Wednesday, October 15, 2014
China Merchants Securities (HK) Company Report Hong Kong Equity Research
Jintian Pharma Group (2211 HK) Jonathan HSU Marley Ngan 852-31896135 852-31896635 Value of strong branding and platform; initiate with BUY [email protected] [email protected] ■ Leading private pharma retail & distribution group in NE China ■ A Licensed Brand Manager (LBM) creating a high-GM multi-brand sales platform and implementing a streamlined Direct Supply Initiation system. Entry barrier is further established with channel and CRM. ■ Significant re-rating potential for this single-digit-PER stock with BUY 30% EPS CAGR FY13-16E. BUY-rated with 101% upside to 12-m TP. Previous NA
Unique business model in a unique market Price HK$2.83 Jintian adopts a unique LBM plus Direct Supply business model on its 12-month Target Price HK$5.68 (+101%) fast-expanding networks of retail (mainly based in NE China) and national (Potential upside) distribution. Positioned as a multi-brand sales platform operator, Jintian Previous NA license-in third-party brands and directly supplies to retailers/distributors from manufacturers. It further offers value-adds: brand/channel/customer Price Performance relationship management. Its Direct Supply model not only integrates (%) margins by cutting traditional intermediaries, but also lowers upstream 40 2211 HSI Index raw material costs by leveraginig collective bargaining power given Jintian’s control over downstream order quantity and pricing. 20 Multiple catalysts drive long-term profitable growth 0 Management is targeting 30% net profit growth for both FY14E and -20 FY15E on 1) increase in number of directly-owned retail pharmacies via -40 acquisition and self-build, 2) expanding national distribution network, 3) Dec/13 Apr/14 Jul/14 expanding high-margin product portfolio by carrying more branded products with exclusive distribution rights and LBM, 4) emerging new e- Source: Bigdata commerce platform and O2O business. % 1m 6m 12m 2211 HK (6.1) 18.1 23.6 HSI (5.9) 0.6 (0.3) Strong 1H14 results indicate strong growth momentum 1H14 net profit grew 48% YoY driven by 1) 40% revenue growth thanks to 34% increase in member no. and 19% higher average spending, 2) Pharmaceutical & Healthcare 3.4-ppt GM rise thanks to better sales mix towards LBM products and Hang Seng Index 23,048 products utilizing Direct Supply model. OPM/NM improved 1.2/0.6-ppt. HSCEI 10,255 Key Data Valuation 52-week range (HK$) 1.88-3.65 We set our TP on target 15x FY15E PER or 0.5x FY15E PEG using 30% Market cap (HK$ mn) 5,600 FY13-16E EPS growth, approx. 50% discount to HK pharma sector avg. Avg. daily volume (mn) 11.74 BVPS (HK$) 1.23 Financials Shareholdings Structure RMB m, Dec-YE 2012 2013 2014E 2015E 2016E Asia Health 45.1% AMG 16.1% Revenue 2,326 3,323 4,540 5,934 7,407 Target Asset Management 5.1% Growth (%) 58% 43% 37% 31% 25% No. of shares outstanding 2,000M Net profit 214 355 478 606 779 Free float 46.0% Growth (%) 19% 66% 35% 27% 29%
EPS (RMB) 0.11 0.18 0.24 0.30 0.39 DPS (RMB) NA NA 0.05 0.06 0.08 P/E (x) 21.18 12.75 9.48 7.48 5.81 P/B (x) 7.21 1.84 1.57 1.32 1.10 ROE (%) 36% 16% 18% 19% 21% Source: Company data, CMS (HK)
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公司报告 招商证券（香港）有限公司
金天医药集团 (2211 HK) 许瑞生 颜宇翾 852-31896135 852-31896635 强大的品牌和平台价值；首次覆盖，给予“买入”评级 [email protected] [email protected] ■ 中国东北的领头民营医药零售与分销企业
■ 特许品牌经销商（LBM）实现多品牌高毛利销售平台，实施精简直供 首次覆盖 体系。通过渠道及客户关系管理进一步提升行业门槛
■ 市盈率为个位数，2013-2016年EPS年复合增长率30％，拥有强大的估 值提升潜力。给予买入评级， 个月目标价上涨空间为 ％ 买入 12 101
前次评级 NA 独特的市场，独一无二的商业模式 股价 HK$2.83 金天采用特许品牌经销商及直供商业模式，快速扩张零售（主要在中国东 12个月目标价 北地区）和全国配送网络。其定位是多品牌销售运营商，金天拥有第三方 HK$ 5.68 （+101%） 品牌许可，可直接从厂家供货给零售/分销商。公司更提供增值服务项目： (上涨空间) 品牌/渠道/客户关系管理。其直供模式不仅削减了传统销售的中间商成分， 前次目标价： NA 金天还可以通过控制下游订单数和销售价格（控销）提升议价能力，降低 上游原料成本。 股价表现 (%) 多重催化剂推动长期盈利增长 40 金天医药集团 恒生指数 管理层对 和 年的目标是净利润成長 ％，通过 ）增加自营零售 2014 2015 30 1 20 药店数量（来自收购和自建），2）扩大全国分销网络，3）获得更多独家 产品经销权和特许品牌从而扩大高毛利产品组合，4）建立新的电子商务平 0 台和O2O业务。 -20 2014上半年良好业绩显示强劲增长动力 -40 2014上半年净利润同比增长48％，动力来自1）40％的收入增长得益于 2013/12 2014/04 2014/07 ％的会员数目增加及平均消费上升 ％， ）毛利率上升 个百分点得 34 19 2 3.4 资料来源：贝格数据 益于特许品牌产品更好的销售组合和直供的销售模式。营业利润率/ 净利 % 1m 6m 12m 润率分别上升1.2/0.6个百分点。 2211 HK (6.1) 18.1 23.6 HSI (5.9) 0.6 (0.3) 估值 行业：医药、医疗服务 我们目标价对应于15倍2015年预期市盈率或0.5倍2015年PEG，基于 恒生指数 23048 2013-2016年EPS年复合增长率30％，较港股医药行业均值约有50％的折 国企指数 10255 价。 重要数据 52周股价区间（港元） 1.88-3.65 港股市值（百万港元） 5,600 日均成交量（百万股） 11.74 每股净资产（港元） 1.23 盈利预测及估值 主要股东 Asia Health 45.1% 人民币百万元 2012 2013 2014E 2015E 2016E AMG 16.1% 营业额 2,326 3,323 4,540 5,934 7,407 Target Asset Management 5.1% 同比增长(%) 58% 43% 37% 31% 25% 总股数 （百万股） 2,000 净利润 214 355 478 606 779 自由流通量 46.0% 同比增长(%) 19% 66% 35% 27% 29% 每股盈利(元) 0.11 0.18 0.24 0.30 0.39 每股股息(元) NA NA 0.05 0.06 0.08 市盈率(X） 21.18 12.75 9.48 7.48 5.81 市净率(X) 7.21 1.84 1.57 1.32 1.10 ROE(%) 36% 16% 18% 19% 21% 资料来源：公司资料,招商证券（香港）预测
彭博终端报告下载: CMHK
Contents Focus Charts...... 5 Figure 1: Strong 31% revenue CAGR FY13-16E ...... 5 Figure 2: Margin expansion trend ...... 5 Figure 3: Strong growth of high-GM Retail biz segment ...... 5 Figure 4: Healthy growth of Distribution biz segment ...... 5 Figure 5: Key driver: High-GM prem branded products ...... 5 Figure 6: Key driver: High-GM Direct Supply Model...... 5 Valuation ...... 6 Key risks ...... 6 Company Analysis ...... 8 - Unique market; capturing opportunities in a rapidly-developing market 8 - Unique business model; creating win-win for all partners 8 - Unique business strategy; moving forward with speed, scale, and innovation 8 Key growth drivers……………………………………………………………………………………………………………… 11 Financial Analysis ...... 12 Company Profile ...... 16 Appendix: Macro Charts ...... 19
