文档介绍：September 20, 2010
China: Healthcare: Pharmaceuticals

Approval inflection point: Initiate on 3 China pharma CMOs; Buy Huahai, add to Conv list
Major themes for China’s CMO industry Buy Huahai (CL); Neutral on Hisun, Hepalink
We envisage three themes in shaping China’s We favor Huahai for its accelerated earnings INITIATION SUMMARY (THE 3”H”S)
Potential
pharmaceutical Contract Manufacturing growth of 59% from 2010E-2012E, driven by Price Pricing 12m
Name Ticker Rating Upside/
(Sept. 16) Currency TP
Outsourcing (CMO) industry. Theme 1: Rising strong R&D pipeline, substantial capacity Downside
Huahai Buy * 30%
generic demand spurs growth of Active expansion and shift in business mix, from API to Hepalink Neutral 16%
Hisun Neutral 4%
Pharmaceutical Ingredient (API) companies. OEM/FDF. We like Hisun’s leading position in * The stock is on our regional Conviction List.
Theme 2: Increasing global partnership driven by China’s API industry and a broad range of product
a shift in focus to generics and to emerging mix; however, we think its current valuation has Source: Factset, Gao Hua Securities Research estimates.
markets. Theme 3: A changing business model already priced in the moderate earnings growth THE 2010 YTD 3”H” STOCK PERFORMANCE
from raw material provider to forward integrated prospects. In similar vein, we think Hepalink’s
150% HISUN
Finished Dosage Form (FDF) manufacturer. current 27X 2011E P/E is justified by its dominant
135%
position in global heparin market.
Our investment thesis 120%
We expect China’s API exporters to post robust Valuation 105% HUAHAI 
growth in the next 3-5 years, driven by rising We use EV/GCI vs. CROCI/ as our primary 90%
global demand for generics. We believe China’s valuation metric to derive our 12-m TP, as we 75%
API exporters will continue to benefit from a cost believe this valuation suits China’s API industry by
60% H