Recovery, Rejuvenation and Rerating
Recovery. We believe the robust turnaround of sector
earnings growth to an estimated 50% in 2007 should
lead investors to revisit the long-term investment
potential of China’s pharmaceutical sector. Indeed, China
has never derailed from being one of the fast-growing
pharmaceutical markets in the world over the past
decades.
Rejuvenation. In the future, we expect entry barriers of
the industry to be enhanced, which will accelerate
consolidation in the market. With high regulation
restrictions, market leaders will benefit, further enlarging
their market share at the expense of smaller players. For
those with strong expertise on M&A and healthy balance
sheet, their earnings upside potential will be even more
attractive.
Re-rating. With promising sector growth target of over
20% CAGR, market leaders are expected to achieve even
stronger earnings growth. However, the sector’s
valuation is undemanding with leading sector stocks
trading at appealing levels of below 0.5x PEG. We see
strong re-rating potential ahead for this sector, stemming
from its attractive valuation, promising growth and
resilience to macro-economic risks.
Top picks. We believe long-term sector winners should
be those with leading R&D competence, strong
marketing capability and competitive cost advantages. As
such, our top picks are Sino Biopharmaceutical,
Mingyuan Medicare, Guangzhou Pharmaceutical, China
Shineway Pharmaceutical and Hua Han
Biopharmaceutical

[此贴子已经被fuguitop于2008-6-16 11:13:47编辑过]