 0.440 Reported already. 1. More color on individual product sales needed to increase visibility/investor confidence; 2. Sustainability of volume recovery o
30、n QKL and Shenmai; 3. Progress and ROI on sales channel restructuring; 4. Potential price cut on Shenmai on ex- manufacturing level; 5. Potential inclusion of any new drug on the new EDL list. Shanghai Pharmaceuticals 2607.HK 38,864 Hold 34,741 34,741 0.360 0.360 1. Market share gain/loss on distrib
31、ution business by geographical regions and the drivers behind it; 2. Impact of integration on manufacturing side; 3. Delineate one-time gains from GAAP income, including asset sales; 4. Organic growth vs. acquired growth vs. growth derived from increasing ex-manufacturing prices Mindray Medical MR.N
32、 3,931 Buy 264 262 0.440 0.442 1. Outlook for international growth, as well as MRs risk mitigation strategy; 2. Sustainability of the growth momentum in China, as MR grows faster than industry average and domestic peers; 3. Pipeline and new product launch schedule; 4. Impact of FX. WuXi PharmaTech W
33、X.N 1,022 Buy 125 113 0.310 0.289 1. Ramp up of the new services and acquired business; 2. Outlook on CMO business as Incovek growth moderates; 3. Impact of FX and labour inflation. Biosensors International BISO.SI 1,996 Buy 88 83 0.017 0.017 1. Royalty revenue growth in Japan and EU respectively, a
34、s we expect weakness in 3Q12; 2. Pricing trend and volume growth in China and ex-China; 3. Terms for contract renewal with Terumo; 4. Progress on business development Source: Deutsche Bank; Bloomberg Finance LP; Note: We are restricted on two large cap names; therefore, we cannot comment here. 27 Oc
35、tober 2012 Health Care China Health Care Deutsche Bank AG/Hong Kong Page5 Company preview summary For Sino BiopharmSino Biopharm, we anticipate EPS reaching HKD0.042 in 3Q12, in line with consensus, and 3Q revenue of HKD2.10bn vs. consensus of HKD1.99bn. For 2012E, we expect EPS/revenue of HKD0.154/
36、7.8bn vs. consensus of HKD0.151/7.8bn, respectively. We have a Buy rating for Sino Biopharm. The company will report its 3Q12 results in mid-November. For Shanghai PharmaShanghai Pharma, we anticipate EPS reaching RMB0.36 and revenue of RMB34.7bn in 2H12, in line with consensus. For 2012E, we expect
37、 EPS/revenue of RMB0.75/RMB68.4bn vs. consensus of RMB0.76/RMB66.8bn, respectively. We have a Hold rating for Shanghai Pharma. The company will report its 3Q12 results on 30 October. For Mindray MedicalMindray Medical, we anticipate EPS reaching USD0.440 in 3Q12 vs. consensus of USD0.442 and 3Q reve
38、nue of USD264m vs. consensus of USD262m. For 2012E, we expect EPS/revenue of USD1.81/USD1.07bn vs. consensus of USD1.75/USD1.06bn, respectively. We have a Buy rating for Mindray Medical. The company will report its 3Q12 results on 5 November, and its conference call is on 6 November at 8:00am ET, 9:
39、00pm Hong Kong. ShinewayShineway reported a 3Q12 top line of RMB503M with growth of 24%. We anticipate EPS reaching RMB0.43 in 2H12 vs. consensus of RMB0.44 and 2H revenue of RMB1.2bn vs. consensus of RMB1.1bn. For 2012E, we expect EPS/revenue of RMB0.86/RMB2.18bn vs. consensus of RMB0.87/RMB2.10bn,
40、 respectively. We have a Buy rating on Shineway. For United LabUnited Lab, we anticipate EPS reaching HKD0.080 in 2H12 vs. consensus of HKD0.07 and 1H revenue of HKD3.9bn vs. consensus of HKD3.8bn. For 2012E, we expect EPS/revenue of HKD0.13/HKD7.6bn vs. consensus of HKD0.16/HKD7.3bn, respectively.
