Microsoft word - china morning meeting minutes 081909 eng.doc
Principal Market Indices
Comment on 2009 national basic pharmaceutical system and catalogue:
with the basic pharmaceutical system and catalogue unveiled, we prefer
markets of lower level and relevant pharmaceutical makers –
Composite Index 2910.88 1.40
Event: Opinions on Establishing National Basic Pharmaceutical System,
Measures for National Basic Pharmaceutical Catalogue (Provisional) and National
Basic Pharmaceutical Catalogue (the section for supplies for health care intuitions
of lower levels) (2009 Edition) were released on August 18 and this marks the
formal start of China’s efforts to establish national basic pharmaceutical system.
Content of the national basic pharmaceutical system is largely in line with
expectations in terms of pharmaceutical production, purchase, use and
The national basic pharmaceutical system is further clarified in its content,
Our view: when products of pharmaceutical makers are included into the basic
pharmaceutical catalogue, their sales volume will go up according on markets of
lower level and producers’ profitability will be maintained or improved due to lower
cost ratio and expense ratio and scale effect. As dispatching of basic
pharmaceuticals will be carried out by pharmaceutical distributors with modernized
logistics capability or other eligible enterprises. As such we believe that national or
locally leading health care distributors such as CNMC (600511), Shanghai
Pharmaceutical (600849), NanJing Medical (600713) and Accord Pharmaceutical
Hong Kong Market
(000028) and heath care distribution division of Yunnan Baiyao will all benefit
(HK$ 100m) (HK$ 100m)
Traditional Chinese medicine. We believe that TCM makers that boast
monopolized TCM products contributing considerably to revenue and gross
margin or take up no huge share in distribution via hospitals will benefit more
notably from this positive. And enterprises we pick out by these metrics
includeYunnan Baiyao (000538), Qianjin Pharmaceutical (600479), Sanjiu Medical
and Pharmaceutical (000999), Zhongxin Pharmaceutical (600329), Jinling
Pharmaceutical (000919), Mayinglong Pharmaceutical (600993), Guangzhou
Pharmaceutical (600332), Zhongheng Group (600252) etc. and enterprises whose
TCM products as percent of their total products is huge and growth rate is
expected to increase with sales volume of basic pharmaceuticals going forward:
Tasly Pharmaceutical (600535). In addition, we also prefer Kangmei (600518) as
consumption of herbal pieces prepared for decoction will go up when
reimbursement ratio for herbal pieces will be raised gradually.
Chemical and biological pharmaceuticals. We believe that one can find relevant
beneficiaries from the following aspects: I. enterprises with more products included
into the basic pharmaceutical catalogue such as North China Pharmaceutical
(600812), Baiyunshan Pharmaceutical (000522), Double Crane Pharmaceutical
Note: PER and PBR are based on data from the
(600062) etc. II. Makers boasting almost monopolized products or products with
latest annual reports and market cap and turnover
are based on the data on the last trading day.
huge market share such as Double Crane Pharmaceutical with Jiangya 0#
Source: CITIC Quantitative Investment Analysis System,
Please refer to the Disclaimer and attached note on investment ratings at the end of this document
(Compound Hypotensive Tablets）,Baiyunshan with Cefixime (Ceftriaxone), North China Pharmaceutical with VB12, Fosun Pharmaceutical (600196) withanimal insulin and artemisinin, Huapont Pharmaceutical (002004) with Vitamin A acid and Humanwell High-tech Industry (600079) with alfentanil. III. Makers of API whose business will increase in line with expansion of market for chemical or pharmaceutical preparation such as North China Pharmaceutical, Tianyao Pharmaceutical (600488)etc. IV. Beneficiaries from vaccines under planned inoculation programmes such as Tiantan Biological Products (600161).
Comments on SINOPEC’s acquisition of addax: with the acquisition accomplished, expectation of
overseas assets injection strengthened – Buy (Reiterate)
Event: SINOPEC (600028) announced that its parent company China Petrochemical Corporation had already
accomplished acquisition of 100% stake in Addax, the Swiss oil company and undergone the delivery. This acquisition is the largest overseas acquisition project executed by Chinese company up to now.
Addax: an independent multinational oil company with huge potential.
Analysis of acquisition efficiency. As of June 24, price of Addax’s shares closed at US$ 48.96 with share capital at 157
mn and market value totalling US$7.24 bn. The 08 PE of this acquisition stands at 9X and PB at 2.95X. in 2008, It reported total revenue of US$3.762 bn and net income of RMB784 mn. Its operating cash flow stands at ~ US$1 bn per year. Its 06-08 cash flow came in at US$1.085 bn, 869 mn and 1.521 bn. In 1Q09, impacted by plunging crude price, Addax’s revenue went down over 50% (earnings similar to most oil&gas companies worldwide). Crude extracting cost stands at US$ 7.07 bbl, down 5%.