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Investment thesis BUY-rated with 12-month target price HK$5.68, a 101% upside We expect Jintian’s leading market positioning, unique business model, and entrepreneurial management team to generate 31% revenue CAGR and 30% EPS CAGR FY13-16E, capturing attractive growth Multiple growth drivers to opportunities in the fragmented and under-developed pharma retail and generate 31% revenue CAGR distribution market in particularly Northeast China. Key growth drivers and 30% EPS CAGR FY14E-16E. include: 1) organic growth in SSSG, customer/member base and average spending, 2) retail pharmacy network expansion via M&A and self-build, 3) high-margin (over 60% GM) product portfolio expansion via licensing-in brands and obtaining products with exclusive distribution rights, and 4) increasing implementation of the Direct Supply model. Emerging e-commerce business initiative could become a new key growth driver in the future. Our model estimates are conservative as we factor in business risks associated with branding efforts, product sourcing, and M&A. We expect gradual margin uptrend FY13-16E as a result. As such, margin upside exists if sales of new high-margin products ramp up faster than expected, and if further Direct Supply model is applied.
Investment positives We like the combination of Jintian’s multi-brand sales platform and its extensive retail and distribution presence. It further creates value (and set up entry barrier) by aggressively focusing on licensing-in and managing brands, streamlining supply chain, managing the channel and Multi-brand sales platform with customer relationship. The company’s scale and track record in higher-margin Direct Supply on successfully identifying and seizing business opportunities in a fast- top of retail and distribution consolidating, rapidly-changing growth market, will help achieve long networks that are expanding term sustainable profitable growth. rapidly with scale.
Jintian’s home market of pharma retail and distribution market in Northeast China is growing at over 20% annually, vs. decelerating growth for China overall towards mid-teens. With high GDP per capita, local demand for high-quality healthcare products is outstripping supply. By targeting non-pharma healthcare products, Jintian avoids prescription drug pricing pressure driven by government policy and competition. Selling only OTC drugs, it also avoids potential operational risks associated with prescription drugs: increasing CFDA requirements and uncertain approval time, likelihood of medical lawsuits, etc. By strictly licensing-in third-party brands, instead of creating its own, Jintian avoids potential conflict of interest with product suppliers and customers. Jintian focuses on building a multi-brand platform, offering a wide range of product selections to customers. Margin upside exists as Jintian strives to turn popular products with exclusive distribution rights into licensed-in brands. The company will gain more control of the product strategy and attain higher margins through brand management and other value-added services by applying its Direct Supply model.
Valuation Our 12-month target price of HK$5.68 is based on target 15x FY15E Single-digit PER valuation is a PER or 0.5x FY15E PEG using 30% EPS CAGR FY13-16E, about 50% substantial discount vs. HK discount to 1.0x HK pharma sector average. Stock now trades at pharma and HK consumer 9.5/7.5x FY14E/15E PER, 63%/63% discount to 25.8/20.5x HK pharma discretionary peer averages. peer average, and 37%/46% discount to 15.1/13.9x HK consumer discretionary peer average.
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Focus Charts Figure 1: Strong 31% revenue CAGR FY13-16E Figure 2: Margin expansion trend
Source: Company data, CMS(HK) Source: Company data, CMS(HK)
Figure 3: Expanding retail biz w/ margin expansion Figure 4: Growing distribution biz and GPM
Source: Company data, CMS(HK) Source: Company data, CMS(HK)
Figure 5: Key driver: High-GM prem branded products Figure 6: Key driver: High-GM Direct Supply Model
Source: Company data, CMS(HK) Source: Company data, CMS(HK)
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Valuation 12-month target price HK$5.68 implies 101% share price upside Our target price is based on target 15x FY15E PER or target 0.5x FY15E PEG using EPS CAGR FY13-16E. As we regard Jintian’s business as a mix of both pharma and consumer discretionary concepts, we believe a 15x target PER is reasonable for the stock, below 17x mean level between 20x HK-pharma sector average and 14x HK- consumer discretionary sector average. Specifically, we expect Jintian stock to re-rate from current 8x to 15x FY15E PER on Management’s continued delivery of strong growth and margin uptrend Visibility of product portfolio improvement towards high-margin products in depth and scope Visibility of new business growth and EPS contributions, e.g. Online-to-Offline (O2O), mobile shopping platform, Hong Kong business expansion, etc. Business expansion in terms of number of retail drugstores, downstream distributors, geo-market penetration, market share, etc. Gains in capital market recognition, e.g. sell-side coverage increase.
Peer valuation analysis We have identified direct peers in the pharma retail and distribution space, namely China Nepstar Chain drugstore Ltd. (NPD US, NR), Yunnan Hongxiang Yixingtang Pharmaceutical Co Ltd. (002727 CH, NR), and Sinopharm (1099 HK, BUY) in China, as well as Walgreen Co (WAG US, NR) in the US and Raia Drogasil SA (RADL3 BZ, NR) in Brazil. We have also referenced Hong Kong-listed consumer discretionary names as indirect peers, as Jintian is increasingly carrying non-pharma products in its product portfolio.
