1、,Change,EPS,(%),1.44,-9%,November 8, 2012China: HealthcareEquity Research3Q12 in line; we like rationally-valued stocks with good growthInvestment view: Pick stocks with healthy safety margins,The A-share healthcare sector has performed well since May. It is currentlyat a 148% premium to the CSI300,
2、 above the average premium over the,HEALTHCARE A-SHARES UNDER GH COVERAGEPotential EPS12-m TPCompany Ticker Rating Upside/ 2013E(Rmb)Downside (Rmb),past year (143%). Our forward 12-month P/E estimate of 22X is less thanthe average P/E over the past two years (25X). Prices are rational, but somestock
3、s appear expensive relative to their expected growth. Without cleargovernment policy to act as a positive catalyst, we recommend rationally-valued stocks with good growth. We maintain our Buy ratings on Yuyue(on CL), Humanwell, Yibai, and Dong-E E-Jiao.Listed firms 3Q12 results met our expectationsA
4、-share healthcare firms aggregate revenue growth slid to 18.7% in the,YuyueHumanwellDong-E E-jiaoShinvaLummyYibaiLepuHuahaiTaslySanjiuNHWABaiyaoHengruiHisunHepalinkKM PharmBeijing SLKehua,002223.SZ600079.SS000423.SZ600587.SS300006.SZ600594.SS300003.SZ600521.SS600535.SS000999.SZ002262.SZ000538.SZ6002
5、76.SS600267.SS002399.SZ600422.SS002038.SZ002022.SZ,Buy *BuyBuyBuyBuyBuyNeutralNeutralNeutralNeutralNeutralNeutralNeutralNeutralNeutralNeutralNeutralSell,19.426.345.534.019.722.89.613.251.822.726.664.628.113.617.917.233.99.5,26%15%11%8%7%6%8%2%0%-1%-2%-2%-7%-10%-10%-10%-11%-15%,0.721.092.201.320.801.
6、250.640.711.781.250.962.801.030.640.810.781.530.59,-6%6%4%4%3%-1%-8%-4%8%0%0%6%0%-7%-5%0%0%0%,9M2012, the slowest rate since 2010. Net profit growth was 3.0% after dippinginto negative territory in 1Q12, but slower than revenue growth mainly due torising selling expenses and decreasing gross margins
7、 at some firms. For4Q12E, we expect net profit growth to continue to rebound yoy, though off alow base. Among the 19 firms under our coverage, revenue/profit grew 20.5%and 8.9% in the 9M2012. Excluding API firms, revenue/profit grew 27.2% and17.9%. The recovery is clear and in line with expectations
8、.Industry data indicate stable operationsIndustry revenue growth slid to 19.5% yoy in Jan-Sept, near the 3-year low,led by lower prices and the toxic gel capsule incident in 2Q12. Net profitsare slowly recovering due to lower period expense ratios. Overall, industryoperations are stable and we expec
9、t 20% yoy revenue and profit growth in2012E. In Jan-Aug, revenue/profit growth was more varied in subsectorslike Herbal TCM (28%, 23%), prepared TCM (20%, 23%), chemical medicine(23%, 23%), and medical devices (19%, 25%). Increased price pressure anddownstream slowed revenue/profit growth in Chemica
10、l API to 13%/1%.Biological products revenue and profit grew 15%, slightly below theindustry average.Earnings and target price adjustments to firms under our coverageWe revise our 12-month target prices (-9% to +8%) for most companies in ourcoverage to reflect changes to our 2012E-14E EPS (-9% to +9%
11、) following 3Q12results. Key risks: Chinese government starting to tighten price control onmedical devices; volatile raw material prices.,NHU 002001.SZ Sell 14.6 -21%* denotes stock is on the regional Conviction List.As of November 6, 2012 market close.Source: Company data, Gao Hua Securities Resear
