[ET Net News Agency, 1 February 2018] Nomura initiated coverage on Sinopharm Group
(01099) with a "neutral" rating, and a target price of HK$35.7, based on 14x P/E on FY2019
earnings, given a net profit CAGR of 11.5% from 2019-21.
It thinks the stock will bottom in 2018 due to: (1) a sharp decline in distribution
revenue to other distributors; and (2) slower growth in distribution revenue to hospitals
under public hospital budget control.
From 2019-21, Nomura estimated distribution revenue CAGR at 10.3%, while the retail
pharmacy revenue CAGR would be 12.1%. It thinks Sinopharm would gain market share in
distribution to hospitals, but the revenue would be dragged down by strict budget control
of government medical insurance, which are hospitals' largest payer. (KL)