Key risks Key risks for Jintian include: government regulations regarding pharma retail and distribution, contract risk, management execution in retail/distribution network expansion and post M&A integration, high-margin product- sourcing progress and sales ramp up schedule, Hong Kong business expansion plans, and execution of new growth initiatives such as e-commerce. We are also concerned about risks associated with brand development. Increased media advertising and expensive corporate sponsorships could weigh on marketing expense and pressure cash flow. While we believe Jintian is well-positioned to capture O2O business opportunities, thanks to a large existing offline presence, we are concerned about possibility of market cannibalization where online business would grow at the expense of offline business. Such risk however can be mitigated by clear product differentiation and strict channel management. As a result, consumers would conciously choose the purchase channel based on product, price and service qualities.
Positive share price drivers - Winning of exclusive distribution rights for a new major high-GM product - Completion of a major M&A deal Negative share price drivers - Loss of exclusive distribution rights for a key product - Failure to complete a major M&A deal - ASP erosion due to competition - Shipment volatility due to competition or channel mis-management
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na
na
na
1.2
2.2
1.2
1.1
0.2
0.6
0.3
0.9
2.3
0.7
0.7
0.5
1.2
0.7
1.2
0.8
0.9
1.7
1.1
1.9
1.4
0.9
0.6
1.6
0.7
1.4
0.8
1.0
1.2
0.9
0.3
0.5
1.0
FY15E
na
na
0.9
1.6
0.6
1.3
0.1
1.3
1.3
1.4
0.7
1.2
0.8
1.4
2.1
1.4
1.0
1.3
1.1
1.0
1.4
1.2
2.3
1.7
1.1
2.0
0.5
0.7
2.2
0.7
0.8
1.9
0.9
0.3
0.6
1.2
FY14E
PEG
na
na
na
7.0
8.5
24.3
16.1
58.0
16.3
29.5
29.5
14.9
34.8
23.3
33.9
13.0
22.9
23.1
22.0
29.1
23.9
27.8
13.1
21.7
24.3
24.6
33.8
23.8
24.8
28.3
22.2
24.1
17.1
35.8
28.8
23.6
FY16E
na
8.5
8.9
8.5
20.3
16.8
29.4
26.3
28.0
28.0
28.6
42.7
87.5
15.0
23.0
13.0
26.9
33.6
20.0
25.8
27.1
50.0
12.7
22.3
24.0
25.5
50.3
28.0
29.0
24.6
20.9
14.0
20.9
26.7
33.3
24.1
FY15E
na
na
na
5.2
5.1
2.0
5.3
5.8
1.7
(5.6)
10.5
13.3
29.0
16.1
52.3
36.3
91.7
12.3
33.6
30.6
22.1
49.6
11.6
30.7
14.7
31.7
39.7
33.3
16.9
23.2
34.5
34.9
100.7
100.7
114.3
101.6
FY14E
na
na
na
6.1
6.5
9.7
9.2
5.5
(1.3)
(3.5)
(3.5)
29.9
78.4
50.2
16.3
52.7
22.2
22.7
38.2
17.2
17.7
40.8
33.7
44.1
16.4
13.7
66.1
22.9
(14.4)
(21.6)
(40.7)
(85.7)
(11.0)
(55.0)
127.9
250.0
FY13A
EPS EPS Growth
na
9.7
5.6
0.9
4.4
9.5
9.3
9.4
(0.5)
12.5
12.9
14.3
13.2
10.3
10.1
12.8
14.6
13.9
16.8
25.8
21.4
16.1
16.7
19.0
19.7
26.8
22.5
15.4
17.5
15.7
21.9
14.5
19.3
29.3
24.4
(15.3)
FY15E
na
4.6
8.4
8.6
6.1
9.1
8.5
7.3
(1.8)
(6.3)
(8.9)
11.4
13.0
13.4
14.4
10.3
13.3
13.8
16.1
23.9
20.7
15.6
16.5
18.4
18.2
21.6
20.6
15.6
16.7
15.7
23.3
13.6
18.1
25.1
22.9
(12.0)
FY14E
na
na
na
4.8
4.8
2.7
7.0
9.0
0.1
7.1
8.6
4.2
(4.0)
12.5
14.9
13.2
17.3
15.5
12.3
13.1
18.4
23.3
19.7
23.7
16.5
17.8
24.0
18.5
16.2
13.8
13.2
26.3
12.5
15.7
30.4
20.8
FY13A
ROE
na
na
na
na
na
na
9.4
8.6
9.3
8.8
7.4
8.5
6.3
3.6
10.8
18.1
16.6
19.5
14.8
17.1
11.9
12.5
11.0
12.2
18.0
15.4
31.3
15.2
13.9
33.3
11.8
16.9
25.5
13.0
13.0
21.8
FY15E
na
na
na
na
na
na
9.7
8.8
9.3
7.4
4.7
11.6
11.5
12.6
12.8
25.2
23.9
26.5
18.9
24.1
12.7
13.4
11.9
12.8
21.6
19.6
36.3
19.7
22.0
46.7
14.7
21.5
30.7
14.9
17.1
27.9
FY14E
na
na
na
na
na
na
na
na
8.9
8.4
9.4
6.4
9.1
9.1
9.1
9.6
5.9
11.3
27.5
14.9
40.2
22.7
35.2
15.0
17.3
12.7
15.1
26.0
25.1
62.0
19.1
32.3
47.2
18.5
21.9
35.2
FY13A
EV/EBIT
na
na
1.5
1.2
1.7
1.6
1.6
1.9
1.0
2.7
2.2
3.3
1.6
2.4
2.4
2.3
4.1
6.3
4.1
3.3
3.7
1.3
3.7
6.3
3.5
4.8
4.4
3.3
1.7
3.8
4.5
3.6
1.6
1.3
4.4
5.3
FY15E
na
na
1.6
1.3
1.7
1.7
1.7
1.9
0.9
2.9
2.5
3.8
1.6
2.6
2.5
2.7
4.9
8.0
5.0
3.8
4.4
1.4
4.1
7.7
4.1
5.9
4.8
3.7
1.9
4.5
5.2
4.4
1.9
1.6
5.0
6.4
FY14E
na
na
na
na
1.7
1.4
1.9
1.7
1.8
1.8
0.6
3.1
3.3
8.7
1.7
2.8
2.6
3.0
5.8
5.9
6.5
5.2
1.5
4.3
7.4
5.1
4.2
2.1
5.0
3.0
5.4
2.0
1.8
3.7
7.7
10.0
FY13A
PBR
na
na
9.7
7.5
13.9
12.4
21.1
12.2
27.4
27.4
22.6
26.1
16.2
15.9
15.8
17.0
28.2
26.0
21.1
21.9
21.8
46.1
13.9
41.3
33.8
20.5
19.9
37.5
17.5
11.7
23.7
23.2
28.2
17.8
15.7
23.0
FY15E
na
na
9.5
15.1
10.3
13.5
16.1
20.5
35.0
35.0
20.6
37.2
18.5
19.2
17.8
18.5
36.6
34.7
25.3
27.6
27.7
69.1
15.6
50.5
41.9
25.8
29.9
48.0
22.6
12.7
29.6
28.1
32.1
21.5
20.9
28.6
FY14E
na
na
na
na
9.5
9.3
13.1
14.2
19.3
34.1
22.5
45.7
58.3
56.7
19.8
20.2
19.5
54.4
43.1
27.5
34.1
17.3
53.7
33.5
34.3
96.8
29.8
13.4
38.9
18.7
37.6
26.0
12.8
21.3
38.6
150.7
FY13A
PER
591
198
939
263
799
730
2,967
1,201
4,426
4,245
2,074
2,842
5,646
6,385
4,854
2,064
1,371
1,431
4,874
8,043
4,777
8,873
1,067
4,003
92,789
58,054
(US$m)
Mkt CapMkt
3.90
2.01
4.51
8.29
3.67
7.68
6.40
6.02
7.50
2.83
6.21
21.50
18.57
80.12
60.69
59.89
26.53
50.98
27.93
14.55
18.09
48.57
12.76
13.42
26.80
12.86
14-Oct-14
Price (Lc$)
BPHA3 BZ
RADL3 BZ RADL3
KANG US
NPD US NPD
RAD US RAD
CVS US
WAG US
000963 CH 000963
600511 CH 600511
000028 CH 000028
600332 CH 600332
600713 CH 600713
601607 CH 601607
600998 CH 600998
002727 CH 002727
1061 HK 1061
1515 HK 1515
2348 HK 2348
2877 HK 2877
1093 HK 1093
460 HK 460
1177 HK 1177
1099 HK 1099
2211 HK 2211
1345 HK 1345
867 HK 867
Ticker
NR
NR
BUY
NR
NR
NR
NR
NR
NR
NR
NR
NR
NR
NR
NR
BUY
BUY
BUY
NEUTRAL
BUY
NEUTRAL
BUY
BUY
BUY
NR
NR
Rating
HK Consumer Discretionary avgConsumer HK
HK Department Stores HK avg Department
HK HK Shoes avg
HK Sportswear avg HK Sportswear
HK Apparel avg HK Apparel
BZ-listed Drug Retail avg Drug BZ-listed
