China Resources Double-Crane Pharma:Focused on extending advantage in preparation field
Saike Pharmaceutical will improve preparation product mix
Double-Crane recently announced China Resources Saike, its wholly-owned subsidiary,received Chinese GMP certifications for its amlodipine besylate tablet (1bn tablets/year,treating hypertension and chronic stable angina) and valsartan capsule (300m capsules/year) production lines. Saike registered three types of amlodipine besylate tablets(2.5mg/5mg/10mg) with the US FDA. Amlodipine besylate tablets, as a brand-namedrug (Norvasc) made by Pfizer, were sold in the US from 1987 and generated US$991mof sales for Pfizer in 2105. Valsartan, treating mild to moderate essential hypertensionand first made by Novartis, generated US$1.284bn of sales for the original producer.We estimate Double-Crane's preparation revenue will increase c20% in 2016-18.
H116 earnings increased quickly
H116 operating revenue/net profit rose 10.97%/5.58% YoY to Rmb2.79bn/430m (netprofit up 30% excluding one-offs). Double-Crane focused on the development ofcardio-cerebrovascular and endocrine preparations, with revenue from drugs treatingchronic diseases up 31% YoY in H116. In this segment, revenue from Hypertensive No.0, its core cardio-cerebrovascular product, increased 4.2% YoY due to optimizedchannels/end-market retailers and low-cost drug policies. Revenue from Glurenorm, forglycemic control, rose 4.2% YoY, driven by the extension of channels to lower-tiercities. Revenue from pitavastatin increased 74.1% YoY.
Decline at infusion segment narrowed
While revenue at the infusion segment decreased 9.8% YoY in H116, sales volume ofDouble-Crane's new infusion products using the BFS technology rose 41% YoY. Inrecent years, Double-Crane has focused on product mix optimization and a packagingmaterial upgrade and has lifted the share of therapeutic infusion products in its salesand the share of plastic-package infusion products in its non-therapeutic segment. Theinfusion segment represented only 29% of Double-Crane's gross profit in H116.
Valuation: Maintain Buy and price target of Rmb32.74
We derive our price target of Rmb32.74 using DCF-based methodology (7.7% WACC)and maintain our Buy rating.