Analyst Note| Jay Lee |
Narrow-moat 3SBio reported year-end results that were slightly better than our expectation, but its outlook is still challenging due to lack of significant progress in pipeline or business development. Revenue for the full year and second half were CNY 6.3 billion and CNY 3.2 billion, respectively, representing 14% and 13% growth on year. Operating profit, as calculated with cost of sales, SG&A, and research and development expenses, was CNY 4.2 billion, or 6% better than our expectation, and was due to a modest gross profit margin improvement of 1.7 percentage points. We lower our fair value estimate to HKD 10.00 per share (from HKD 11.70) due to lower pipeline and profit margin forecasts. The stock trades at a 33% discount to our new fair value.