Brasil SAPharma
Raia Drogasil SA Drogasil Raia
US-listed CNHC avg US-listed CNHC
iKang iKang Healthcare
China Nepstar Chain Drugstore Chain Nepstar China
US Drug Retail avg US Drug
Rite Rite Aid Corp
CVS Health CVS Corp Health
Walgreen Co Walgreen
CN Pharm Retail &Pharm CN Dist avg
Huadong Medicine Huadong
China National Medicines National China
Shenzhen AccordShenzhen Pharma
Guangzhou Pharma Guangzhou
Nanjing Pharma Nanjing
Shanghai Pharma Shanghai
Jointown
Yixintang
HK Pharma avg HK Pharma
Essex Bio-Tech
Phoenix Phoenix Healthcare
Dawnrays Pharma Dawnrays
China Shineway China
CSPC CSPC Pharma
Sihuan Pharma Sihuan
Sino Sino Biopharma
Sinopharm
Jintian Pharma Jintian
Pioneer Pharm Pioneer China Med SysChina Name
Source: Bloomberg, CMS(HK)
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Company Analysis We expect these three unique drivers to propel Jintian’s expansionary growth: - Unique market; capturing opportunities in a rapidly-developing market - Unique business model; creating win-win for all partners - Unique business strategy; moving forward with speed, scale, and innovation
Unique market; capturing opportunities in a wealthier but under-developed market Jintian derives approximately 50% of revenue from Northeast China (the geographica region of China consisting of Heilongjiang, Jilin and Liaoning Provinces) and directly operates over 99% of its retail pharmacies there. Jintian became the largest private pharma retailer in terms of revenue and number of self-operated pharmacies, beating competitiors who are mostly state-owned. We believe Jintian has achieved successes by capturing regional- specific business opportunities: 1. Strong demand for high-quality healthcare products in an under-supplied market. 2. Selling OTC drugs in privately-held pharmacies at wholesale prices, vs. high fixed retail prices at predominantly SOE-operated pharmacies. 3. Frequent hosting of large marketing/promotional events and regular member-loyalty activities that raise Jintian profile, promote sales, and attract new customers that expand membership base. 4. Sourcing and distributing non-commodity/special products. 5. Acquiring pharmacies in 2nd, 3rd, and 4th-tier cities at relatively low cost (less than 8-10x historical PER on average), directly benefiting from pharma retail and distribution industry consolidation trend.
The Northeast region is China’s heartland for industrial manufacturing and agriculture historically. Currently behind the East and the South regions of China in economic development, it has been focused in the central government’s “Revitalize Northeast” initiative. With total population of 110 million on a land area of 800k square kilometers, the three northeastern provinces contributed approximately 9.6% to China’s national GDP in 2013, with annual GDP growth (11.9% in 2012) outpacing national GDP growth (7.7% in 2012). Provincial per capital GDP is over US$7,000, vs. US$6,807 for China GDP per capita in 2013.
Figure 7: Northeast China Figure 8: Three northeastern provinces
Source: www.hotelstravel.com, CMS(HK) Source: www.tastetalks.com, CMS(HK)
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Unique business model; creating win-win for all partners Jintian employs a unique LBM (Licensed Brand Manager) plus Direct Supply business model through which it succeeds in creating - Power of branding. By intentionally not creating its own brands, Jintian avoids conflict of interests by positioning itself as a platform carrying multiple brands licensed from third-parties or with exclusive distribution rights. As such Jintian becomes a dedicated multi-brand manager. Jintian will have about 500 LBM items by FY14E year- end and over 1000 products with exclusive distribution rights. - Power of collective bargaining power. Jintian with its many retail outlets and downstream distributors generates substantial demand that enable strong collective bargaining power against product manufacturers as well as upstream raw material suppliers. As a result, Jintian can purchase products at low ex-factory prices, negotiate lower input costs with upstream raw material suppliers on behalf of the product manufacturers from the source, and control retail prices at the retail end. Jintian thus keeps an equilibrium among different players along the supply chain. - Power of Direct Supply and other Jintian-only value-added services like CRM. Jintian cuts traditional middlemen between the manufacturer and the retailer/downstream distributor, ensuring higher margins for itself and downstream distributors. Further aided by value-added services provided by Jintian like sales training and customer relationship management (CRM) courses from Jintian Institute, downstream distributors are happy to carry Jintian’s products over longer term, creating a win-win scenario and starting a virtuous cycle. - Power of marketing. Jintian is a skilled and experienced event organizer. It has been organizing small to large- scale store/product promotional activities, building a 1-million-person membership base since 1998. Jintian believes it understands what consumers really want and strives to offer a wide-array of pharma and non- pharma healthcare products ranging from value-for-money to premium-priced. - Power of partnership. Jintian creates a systemized partnership through training sessions or workshops for staff and distributors via the Jintian Institute. It also actively participates in industry associations to explore business opportunities.
