华润医药(03320.HK)：Margin expansion made the day，Maintain BUY，TP HK$14.3

机构：招商证券

评级：买入

目标价：14.3港元

Margin expansion made the day

■ 1H18 adj. NP grew 21%, better than expected; on the positive note, Co. delivered strong margin expansion in distribution thanks to the c.20% growth in direct sales; on the negative side, the overall distribution revenue growth was relatively weak due to the sequence of two invoices (hitting GD in 2Q), the interest charges and gearing were also higher than expected 

■ Maintain BUY as the stock is under-valued (below 1x PEG) with decent earnings growth prospect over 2018-19E (19% CAGR of EPS in HK$) 

Pharma mfg and dist. margins were the main positives 

1H18 HK$ denominated rev./adj. NP grew 13%/21%. This was driven by strong distribution GPM expansion (up 1pp to 7.4%, which in turn was driven by c.20% growth in direct sales), and good mfg rev growth (up 15%-16 in RMB ex. invoicing method changes). Worth noting Sanjiu’s TCMG sales growth also reaccelerated to c.25% (in RMB terms). Meanwhile, its OTC portfolio continued to optimize after the acquisition of Jiangzhong Pharma, which should contribute c.1% EPS in 2019E.  

Ejiao, dist. revenue growth and interest expenses were the main negatives  

Ejiao showed flat sales and falling net profit in 1H18. Still mgmt. reassured on the 2H turnaround, citing the accelerating volume growth and manageable inventory. Distribution revenue growth also weakened (up only 1% in RMB) largely reflecting the sequence of two invoices (which hit GD in 2Q). The interest charges and gearing were also greater than expected.  

SOTP-based TP upgraded at HK$14.3 (18x 2019E PER) 

We slightly increased 2019 EPS by 2%, reflecting the better-thanexpected gross margin expansion. Our TP was upgraded to HK$14.3 (from HK$12.3) mainly as we rolled over to use 2019 EV/NOPAT multiples (instead of 2018).