Made in China:Company Updates,3SBio,Gemdale Corp,QSLI

We anticipate that investors will gradually valuate the combined CDMO business separately from the company's manufacturing business, which should lead to significant upside in the mid/long term. However, as its profitability remains unclear, we expect the market to apply a discount on the P/S (or EV/EBITDA) for its CDMO business vs. WuXi, which is trading at 30x 2017E sales (or 67x 2017E EBITDA). We highlight that Therapure's CDMO business achieved about a 56% CAGR in 2014-2016, vs. Wuxi's 73% CAGR 2014-2016, based on prospectuses. On fundamentals, management expects significant upside from improved utilization of the 38,000L mammalian cell culture facility, combined with the existing/ potential client base of Therapure Biopharma. (Jack Hu - 852 2203 6208).

    We maintain Sell, raise FY17-19E earnings by 30-50%, and increase TP by 8% to RMB10.06 after factoring faster sales (lifting FY17/18E sales by 24%/75%), better margins (28-30%), new land acquisitions, and 1H results. We believe its current landbank (33msqm) is not enough to sustain sales growth and expect sales to start dropping from FY18E. In addition, we expect more JV projects (only 57% attributable saleable resources), leading to only 9% earnings CAGR in FY17-19E despite gross sales growth. Its slow growth does not justify the valuation. Gemdale trades at a 19% NAV discount and 8.3x FY18E PE (higher than Vanke-A with 7.1x PE and 19% NAV discount, but 30% earnings CAGR). (Foo Leung - 852 2203 6239)