41、We have a Buy rating on United Lab. For Wuxi PharmaWuxi Pharma, we anticipate EPS reaching USD0.31 in 3Q12 vs. consensus of USD0.289 and 3Q revenue of USD125m vs. consensus of USD113m. For 2012E, we expect EPS/revenue of USD1.33/USD501m vs. consensus of USD1.27/USD497m, respectively. We have a Buy r
42、ating on Wuxi Pharma. It will report its 3Q12 results on 12 November ET, 13 November in Hong Kong, and its conference call is on 13 November at 8:00am ET, 9:00pm in Hong Kong. For Sihuan PharmaSihuan Pharma, we anticipate EPS reaching RMB0.10 in 2H12, in line with consensus, and 2H revenue of RMB1.9
43、4bn vs. consensus of RMB1.66bn. For 2012E, we expect EPS/revenue of RMB0.188/RMB3.3bn vs. consensus of RMB0.184/RMB3.0bn, respectively. We have a Buy rating for Sihuan Pharma. We anticipate Biosensors Biosensors EPS reaching USD0.017 in FY2Q13, in line with consensus, and 2H revenue of USD88m vs. co
44、nsensus of USD83m. For 2012E, we expect EPS/revenue of USD0.071/USD358m vs. consensus of USD0.072/USD371m, respectively. We have a Buy rating on Biosensors. It will report its FY2Q13 results on 7 November at 7pm in Hong Kong. China Health Care Health Care 27 October 2012 Page6 Deutsche Bank AG/Hong
45、Kong Figure 2: Comp sheet for covered companies 24-Oct 20112012 TickerName Price (LC) High Low Crncy 2012E2013E2014E2012E2013E2014E2012E2013E2014E2012E2013E2014E 0460.HKSihuan Pharmaceutical Holdings Group Ltd Buy4.00 3.12 3.47 2.50 2,083 13.4 11.6 10.2 CNY0.19 0.22 0.25 3,334 4,378 5,306 18.8 15.8
46、13.6 3933.HKThe United Laboratories International Holdings Ltd Buy4.45 4.36 6.06 2.66 915 33.5 18.2 15.6 HKD0.13 0.24 0.28 7,551 9,017 10,227 62.5 84.6 16.7 1177.HKSino Biopharmaceutical Ltd Buy3.30 2.98 3.18 1.84 1,900 19.9 16.6 14.2 HKD0.15 0.18 0.21 7,801 9,671 11,544 15.4 20.0 16.7 2877.HKChina
47、Shineway Pharmaceutical Group Ltd Buy15.50 12.50 13.28 8.41 1,334 11.9 10.2 8.9 CNY0.86 1.00 1.15 2,180 2,598 3,071 (5.5) 16.3 15.0 2607.HKShanghai Pharmaceuticals Holding Co Ltd Hold15.00 14.82 15.96 7.70 6,496 16.2 14.6 13.3 CNY0.75 0.83 0.91 68,362 80,191 93,804 5.6 10.7 9.6 BIOS.SI Biosensors In
48、ternational Group LtdBuy1.40 1.16 1.70 1.09 1,637 13.6 13.6 N/AUSD0.07 0.07 0.08 292 358 383 40.0 - 14.3 MR.N Mindray Medical International LtdBuy38.00 33.97 36.36 23.88 4,004 18.8 16.7 14.8 USD1.81 2.03 2.29 1,074 1,275 4,195 15.3 12.2 12.8 WX.N Wuxi Pharmatech (Cayman) IncBuy18.00 14.34 15.60 10.65 1,030 10.3 9.2 8.3 USD1.30 1.56 1.73 493 578 662 4.8 20.0 10.9 Covered listed average19.8 15.9 13.8 14.0 13.0 11.1 EPS Growth % Rating Target Price (LC) 52-week Mkt cap (US$m) EPS (repor