Kanghong Pharmaceutical (002773): The proprietary Chinese medicine sector dragged down 18-year results; expects continued volume of Compaqap in 2019

Kanghong Pharmaceutical (002773): The proprietary Chinese medicine sector dragged down 18-year results; expects continued volume of Compaqap in 2019

2018 performance is lower than expected Kanghong Pharmaceutical announced 2018 results: operating income29.

17 billion yuan, an annual increase of 4.

7%; net profit attributable to parent company 6.

9.5 billion, a ten-year growth of 7.

88%, corresponding to profit 1.

03 yuan.

The performance was lower than our expectations, mainly due to the drag on the company’s proprietary Chinese medicines sector.

The company plans to distribute a dividend for every 10 shares2.

80 yuan (including tax), the capital reserve will be converted into 3 shares for every 10 shares.

Development trend The proprietary Chinese medicines sector has dragged down 2018 results and is expected to stabilize in 2019.

From the perspective of the sector, Chinese patent medicines have an income of 8 years.

63 ppm, with a ten-year average of 20.

4%, we believe that it is fundamentally 1) the traditional business sector is undergoing sales reform, which is in the painful period of transformation; 2) the proprietary Chinese medicine sector is facing pressure to reduce prices.

At present, the internal adjustment is coming to an end. We believe that the proprietary Chinese medicine sector has tried to stabilize in 19 years.

Revenue from the chemical medicine sector11.

70 ppm, an increase of 9 in ten years.

02%; Revenue from biological products (Compaq Ship) 8.

820,000 yuan, an increase of 42 in ten years.


Compaq maintains a high growth momentum.

Compaq’s revenue in 2018 8.

8.2 billion, net profit 2.

05 ‰, an increase of 130% in ten years; net profit margin increased by 9 ppt to 23% over last year, mainly due to the effect of scale.

At present, Compaq’s diabetic macular edema (DME) has submitted an NDA application and is expected to be approved for listing in 2019.

The fourth indication, retinal vein stenosis (RVO), is currently in Phase 3 clinical stage.

We believe that choroidal neovascularization (pmCNV) secondary to pathological myopia is expected to enter medical insurance through a new round of negotiations this year, which will lead to continued rapid volume expansion of Compaq.

Compaq’s US Phase 3 clinical progress is worth looking forward to.

In May 2018, the head-to-head Phase 3 clinical study of Compaqip 天津夜网 and Abbisep wAMD indications was officially launched in the United States, and we expect that there are currently thousands of patients enrolled.

We expect to reveal preliminary clinical data in 2021, and overseas progress is worth looking forward to.

Earnings Forecast Taking into account the impact of the performance of the proprietary Chinese medicines sector, we have reduced our 2019 / 20e earnings forecast by 18/21% to 1.

20 yuan / 1.

50 yuan, with annual growth of 16 each.

8% / 24.


Estimates and recommendations The company currently expects to correspond to 47/37 times P / E in 18/19, maintaining the recommendation level.

Taking into account that the pessimism in the generic drugs sector has improved and the estimated center of the sector has been restored, and that the medical insurance expected for the year of Compaq’s PM indications has led to the continued high growth of Compaq, we have raised our target price by 25% to 65 yuanCorresponding to 54/43 times P / E in 19/20, there is 16% space compared to current expectations.

Risks The growth of traditional sectors declined; Compaq’s heavy volume fell short of expectations.