Company Report: Sinopharm Group Co. Ltd. (01099 HK) Kay Mai 麦梓琪 公司报告：国药控股 (01099 HK) +86 755 23976685 [email protected] 国泰君安研究 2 March 2017 PRC's Largest Pharmaceutical Distributor, “Accumulate” 中国最大的医药分销商，“收集” GTJA ResearchGTJA Sinopharm is the largest pharmaceutical distributor and retailer in the Rating: Accumulate PRC, with sustainable above-industry growth. It took about 16.0% of market share in the pharmaceutical distribution industry and approximately 2.7% of market share in retail pharmacy business in 2015, according to the Ministry of 评级： 收集 Commerce in the People's Republic of China ("MOFCOM"). Sinopharm will benefit from further industry consolidation and will 6-18m TP 目标价: HK$39.89 solidify its leading position in for the foreseeable future. We believe recent polices such as the two-invoice system, unannounced Inspections, and stricter 股价： HK$36.550 Share price GSP will drive out small- and medium-sized distributors, which is likely to boost the market share and maintain the above-average growth of the Company. Revenue is estimated to grow by 12.9%, 12.8% and 12.8% YoY to Stock performance 股价表现 RMB256,337 million, RMB289,268 million and RMB326,410 million in respectively, as a result of 1) stable growth of the 50.0 % of return period FY2016-FY2018, 45.0 pharmaceutical distribution segment deriving from the combinational effect of 40.0 market share gaining growth from direct sales as well as the loss in indirect 35.0 30.0 sales triggered by industry consolidation, 2) fast expansion of the retail 25.0 business and its integration impact, and 3) a promising outlook for innovative 20.0 15.0 businesses such as financial leasing. 10.0 5.0 TP is HK$39.89, representing 19.0x FY17F PER and 16.9x FY18F PER. We 0.0 Mar/16 May/16 Aug/16 Nov/16 Feb/17 think that the TP is justified given the valuations of Sinopharm's global peers. HSI Sinopharm-H Risks: 1) margin erosion triggered by further drug price cuts, and 2) increased competition caused by the entry of new rivals from the logistics industry. ) 国药控股是中国最大的药品零售商和分销商，并长期保持高于行业平均的增长率。根据商务 Change in Share Price 1 M 3 M 1 Y HK 股价变动 1 个月 3 个月 1 年 部的资料，公司在 2015 年占有医药分销行业 16.0%以及零售药店业务 2.7%的市场份额。 Abs. % 绝对变动 3.1 1.7 26.0 1099 % 0 国药控股将长期受益于行业整合并进一步巩固其龙头地位。我们相信近期的政府政策（包括 ( Rel. % to HS index 1.1 (2.3) 3.5 两票制、飞行检查以及新版 GSP）将会挤出中小型的医药分销商，并有利于国药控股获得 相对恒指变动 % Avg. share price(HK$) 更多的市场份额以及保持高于行业平均水平的增长速度。 36.6 35.0 35.9 平均股价（港元） Source: Bloomberg, Guotai Junan International. 预计 2016-2018 财年收入将分别同比增长 12.9%、12.8%和 12.8%至人民币 256,337 百万 、国药控股 元、289,268 百万元、326,410 百万元。收入的增长主要基于 1）受直接销售的市场份额增 加以及受行业整合影响下间接销售市场份额损失的共同影响下的医药分销业务的稳定增长， 2）医药零售业务的快速扩展以及相应的整合效应，3）创新业务（如融资租赁）的良好前景。 Sinopharm 我们的目标价为 39.89 港元，相当于 19.0 倍 2017 财年以及 16.9 倍 2018 财年的市盈率。 考虑到国药控股国际同行的估值范围，我们认为目标价是合理的。 风险：1）利润率由于药品进一步降价遭到侵蚀；2）行业竞争因物流公司的进入而升级。 Year End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE 年结 收入 股东净利 每股净利 每股净利变动 市盈率 每股净资产 市净率 每股股息 股息率 净资产收益率 12/31 (RMB m) (RMB m) (RMB) (△%) (x) (RMB) (x) (RMB) (%) (%) 2014A 200,131 2,875 1.112 22.0 29.3 10.592 3.1 0.332 1.0 11.7 2015A 227,069 3,761 1.359 24.7 23.9 10.860 3.0 0.410 1.3 13.1 2016F 256,337 4,644 1.678 31.9 19.4 12.129 2.7 0.503 1.6 14.6 2017F 289,268 5,170 1.868 19.0 17.4 13.493 2.4 0.560 1.7 14.6 2018F 326,410 5,825 2.105 23.7 15.5 15.038 2.2 0.631 1.9 14.8 总股数 大股东 Shares in issue (m) (m) 2,767.1 Major shareholder CNPGC 29.06% Market cap. (HK$ m) 市值 (HK$ m) 101,137.3 Free float (%) 自由流通比率 (%) 43.11 3 month average vol. 3 个月平均成交股数 (‘000) 4,549.2 FY17 Net gearing (%) FY17 净负债/股东资金 (%) 10.47 52 Weeks high/low (HK$) 52 周高/低 42.500 / 28.550 FY17 EV / EBITDA (x) FY17 企业值 / EBITDA (x) 8.2 Source︰the Company, Guotai Junan International. Company Report See the last page for disclaimer Page 1 of 27 Table of Contents INDUSTRY BACKGROUND ........................................................................................................................... 3 The PRC Healthcare Industry ...................................................................................................................... 3 The PRC Pharmaceutical Distribution Industry ........................................................................................... 6 2 March 2017 The PRC Pharmaceutical Retail Industry .................................................................................................... 7 COMPANY ANALYSIS .................................................................................................................................. 10 Company Profile ........................................................................................................................................ 10 Business Segment ..................................................................................................................................... 