12、ch estimates.RELATED RESEACHFundamentals coming to fore; expect 2H share pricedivergence, September 25, 2012Adjustments post annual reports; Kunming, Huahai to Neutral,April 20, 2012Earnings divergence more visible, select risk averse qualitystocks, February 8, 2012Prefer medical devices; fears of o
13、rthopedic price cut overdone,January 9, 2012,Fengqi Qian+86(21)2401-8929 Beijing Gao Hua Securities Company LimitedWei Du, Ph.D+86(21)2401-8928 Beijing Gao Hua Securities Company LimitedLi Yu+86(21)2401-8932 Beijing Gao Hua Securities Company LimitedThe Goldman Sachs Group, Inc.,Goldman Sachs doe
14、s and seeks to do business withcompanies covered in its research reports. As a result,investors should be aware that the firm may have a conflict ofinterest that could affect the objectivity of this report. Investorsshould consider this report as only a single factor in makingtheir investment decisi
15、on. For Reg AC certification and otherimportant disclosures, see the Disclosure Appendix, or go Analysts employed by non-US affiliates are not registered/qualified as research analystswith FINRA in the U.S.Global Investment Research,P/E (X),70,60,2,November 8, 2012Exhibit 1: Healthcare A-shares und
16、er our coverage valuation comparison table,China: Healthcare,Company,Ticker,RatingNew,Marketcap(Rmb bn),Price(Rmb),12-m PotentialTP Upside/(Rmb) Downside,EPS (Rmb)12E 13E 14E,EPSCAGR12-14E,Implied P/E PEG(X) (X)12E 13E 14E 12E 13E 14E 12-14E,PB(X)13E,ROE13E,Gross EBIT NetMargin Margin Margin13E 13E
17、13E,CROCI13E,Buy,YuyueHumanwellE-JiaoShinvaLummyYibai,002223.SZ600079.SS000423.SZ600587.SS300006.SZ600594.SS,Buy*BuyBuyBuyBuyBuy,61123438,15.422.941.131.418.421.5,19.426.345.534.019.722.8,26%15%11%8%7%6%,0.520.841.630.960.500.91,0.721.092.201.320.801.25,0.911.342.641.671.161.59,32%26%27%32%51%32%,29
18、2725333624,222118242317,171715191613,373128353925,272421262518,212017201714,0.91.00.91.00.70.7,5.03.24.93.14.24.2,26%16%30%14%20%28%,39%42%74%23%43%81%,23%18%41%8%21%19%,20%9%38%6%18%15%,34%16%43%18%16%31%,Neutral,LepuHuahaiTaslySanjiuNHWABaiyaoHengruiHisunHepalinkKunmingBeijing SL,300003.SZ600521.S
19、S600535.SS000999.SZ002262.SZ000538.SZ600276.SS600267.SS002399.SZ600422.SS002038.SZ,NeutralNeutralNeutralNeutralNeutralNeutralNeutralNeutralNeutralNeutralNeutral,772523646371316610,8.913.051.922.827.265.930.115.119.919.238.1,9.613.251.822.726.664.628.113.617.917.233.9,8%2%0%-1%-2%-2%-7%-10%-10%-10%-1
20、1%,0.540.581.441.020.652.230.870.520.760.581.21,0.640.711.781.250.962.801.030.640.810.781.53,0.770.952.091.441.233.451.170.720.851.031.95,19%28%21%19%38%24%16%18%6%33%27%,1722362342293429263332,1418291828242924252425,1213241622192521231820,1823362241293226243028,1519291828232721222222,13142516221924
21、19211717,0.90.81.71.21.11.22.21.74.41.01.2,2.43.45.03.77.15.15.82.42.05.95.8,18%20%19%22%28%24%22%11%8%26%26%,81%40%30%60%40%31%81%25%32%31%75%,49%22%10%18%11%14%24%3%25%9%58%,44%16%9%15%9%12%19%8%28%7%55%,30%21%25%32%34%37%27%11%34%26%41%,Sell,KehuaNHU,002022.SZ002001.SZ,SellSell,612,11.218.5,9.514
22、.6,-15%-21%,0.531.42,0.591.44,0.651.49,11%2%,2113,1913,1712,1810,1610,1510,1.95.8,5.21.9,28%16%,51%40%,30%30%,26%25%,36%24%,AverageMedian,1410,0%-1%,0.930.84,1.181.03,1.431.23,24%26%,2829,2223,1817,2828,2222,1817,1.61.1,4.24.2,21%22%,48%40%,23%21%,20%16%,28%30%,* denotes stock is on the regional Con