Figure 9: Jintian’s Direct Supply business model Figure 10: Jintian business model framework
Source: Company, CMS(HK) Source: Company, CMS(HK)
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Unique business strategy; moving forward with speed, scale, and innovation - Jintian’s overriding goal is maintaining high margins to create a virtuous cycle throughout its supply chain, enabling its Direct Supply model. High margins 1) incentisize retailers and distributors to carry Jintian products, and 2) help Jintian attain scale of sales that enables collective bargaining power against upstream raw material suppliers, effectively lowering input costs for product manufacturers, who are incentivized to supply Jintian high-margin products at competitive prices with exclusivity. - Jintian’s strength in identifying and meeting customer needs are manifested in their regular as well as occasional product promotion campaigns. Membership-loyalty events like free in-store checkup not only help enhance customer stickiness but also attract joining of new members, expanding its membership base. All these activities help boost brand visibility and promote brand recognition via word-of-mouth. We view these events positively as they are low-cost/high-impact activities. Product suppliers or brand licensers, instead of Jintian, usually pay for these marketing activities. - Power of No. 3. Jintian is comfortable with non-leading market share in any market (e.g. Fuyuan City) because many No. 3 shares would add up to one No. 1 share if considering one greater market (e.g. total NE China). - Retail strategy: Carrying more high-margin licensed-brand products in more stores. Number of directly-owned stores will increase via gradual and low-cost M&A and self-build. While pharma products will continue to dominate product mix but non-pharma mix is growing fast. Pharma mix remains important given strong local demand, driving non-pharma consumption. - Distribution strategy: Distributing more high-margin LBM products to more downstream distributors. Non- pharma healthcare products will grow faster given stronger demand than for pharma products. Figure 11: Growing number of high GM products Figure 12: Increasing member number and average spending
Source: Company data, CMS(HK) Source: Company data, CMS(HK) Figure 13: Increasing contributions of higher-margin LBM and Direct Supply products
GM % GP % mix Sales % mix 1H13 1H14 1H13 1H14 1H13 1H14 Group 26.3 29.7 100.0 100.0 100.0 100.0 By product type LBM 38.4 50.4 36.7 46.4 25.2 27.3 Other products 22.3 21.9 63.2 53.6 74.8 72.7 By supply chain type Direct supply 38.7 37.6 38.4 49.2 26.1 38.8 Non-Direct supply 22.0 24.7 61.6 51.0 73.9 61.2 By business segment Retail 38.4 40.0 70.1 63.5 48.1 47.1 Distribution 15.2 20.5 29.9 36.5 51.9 52.9
Source: Company data, CMS(HK)
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Key growth drivers - High-margin/high-growth licensed-brand (LBM) products - High-margin Direct Supply model - Sourcing of more products from overseas including infant formulas from Holland, etc. under exclusive distribution rights agreement or OEM partnership. - Developing products with exclusive distribution rights into LBM products. - Retail outlet number increase via acquisition and self-build; company management targets 150 new stores each year for 2014 and 2015
E-commerce as potential new growth driver While we believe Jintian is well-positioned in capturing O2O (Online-to-Offline) business opportunities, thanks to a large existing offline presence (retail drug stores and customer membership), we are concerned about possibility that online business would grow at the expense of offline business. Such risk could be mitigated by clear product differentiation and strict channel management. Consumers would choose the purchase channel based on price and service qualities. - Business partnership with Internet and social media-based online shopping platforms, e.g. JD.com, WeChat.
Positive new business developments - Innovative advertising via new media, e.g. corporate sponsorships of WLF Kunlun Fight and crowning of Harbin-Beijing train name, online beauty contests, and charity campaigns. - Full implementation of the Yonyou ERP system in 2015 - Opening of the 5th store in Yuenlong, Hong Kong SAR - Plans of building a one-stop shopping centre for mother-infant products in Hong Kong - Plans of opening airport gift shops in first-tier cities like Beijing and Shenzhen.
Figure 14: Competitive landscape No. of stores Pharma Retail segment only Revenue (RMB m) GM (%) (13YE) Company name Ticker Geo coverage Total 2011 2012 2013 1H14 2011 2012 2013 1H14 Jintian 2211 HK NE, HK 794 526 912 1,550 963 36.9 35.1 39.1 40.0 Nepstar NPD US C, S, E, N, NE, SW 2,132 2,491 2,550 2,699 1,365 47.7 46.3 43.7 41.9 Yixintang 002727 CH C, S, N, SW 1,872 2,050 2,609 3,291 1,956 39.4 38.9 40.5 41.7 Sinopharm 1099 HK C, S, E, N, NE, NW, SW 2,034 3,045 4,114 4,833 2,798 29.0 30.0 na na
Co as a whole Revenue (RMB m) GM (%) Company name Ticker 2011 2012 2013 1H14 2011 2012 2013 1H14 Jintian 2211 HK 1,474 2,326 3,323 2,044 25.7 23.5 28.2 29.7 Nepstar NPD US 2,491 2,550 2,699 1,365 47.7 46.3 43.7 41.9 Yixintang 002727 CH 2,219 2,842 3,547 2,074 39.4 38.9 40.5 42.1 Sinopharm 1099 HK 102,225 136,502 166,866 94,836 8.2 8.0 8.0 8.3
OPM (%) NM (%) Company name Ticker 2011 2012 2013 1H14 2011 2012 2013 1H14 Jintian 2211 HK 16.6 13.5 15.7 15.9 12.2 9.2 10.7 10.9 Nepstar NPD US 1.6 1.8 0.9 na 1.4 3.5 0.4 na Yixintang 002727 CH 7.0 7.0 7.5 8.5 6.1 6.4 6.8 7.6 Sinopharm 1099 HK 3.4 3.4 3.5 4.0 1.5 1.5 1.3 1.5 Source: Company data, CMS(HK)
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Financial Analysis Expect 31% revenue CAGR and 30% EPS CAGR FY13-16E with margin uptrend Jintian is in an expansionary growth phase targeting to open 150 stores per year FY14E-15E, according to management guidance. We expect Distribution and Retail revenues to grow at 33% and 28% CAGR FY13-16E respectively as geographic coverage expands for its nationwide distribution network and number of directly-owned drugstores increase via acquisition and self-build. With increasing number of high-margin branded premium products (licensed and branded products with exclusive distribution rights), we expect GP margin for both distribution and retail segment to improve. Distribution segment is expected to show stronger growth as most of the branded premium products are non-pharma healthcare products. These products will be shipped through distribution channel where non-pharma products dominate product mix vs. retail outlets where pharma products dominate, in our view. Despite an increasing OPEX ratio as Jintian spends more in marketing activities including media advertising, corporate sponsorships, promotional sales discounts, etc, we expect NP margin to remain stable at 11% in FY14E. The SG&A expense increase is likely to be offset by improving GP margin. Figure 15: Revenue growth and margin trend 2211 HK, RMB m, Dec YE 2011 2012 2013 2014E 2015E 2016E Revenue 1,474 2,326 3,323 4,451 5,802 7,392 YoY 58% 43% 34% 30% 27% Distribution 948 1,414 1,774 2,448 3,255 4,167 … % YoY 49% 25% 38% 33% 28% Retail 526 912 1,550 2,092 2,678 3,240 … % YoY 73% 70% 35% 28% 21%