11 Future Development .................................................................................................................................. 17 FINANCIAL ANALYSIS ................................................................................................................................. 18 Revenue ..................................................................................................................................................... 18 Gross Profit Margin .................................................................................................................................... 18 Operating Profit Margin.............................................................................................................................. 19 Financial Cost ............................................................................................................................................ 20 Net Profit .................................................................................................................................................... 20 Cash Conversion Cycle ............................................................................................................................. 21 VALUATION ................................................................................................................................................... 22 Peers Comparison ..................................................................................................................................... 22 DCF Valuation ............................................................................................................................................ 24 ) RISKS ............................................................................................................................................................ 25 HK 1099 0 Financial Statements and Ratios ............................................................................................................... 26 ( 国药控股 Sinopharm Company Report See the last page for disclaimer Page 2 of 27 INDUSTRY BACKGROUND The PRC Healthcare Industry 1. Overview 2 March 2017 Sinopharm Group Co. Ltd. (the “Company” or “Sinopharm”) operates business in the healthcare industry (mainly in the pharmaceutical distribution and retail industry) in China, and is one of the largest and one of the most rapidly growing components of the national economy in China. According to the National Health and Family Planning Commission (“NHFPC”), healthcare expenditure in China has significantly increased from RMB1,754.2 billion in 2009 to RMB4,058.8 billion in 2015, representing a CAGR of 15.0%. According to the NHFPC and National Bureau of Statistics of China ("NBS"), in 2015, total healthcare expenditure in China accounted for 5.92% of GDP, compared to 5.08% in 2009. The NHFPC expects that total healthcare expenditure in China will increase to represent around 6.50% to 7.00% of GDP in 2020. Figure-1: 2009-2015 Annual Growth Rate of GDP and Figure-2: 2009-2015 Healthcare Expenditure and Healthcare Expenditure in China Healthcare Expenditure/GDP in China 25.0% Bn in RMB 21.8% 20.7% 4,500 5.92% 6.5% 20.0% 4,000 5.55% 6.0% 5.26% 5.39% 15.5% 3,500 5.08% 5.5% 14.9% 4.89% 5.03% 13.9% 15.0% 13.3% 3,000 5.0% 10.6% 10.8% 2,500 4.5% 9.4% 9.5% 10.0% 7.9% 7.8% 2,000 4.0% 7.3% 6.9% 6.7% 1,500 3.5% 5.0% 1,000 3.0% 500 2.5% 0.0% 0 2.0% 2009 2010 2011 2012 2013 2014 2015 2016 2009 2010 2011 2012 2013 2014 2015 Healthcare expenditure Healthcare expenditure/GDP GDP Healthcare expenditure Source: NHFPC, NBS, Guotai Junan International. Source: NHFPC, Guotai Junan International. ) HK In China, the pharmaceutical industry value chain mainly includes five primary stages, namely (i) research and 1099 0 ( development, (ii) intermediate and active pharmaceutical ingredient manufacturing, (iii) finished dosage form manufacturing, (iv) distribution, and (v) retail sales. Sinopharm primarily engages in the pharmaceutical distribution and retail business with a certain amount of penetration into the pharmaceutical manufacturing business and other innovative 国药控股 businesses such as consulting and financial leasing, etc. Figure-3: Pharmaceutical Industry Value Chain Sinopharm Hospital End-customers Pharmaceutical Manufacturers Distributors Retail Pharmacies End-customers Agents of Foreign Pharmaceutical Manufacturers Primary Health End-customers Services Institutions Source: Guotai Junan International. 2. Industry Drivers Per capita disposable income and per capita healthcare expenditure in the PRC is expected to increase. Per capita disposable income in the PRC has experienced faster growth than per capita GDP in recent years and is expected to continue growing in both urban