Kangmei Pharma (600518.SH): Robust 17Q3 Results with Consolidating Leading Position in TCM Decoction Pieces Market November 14, 2017 536

Investment Summary

  • Robust results in third quarter with improving profit margin;
  • Share-based incentive plan demonstrates strong management confidence;
  • Strategic cooperation relation with BGI underpins future development;
  • Smart pharmacy and acquisition of Guangdong Hengyuan further consolidate the leading position in TCM decoction pieces market.

Business Overview

Strong results in 17Q3. As up to the end of September, Kangmei Pharma recorded revenue/net profit of RMB19.5bn/3.15bn (+18.59%/+21.58% YoY), and net operating cash flow rose by 130.65% reporting RMB1.5bn due to sales hike. Gross profit margin increased by 1.4ppt compared with that in 16Q3 and net profit margin increased by 0.71ppt. We attribute expanding profit margin to improving weights of three segments which have higher GPM (namely TCM decoction, drug trade and medical instruments). We expect that GPM continues to improve with controlling segments with lower profit margin and accelerating the development of businesses including TCM decoction.

About the author

Profile photo of Eurus Zhou

Eurus Zhou
Phillip Securities (HK)

Graduated from Hong Kong Polytechnic University, Master of Finance (Investment Management). Possess bachelor degree majoring in Financial Management from Southwestern University of Finance and Economics. Focus on industry prospect and corporate fundamentals to explore investment value and cover pharmaceutical and consumer industry.

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