23、viction List.Source: Gao Hua Securities Research estimates.Exhibit 2: The A-share healthcare sectors valuation looks reasonable; it is currently at a 148% premium to the CSI300,above the average premium over the past year (143%)Comparison of 12-month forward P/E for the CSI300 and the healthcare sec
24、tor,PE(x),Premium (RHS)CSI300 PE(x) (LHS),China Pharma Industry PE(x) (LHS)Avg Premium over past 4 yrs (RHS),Premium (%)250%,Avg Premium over Past 1 yr (RHS)200%50,4030,Avg Premium over past 1 yr = 143%Avg Premium over past 4 yrs = 113%,150%100%,2050%10,0,0%,2007/5 2007/10 2008/3 2008/8 2009/1 2009/
25、6 2009/11 2010/4 2010/9 2011/2 2011/7 2011/12 2012/5 2012/10Source: Go-Goal, Gao Hua Securities Research.All prices in this report are as of market close November 6, 2012 unless otherwise noted.Goldman Sachs Global Investment Research,3,November 8, 2012The authors would like to thank Tian Tian for h
26、er contribution to this report.Exhibit 3: Stock performance of firms under coverage January 2012 to present(%),China: Healthcare,50%40%,43%,30%20%10%,32%,29%,28%,24%,24%,19%,18%,16%,13%,12%,9%,6%,0%,-10%,-2%,-4%,-4%,-6%,-20%-19%,-30%-40%Source: Datastream, Gao Hua Securities Research.Exhibit 4: Reve
27、nue growth has slowed; profit growth is recoveringYoy comparison of revenue and profit growth in the pharmaceutical sector,-24%,-35%,50%40%30%20%,Aggregate sales growth yoy (%),Aggregate pre-tax profit growth yoy (%),19.5%,17.4%10%0%,2008/8,2009/3,2009/10,2010/5,2010/12,2011/7,2012/2,2012/9,Source:
28、National Bureau of Statistics, Gao Hua Securities Research.Goldman Sachs Global Investment Research,0%,4,November 8, 2012Exhibit 5: Sector revenue growth is slowPharmaceutical sector and chemical drugs, API and medicaldevice revenue growth,China: HealthcareExhibit 6: TCM herb and TCM prepared medici
29、nes aregrowing rapidlyPharmaceutical sector and TCM herbs, TCM preparedmedicine & biological drugs revenue growth,Pharmaceutical manuf acturing,Chemical drugs,Pharmaceutical manuf acturing,TCM (Herb),35%,API,Medical devices,80%,TCM (Prepared),Biological products,30%25%20%,70%60%50%,40%15%30%,10%5%0%
30、2008/8 2009/5 2010/2 2010/11 2011/4 2011/7 2011/10 2012/2 2012/5 2012/8Source: National Bureau of Statistics, Gao Hua Securities Research.Exhibit 7: Profit growth is slower than revenue growthPharmaceutical sector and chemical drugs, API, and medicaldevice profit growth,20%10%2008/8 2009/5 2010/2 20
31、10/11 2011/4 2011/7 2011/10 2012/2 2012/5 2012/8Source: National Bureau of Statistics, Gao Hua Securities Research.Exhibit 8: TCM herb and TCM prepared medicinecontinue to enjoy rapid profit growthPharmaceutical sector and TCM herbs, TCM preparedmedicine & biological drugs profit growth,Pharmaceutic
32、al manuf acturing,Chemical drugs,Pharmaceutical manuf acturing,TCM (Herb),100%,API,Medical devices,100%,TCM (Prepared),Biological products,80%60%40%20%0%-20%-40%2008/8 2009/5 2010/2 2010/11 2011/4 2011/7 2011/10 2012/2 2012/5 2012/8Source: National Bureau of Statistics, Gao Hua Securities Research.E
33、xhibit 9: Cumulative gross margins are falling, but haveimproved somewhat over last yearPharmaceutical industry cumulative gross margins33.0%32.0%31.0%,80%60%40%20%0%2008/8 2009/5 2010/2 2010/11 2011/4 2011/7 2011/10 2012/2 2012/5 2012/8Source: National Bureau of Statistics, Gao Hua Securities Resea