Gross Profit 378 546 936 1,278 1,659 2,099 YoY 44% 72% 36% 30% 26% Distribution 184 226 331 477 651 875 … GP margin 19.4% 16.0% 18.7% 19.5% 20.0% 21.0% Retail 194 320 605 822 1,061 1,296 … GP margin 36.9% 35.1% 39.1% 39.3% 39.6% 40.0% Blended GP margin 26% 23% 28% 29% 29% 28%
SG&A expense 103 189 333 613 831 1,037 Selling & distribution exp as % of rev. 7.0% 8.1% 10.0% 11.4% 12.0% 12.0% Admin exp as % of rev. 2.1% 1.8% 2.5% 2.1% 2.0% 2.0%
Operating Profit 245 302 519 685 880 1,133 OP margin 17% 13% 16% 15% 15% 15% … % YoY 23% 72% 32% 28% 29%
Net Profit 180 214 355 478 606 779 NP margin 12% 9% 11% 11% 10% 11% … % YoY 19% 66% 35% 27% 29%
EPS (RMB/ share) 0.09 0.11 0.18 0.24 0.30 0.39 … % YoY 19% 66% 35% 27% 29%
Source: Company data, CMS(HK)
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Key financial estimates and model assumptions We expect Jintian’s distribution and retail business segments to grow at 33% and 28% CAGR FY13-16E, respectively. Distribution segment will grow faster as more high-margin non-pharma products will be sold through the distribution channel. Key retail sales drivers include 1) 150 new stores each year, and 2) improving organic sales performance as member number and average spending rises with high-margin product offerings. In terms of product mix, branded premium products including licensed-branded products and products with exclusive distribution rights will achieve 41%/35%/29% revenue growth in FY14E/15E/16E as Jintian aggressively focuses on developing and shipping these high-margin products. We also expect Jintian to apply margin-integrating Direct Supply model to products it exclusively carries as much as possible. Direct Supply revenue growth momentum was strong, growing 108%YoY in 1H14. We expect the growth momentum to continue through FY16E, contributing 43% of group revenue in FY16E vs. 27% in FY13. Figure 16: Jintian financial estimates and model assumptions 2211 HK, RMB m, Dec YE 2011 2012 2013 2014E 2015E 2016E Revenue 1,474 2,326 3,323 4,540 5,934 7,407 YoY 58% 43% 37% 31% 25%
By business segment Distribution 948 1,414 1,774 2,448 3,255 4,167 … % YoY 49% 25% 38% 33% 28% Retail 526 912 1,550 2,092 2,678 3,240 … % YoY 73% 70% 35% 28% 21%
By product type LBM 508 651 966 1,362 1,839 2,370 … % YoY 28% 48% 41% 35% 29% Other products 966 1,676 2,357 3,178 4,094 5,037 … % YoY 73% 41% 35% 29% 23%
By supply chain type Direct Supply 369 549 891 1,725 2,433 3,185 … % YoY 49% 62% 94% 41% 31% Non-Direct Supply 1,105 1,777 2,433 2,815 3,501 4,222 … % YoY 61% 37% 16% 24% 21%
Source: Company data, CMS(HK)
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Potential debt-raising to help fund aggressive business expansion plans We expect operating cash flow to increase gradually with business expansion. Management targets to open 150 new stores each year during FY14E-15E with estimated RMB3m capex per store, FY14E/15E/16E capex are estimated at RMB800/450/243m, with RMB350m building warehouses and logistics hubs incurred in FY14E. Jintian will have a net borrowing position starting from FY14E to finance its aggressive retail pharmacy, distribution capability build-up, and new online business expansion plans. Net borrowings will decrease with increasing operating cash flow. Jintian is expected to maintain a stable 20% dividend payout according to management guidance. Given 1) higher capex vs. operating cash flow and 2) slightly increasing working capital investment, Jintian is expected to generate negative free cash flow in FY14E-15E, reflecting business expansion during this period. However, free cash flow will turn positive in FY16E when net profit ramps up and cash cycle improves. Figure 17: Cash flow analysis 2211 HK, RMB m, Dec YE 2011 2012 2013 2014E 2015E 2016E Cash flow Operating cash flow 122 162 387 475 629 828
Capex -12 -15 -43 -800 -450 -243 Others -167 -309 -10 6 1 1 Investing cash flow -179 -323 -53 -794 -449 -242
Proceeds from IPO 0 0 856 0 0 0 Net borrowings 0 0 0 288 54 69 Dividends paid 0 0 -86 -96 -121 -156 Others 664 -96 5 0 0 0 Financing cash flow 664 -96 775 193 -67 -86
Cash (balance sheet) at period end 713 456 1,564 1,438 1,551 2,051
Free Cash Flow -52 -36 210 -323 180 585
Working capital turnover Inventory days 59 51 42 40 38 35 Trade receivables days 52 43 40 30 25 23 Trade payables days 29 20 13 13 14 15 Working capital days 82 74 68 57 49 43
Source: Company data, CMS(HK)
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Du Pont Analysis Jintian ROA decreased in FY13 but we expect ROA to increase to 20%/21%/23% FY14E/15E/16E on 1) improving GP margins and 2) strong revenue growth. The company has low financial leverage but we expect greater interest burden as well as financial leverage with business expansion. ROA uptrend will help offset higher finance cost, and ROE is expected to expand to 18%/19%/21% FY14E/15E/16E, respectively. Figure 18: Du Pont Analysis Du Pont 2011 2012 2013 2014E 2015E 2016E Adjusted Pre-tax Profit Margin (EBIT/Rev) 17% 14% 16% 15% 15% 15% Asset Turnover (Sales/Assets) 120% 154% 121% 130% 144% 150% ROA (EBIT/Assets) 20% 21% 19% 20% 21% 23% Interest Burden (Pre-tax/EBIT) 103% 97% 100% 101% 100% 100% Tax Burden (Net Profit/Pre-Tax) 75% 74% 74% 75% 75% 75% Leverage (Assets/Equity) 307% 241% 112% 121% 121% 120% ROE 47% 36% 16% 18% 19% 21%
Source: Company data, CMS(HK)
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Company profile Corporate snapshot Established in Jiamusi, Helongjiang Province, China, in 1998 and IPO on the HKSE Dec 2013, Jintian Pharmaceutical Group is the largest privately-licenseded pharmaceutical retailer and distributor in Northeast China, in terms of the number of retail outlets and distribution sales. It made its first big break in the ‘90s by correctly identifying profitable business opportunities in selling general-use drugs at low wholesale prices in local drug stores, against expensive undifferentiated drugs carried by dominant SOE-run retail outlets or hospitals.
