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Here’s why many investors are bullish on CSPC Pharma and Sino Biopharmaceutical
CSPC Pharma(SEHK: 1093) and Sino Biopharmaceutical Limited (SEHK: 1177) have been some of the best-performing pharma stocks on the market. For the last year, shares of CSPC Pharma have risen around 62% while Sino Biopharmaceutical’s shares have more than doubled.
Given China’s huge population and rising incomes, it isn’t hard to see why investors are excited about the two pharma leaders.
Here’s why many bulls are continuing to be optimistic about the two stocks.
CSPC Pharma is one of China’s largest drug makers. The company makes everything from bulk drugs to common generic drugs to innovative drugs. Due to increasing healthcare expenditures in China and CSPC Pharma’s strong execution, the company has had a history of strong earnings growth.
Source: CSPC Annual Report 2018
For CSPC’s interim 2019 period, the company again reported strong results.
For the six-month period ending June 30th, CSPC’s basic earnings per share rose 25% year-on-year to RMB 30.13 cents while total sales rose 27.6% year-on-year to RMB 11.18 billion.
In terms of its innovative drug portfolio, CSPC aided growth in the interim period by expanding its dedicated sales force and accelerating expansion into major cities. In terms of its common generic drug portfolio, the company optimized marketing activities for non-antibiotic drugs and expanded its product line of oral formulation for various chronic diseases.
CSPC Pharma is also poised for more growth. The company has a robust pipeline of hundreds of potential drug candidates in development. Those drug candidates focus on everything from oncology to neurology to cardio-cerebrovascular diseases.
Although it isn’t cheap, CSPC Pharma isn’t too expensive either given its price to forward earnings ratio of around 21.37.
According to Morningstar, CSPC Pharma has a five year average forward price-to-earnings ratio of around 24.41. If CSPC Pharma continues to grow its profits like it has in the past five years, the company has a lot of upside left.
Sino Biopharmaceutical Limited
After having a year to forget in 2018, Sino Biopharmaceutical rebounded in a big way in 2019. Shares more than doubled as investors became more bullish on the company’s considerable drug pipeline and R&D prowess.
In terms of its drug pipeline, many investors expect Sino Biopharmaceutical to compete for approval for a few blockbuster generics by 2021.
In terms of its R&D prowess, Sino Biopharmaceutical could be considered a potential ‘national champion’ that could benefit from government policies. China’s government has made accelerating domestic innovation and R&D in the pharmaceutical sector a key part of its ‘Made in China 2025’ plan. Beyond that, the government has also established that the New National Drug Reimbursement List prioritizes the inclusion of oncology medicines. Oncology research is incidentally one of Sino Biopharmaceutical’s strengths. The company’s cancer drug, Anlotinib, is one of the few domestically developed potential cancer blockbusters.
Shares of Sino Biopharmaceutical also rose due to solid interim results. For the six-month period ending on June 30th2019, Sino Biopharmaceutical’s sales rose 28.8% year-on-year to RMB 12.5 billion. Its earnings per share based on underlying profit attributable to the owners of the parent rose 17.8% year-on-year to RMB 13.3 cents.
Although Sino Biopharmaceutical shares aren’t cheap with a forward price-to-earnings valuation of around 37.04, the stock has upside if the company continues to hone its research and development.
CSPC Pharma and Sino Biopharmaceutical each have solid growth histories and bright growth prospects. Given their potential, each trade at attractive valuations.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Jay Yao doesn’t own shares in any companies mentioned.