Acquisition further optimizes the structure of the group’s overseas oil&gas resources and the Listco (the Company) is
highly sensitive to assets injection. According to our calculation, irrespective of natural gas, up to now, the group’s share of crude output beyond China amounts to ~12.34 mn tonnes, equivalent to ~28.6% of the Company’s current crude output. If these assets are injected into the Company, its upstream resources supply will be enhanced significantly and profit margin will be improved notably.
Risk factors: drastic movement of crude price; geopolitical risks for overseas oil&gas exploration.
Earnings forecast and rating. SINOPEC (09/10EPS: RMB0.74/0.87; 09/10PE: 17/15X; Last price: RMB 12.64; PT:
Offshore Oil Engineering (600583): 2009 interim results comment: posted record high workload but
with mounting cost pressure – Buy (Reiterate)
Slightly lower than expected performance mainly due to lower gross margin. In 1H09, the Company posted operating
income of RMB6.066 bn, operating profit of RMB514 mn, net income of RMB 434 mn, up 84.0%, 29.6% and 46.3% respectively. EPS came in at RMB 0.13, slightly lower than our expectation. Faster growth of operating costs (99%) than that of revenue mainly accounts for the counter’s lower than expected performance, leading gross margin to further drop to 11.44% (by 6.85%) and rapidly mounting costs are mainly due to increase in rental for extra vessels resulting from soaring workload.
09 workload is well ensured. CNOOC’s target of accomplishing 50 mn cubic meters and Bohai 30 mn cubic meters oil
and gas equivalent will provide sufficient workload for the counter. In 1H09, the Company posted record high workload over the same period in history with 35 large/medium projects underway concurrently. As such, there are still ~RMB1.37 bn construction fee for projects in progress unsettled. In addition, we predict that the counter is still communicating with the party outsource their construction projects to it regarding connected transaction and compensation due to changes of factor prices. We thus believe that there is still room for its profit margin to improve going forward and satisfactory 09 performance can still be expected.
Projects under construction are well underway.
Potential risks: risk of slower than expected capacity release, risk of continual sluggishness for oil&gas industry, risk
of shrinking gross margin of the counter and risk of uncertain time for recognizing revenues of its projects.
Earnings forecast and rating. Offshore Oil Engineering (09/10EPS: RMB 0.53/0.65; 09/10PE: 20/16X; Last price:
Top 5 Gaining Sectors on A Share
Hong Kong Market
On Tuesday, HK market was volatile. HIS fell below 20000 in the morning session.
The market recovered driven by HSBC (00005.HK) and Li&Fung (00494.HK). HIS
closed at 20,306, up 0.8%, and HSCEI advanced 0.5% to close at 11,448. Intraday
turnover came in at HK$71.5 bn. China stocks presented mixed performance. Auto
sector led the advancement, up 0.9%, among which Greatwall Motor (02333.HK)
Top 5 Losing Sectors on A Share
jumped 9.1%. Real estate, energy and raw material sectors, which had suffered
the most the day before, were among the best performers, up 0.5% on average. Consumer products, health care and transportation sectors all recorded huge loss,
down ~1-2%. As for individual stocks, AirChina (00753.HK), which announced to
acquire stake in Cathy Pacific(00293.HK) from CITIC Pacific (00267.HK), fell 2%
z A-share Market
On Tuesday, Shanghai Composite Index closed at 2910.88, up 40.25 or 1.40%,
A Share Market
and Shenzhen Component index closed at 11773.30, up 104.50 or 0.90%.
Turnover on the exchanges came in at RMB 180.201 bn.
Stock indices were drastically volatile yesterday. The two markets opened lower
and staged two rounds of rebound. The first rebound saw resistance at 2900. In
the afternoon, individual stocks performed actively. Oil giants, steel and coal
mining sectors pushed the markets to rebound again and close in positive territory
finally. Steel plays became the main force driving the whole market to rebound with
Overview of Sectors Covered by CITICS
90% steel stocks closing higher. Nonferrous metals stocks rebounded notably in
the afternoon. Jien Nickel (600432) and Zhongjin Gold (600489) rose by over
6%.As of close, public utilities, nonferrous metals and steel sectors were the top
performers while financial and real estate sectors performed poorly.
China Securities Market
China initiates formally the development of National Basic Pharmaceutical
The new type of pension for farmers will be subsidized more by central
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Investment rating system
Performance of stock or sector relative to MSCI-China over next 6 months after research publications
Relative performance over MSCI-China Index >20%
Relative performance over MSCI-China Index 5% ~ 20%
Relative performance over MSCI-China Index -10% ~ 5%
Relative performance over MSCI-China Index > -10%
Relative performance over MSCI-China Index >10%
Relative performance over MSCI-China Index -10% ~10%
Relative performance over MSCI-China Index > -10%
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ISCHEMIC STROKE ORDERS WITHOUT ALTEPLASE (TPA) 1. Admit inpatient to : Telemetry Meridian 6 (satellite telemetry) OR if critically ill to ICU to CCU 2. Attending Physician: 3. Condition: 4. Code Status: 5. Allergies/Intolerances: 6. Diet : NPO Initiate nursing bedside swallow screen if po medications ordered. Ok to give po meds with sips