Jintian owns and operates around 850 drugstores in Northeast China, and distributes to around 5,000 downstream distributors nationwide. These drugstores are mostly located in city centers as well as local shopping districts.
Jintian carries over 20,000 items in total, of which almost 500 items are under licensed brands, and over 1,000 items have exclusive distribution rights.
Jintian’s drug store is on average 400 sqm in size and carries 1,000-4,000 types of products including 1) prescription drugs and pharmacy services, 2) over-the-counter drugs, 3) nutritional supplements, 4) medical devices and 5) personal care products.
Jintian has a fast-growing customer membership base sized over 1 million persons currently.
PricewaterhouseCoopers is the independent auditor of the company.
Business model and growth proposition Jintian’s business is driven by a unique LBM plus Direct Supply business model that serves a fast-expanding retail network based mainly in NE China and a nationwide distribution network. Specifically, overall growth is generated via 1) increase in number of retail outlets via M&A and self-build, 2) increase in number of downstream distributors, 3) organic growth via greater store sales and operating efficiency, 4) increase in product offerings especially premium branded products and products with exclusive distribution rights.
Jintian’s Direct Supply model enables the company to maintain high margins by 1) upstream raw materials bulk purchasing for manufacturers to cut input costs from the top-down, 2) sourcing from manufacturers at low ex- factory prices and directly supplying to retailers/downstream distributors by eliminating traditional intermediaries, and 3) strict control of retail selling prices and inventory management at the retail level.
Jintian aims to sign up more products with exclusive distribution rights, that have potential of turning into licensed-in brands or LBM over time. Jintian can do more with licensed-in brands in terms of supply chain arrangement, marketing activities, and product line expansion to enhance margins and overall attractiveness of the products.
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SWOT analysis Strengths Weaknesses Strength in brand management, channel Geo-market concentration risk management, and product sourcing capability for Rising operational costs such as marketing higher-margin/higher-growth licensed-brand expense, store rent and staff wages products and products with exclusive distribution rights Rising M&A costs due to competition
Proven track record in M&A acquisition and Potential operational risk as business quickly integration, targeting 150 new retail outlets each expands nationally and going from offline to online year FY14E-15E
Event planning and management capabilities for sales promotion, e.g. frequent large product promotional activities, and regular in-store free member-loyalty services
Customer relationship management skills
Young, entrepreneurial, and experienced management team with members having been with the company for over 10 years on average
RMB1.6bn cash-on-hand to fund expansion Opportunities Threats Retail pharmacy expansion in tier 2, 3, and 4 cities Intensifying competition vs. major national players in the three northeastern provinces like Sinopharm as business expands to new markets nationally Increasing number of downstream distributors ASP pressure and shipment volatility due to Expanding high-margin product portfolio via competition from emerging online business sourcing more LBM products and products with exclusive distribution rights Government regulations regarding retail pharmacy and online sales of healthcare products Expanding application of high-margin Direct Supply model
Rising SSS, number of members, and average spending per customer/member
Emerginig e-commerce and O2O business
Latest development On 25 August 2014, Jintian announced to acquire the remaining 4.99% equity interest of Jintian Aixin Co at a consideration of RMB67.5m.
On 23 June 2014, Jintian announced it has agreed to acquire the remaining 36% equity interest in Shenyang Wei Kang Drug Store Co Ltd at a consideration of RMB250 million. There are 94 Wei Kang drugstores in central Shenyang, China.
On 13 June 2014, Jintian announced it has become the general distributor in Greater China for US high-end organic infant formula brand McJayden. Such strategic move by Jintian is in-line with a recent Chinese government policy to support milk powder marketing through pharmacies and implementation of the Two-Child policy.