34、rch.Exhibit 10: Monthly gross margins are steady at 29.5%Pharmaceutical industry margins by month33.0%32.0%31.0%,30.0%,29.2%,30.0%29.0%,29.5%,29.0%28.0%,28.0%27.0%,27.0%26.0%,26.0%,2008/11 2009/8 2010/5 2011/2 2011/5 2011/8 2011/11 2012/3 2012/6 2012/9,25.0%2008/11 2009/8,2010/5,2011/2,2011/5,2011/8
35、 2011/11 2012/3,2012/6,2012/9,Source: National Bureau of Statistics, Gao Hua Securities Research.Goldman Sachs Global Investment Research,Source: National Bureau of Statistics, Gao Hua Securities Research.,10%,8.6%,70%,5,November 8, 2012Exhibit 11: Cumulative pre-tax profit margins are below,China:
36、HealthcareExhibit 12: Monthly pre-tax profit margins are recovering,Pharmaceutical industry pre-tax profit margins by monthPharmaceutical industry cumulative pre-tax profit margins,10.6%10.4%10.2%,14.0%13.0%,10.0%9.8%,9.7%,12.0%,9.6%9.4%9.2%9.0%8.8%2008/11 2009/8 2010/5 2011/2 2011/5 2011/8 2011/11
37、2012/3 2012/6 2012/9Source: National Bureau of Statistics, Gao Hua Securities Research.Exhibit 13: Net profit growth is at a five-year lowRevenue and net profit growth among healthcare A-shares,11.0%10.0%10.0%9.0%8.0%2008/11 2009/8 2010/5 2011/2 2011/5 2011/8 2011/11 2012/3 2012/6 2012/9Source: Nati
38、onal Bureau of Statistics, Gao Hua Securities Research.Exhibit 14: Rising sales costs are hurting net marginsNet margins and sales costs among healthcare A-shares,Revenueyoy growth(%),Netprofityoy growth(%),35%,Netprofitmargin(%)Sellingexpenseratio(%)Financialexpensratio(%),Grossprofitmargin(%)Admin
39、istrativeexpenseratio(%),60%50%40%,30%25%20%,30%20%10%,18.7%3.0%,15%10%5%,0%Source: Wind, Gao Hua Securities Research.Exhibit 15: Net profit growth is at a five-year lowRevenue and net profit growth among covered healthcare A-shares,0%Source: Wind, Gao Hua Securities Research.Exhibit 16: Growth is s
40、trong at non-API firmsRevenue and net profit growth among covered non-API A-share firms,140%,Revenueyoy growth(%),Netprofityoy growth(%),70%,Revenueyoy growth(%),Netprofityoy growth(%),120%100%80%,60%50%40%,60%40%,30%20%,27.2%17.9%,20%0%Source: Company announcement, Gao Hua Securities Research.Goldm
41、an Sachs Global Investment Research,20.5%8.9%,10%0%Source: Company announcement, Gao Hua Securities Research.,2,6,November 8, 2012Exhibit 17: Net profit of indexed healthcare sector shares fell 6.2% yoy in the 9M2012Earnings growth among CSI 300 constituent stocks,China: Healthcare,CSI300 Index Sect
42、or,No. ofcompany,1-3Q earnings as % of FY1-3Q 11A 1-3Q 12E,2011A,1H2012A,Earnings growth (yoy)3Q2012 1-3Q2012,2012E,2013E,Basic MaterialsConsumer DiscretionaryConsumer StapleEnergyFinancialsHealth CareIndustrialsInformation TechnologyTelecommunication ServicesUtilitiesOverallOverall (ex. Financials)
43、,493618245022741212300250,89.5%78.8%71.7%79.5%77.3%81.5%80.1%32.0%99.2%78.6%78.3%79.7%,65.8%95.0%79.1%80.5%80.2%84.9%74.2%25.5%205.8%100.5%80.3%80.6%,15.6%8.1%52.7%3.1%22.6%8.6%-3.6%47.5%13.1%6.9%14.9%6.0%,-46.0%-9.3%39.6%-11.2%15.7%-2.7%-22.7%-21.5%30.6%3.8%2.8%-14.5%,-73.5%-11.9%61.7%-23.9%13.8%-1
44、1.9%-7.3%-198.4%26.2%31.6%-0.8%-19.1%,-55.0%-10.3%49.5%-15.6%15.1%-6.2%-18.5%-54.1%28.9%16.2%1.7%-15.9%,-38.7%-25.6%35.6%-16.6%10.9%-9.9%-12.1%-42.5%-37.9%-9.1%-0.9%-16.8%,39.5%16.6%33.6%12.3%8.4%22.1%25.3%79.9%72.9%12.5%12.7%20.5%,Source: Wind, Gao Hua Securities Research.Exhibit 18: Rating and 12-month target price adjustments for our covered healthcare A-shares,