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Management Jintian’s senior managers are relatively young, averaging 35-45 years old, and all have been with the company for over 10 years. Founder/Chairman Jin is 45 years old currently. Title Name Background Chairman Mr. JIN Dongtao - Co-founder of the Group - Serves as the Chairman since 1998 - Over 20 years of experience in China pharmaceutical distribution industry - Licensed Pharmacist in China
CEO Mr. CHU Chuanfu - Honorable Chairman of the Municipal Pharma Association in Jiamusi - Over 14 years of experience with the Group - Qualified Nutritionist in China
COO Mr. YANG Jiacheng - Standing Director of the Chinese Medical Association in Health Industry Committee - COO of Renji Shanghai Hospital Group before joining the Group in 2013 Financial Ms Wendy CHAN - CFO of Sino Distillery Group Ltd (39 HK) Controller - Auditor at Ernst & Young - 15 years of financial auditor experience - CPA in Hong Kong
Shareholding structure Chairman Jin and family own total 50.26% shares Top 3 pre-IPO PE investors: CVC Capital Partners via AMG subsidiary (ongoing placement; selling down shareholdings from 16.13% to 6.8%), DBS Bank PE fund (already sold all shares to the secondary market in Aug 2014), and Seavi Advent (maintaing original 4% holdings). Employee incentive program created. Jintian has setting up a trust structure with a stock pool that discretionarily awards employees based on performance. Figure 19: Jintian shareholding structure
Source: Bloomberg, Company data, CMS(HK)
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Appendix: Macro Charts Figure 20: China pharma retail market Figure 21: China pharma distribution market
Source: SMERI, Company, CMS(HK) Source: SMERI, Company, CMS(HK)
Figure 22: NE China pharma retail market Figure 23: NE China pharma distribution market
Source: SMERI, Company, CMS(HK) Source: SMERI, Company, CMS(HK) Figure 24: Top players in Northeast China pharma retail market 2012 sales 2012 2010-2012 Market Company Name Ownership No. of stores (RMB bn) Sales/Store CAGR Share Liaoning CDFY Pharmacy State-owned 658 2.9 4.3 10% 17% Harbin Renmin Tongtai State-owned 338 1.8 5.4 4% 11% Jintian Pharma Privately-owned 794 0.9 1.1 54% 5% Jilin Pharmacy State-owned 481 0.8 1.7 5% 5% Sinopharm Pharm Group State-owned NA 0.7 NA 16% 4% Source: Company data, CMS(HK)
Figure 25: Top players in Northeast China pharma distribution market 2012 Sales Company Name Ownership 2010-2012 CAGR (RMB bn) Harbin Pharma State-owned 6.1 0.9% Northeast Pharma Group Distribution State-owned 3.7 -0.2% Harbin Pharma Group Sanjing Pharma Trading State-owned 2.4 14.4% Liaoning Pharma Foreign Trade Corp State-owned 1.8 23.2% Jintian Pharma Privately-owned 1.7 73.1% Source: Company data, CMS (HK)
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Financial Summary
Balance Sheet Profit & Loss Statement RMB million 2012 2013 2014E 2015E 2016E RMB million 2012 2013 2014E 2015E 2016E Current Assets 1,099 2,206 2,175 2,406 3,029 Revenues 2,326 3,323 4,540 5,934 7,407 Cash & equivalents 456 1,564 1,438 1,551 2,051 Cost of sales 1,781 2,387 3,240 4,222 5,236 Trading investments 97 0 0 0 0 Gross profit 546 936 1,300 1,712 2,171 ST bank deposits 0 0 0 0 0 Selling exp 189 333 518 712 889 Trade receivables 274 362 373 406 467 Admin exp 42 83 95 119 148 Other receivables 0 0 0 0 0 Other gains - net (13) (1) (1) (1) (1) Inventories 249 272 355 440 502 Op Profit 302 519 685 880 1,133 Other current assets 22 9 9 9 9 Finance income 3 2 16 7 8 Non-current assets 417 538 1,314 1,723 1,917 Finance cost 0 4 6 6 7 Investment property 4 5 5 5 5 Share of profit of JV 1 2 2 2 2 Property, plant & eqt. 47 76 848 1,257 1,452 Non-op inc 0 0 0 0 0 Intangible assets 355 444 444 444 444 Non-op exp 0 0 0 0 0 Other non-current assets 11 13 17 17 17 PBT 306 520 695 881 1,134 Total assets 1,515 2,744 3,489 4,129 4,946 Taxes 79 135 174 220 283 Current liabilities 862 265 296 342 396 Profit after tax 227 385 521 661 850 Bank loans 0 0 0 0 0 Minority interests 14 30 44 55 71 Trade payables 99 85 115 162 215 Net profit 214 355 478 606 779 Prepaid accounts 0 0 0 0 0 EPS (RMB) 0.11 0.18 0.24 0.30 0.39 Other liquid liabilities 763 180 180 180 180 Long-term Liabilities 25 23 311 365 435 Financial Ratios Loans 0 0 288 342 412 2012 2013 2014E 2015E 2016E Others 25 23 23 23 23 YoY growth rate Total liabilities 887 288 607 707 830 Revenue 58% 43% 37% 31% 25% Total equity 628 2,456 2,882 3,421 4,116 Op profit 23% 72% 32% 28% 29% Issued capital 0 12 12 12 12 Net profit 19% 66% 35% 27% 29% Reserves 549 2,343 2,725 3,209 3,833 Profitability Minority interests 79 101 145 200 271 Gross margin 23% 28% 29% 29% 29% Total equity and liabilities 1,515 2,744 3,489 4,129 4,946 Op margin 13% 16% 15% 15% 15% Current Assets 1,099 2,206 2,175 2,406 3,029 Net margin 9% 11% 11% 10% 11%
Cashflow Statement Liquidity RMB million 2012 2013 2014E 2015E 2016E Debt to Asset NA NA 0.08 0.08 0.08 Operating cashflow 162 387 475 629 828 Net Debt to Equity NA NA -0.33 -0.29 -0.33 PBT 227 385 695 881 1,134 Current ratio 1.27 8.31 7.35 7.03 7.66 Deprec & Amort. 14 27 28 41 48 Quick ratio 0.98 7.29 6.15 5.75 6.39 Finance costs - net (3) (1) (10) (1) (1) Operating efficiency Working capital chg (87) (39) (64) (71) (70) Asset turnover 1.54 1.21 1.30 1.44 1.50 Others 10 15 (174) (220) (283) Inventory days 7.14 8.78 9.13 9.61 10.43 CF from IA (323) (53) (794) (449) (242) AR days 8.50 9.19 12.17 14.60 15.87 Capital expenditure (188) (165) (800) (450) (243) AP days 23.45 39.05 39.34 36.64 34.42 Other investments (135) 112 6 1 1 Per share ratios (RMB) CF from FA (96) 775 193 (67) (86) EPS 0.11 0.18 0.24 0.30 0.39 Borrowings 0 0 0 288 54 CFPS 0.12 0.25 0.32 0.42 0.56 Share capital (1) (5) 856 0 0 BVPS 0.31 1.23 1.44 1.71 2.06 Dividends 0 0 (86) (96) (121) DPS NA NA 0.05 0.06 0.08 Others (95) 780 (578) (260) (19) Valuation ratios Net cash flow (257) 1,109 (127) 114 500 P/E 21.18 12.75 9.48 7.48 5.81 Forex effect (0) (1) 0 0 0 P/B 7.21 1.84 1.57 1.32 1.10 Ending Cash 456 1,564 1,438 1,551 2,051 EV/EBITDA 12.63 5.59 4.53 3.45 2.32
Source: Company data, CMS (HK) estimates
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Investment Ratings Rating Definition BUY Expected to outperform the market index by >10% over the next 12 months NEUTRAL Expected to outperform or underperform the market index by 10% or less over the next 12 months SELL Expected to underperform the market index by >10% over the next 12 months
Analyst Disclosure The analysts primarily responsible for the preparation of all or part of the research report contained herein hereby certify that: (i) the views expressed in this research report accurately reflect the personal views of each such analyst about the subject securities and issuers; and (ii) no part of the analyst’s compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed in this research report.
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