Kanion Pharmaceutical (600557.CH): Continuous efforts made for marketing reform July 24, 2017

Investment Summary

Kanion Pharmaceutical boasts a leading R&D strength in domestic enterprises of Traditional Chinese Medicine, with the R&D expenses maintained over 10% of the company`s revenue for years. Although products of TCM injections caused pressure over its previous performance, the company has abundant product lines, among which, the Diterpene Ginkgolides Meglumine Injection has been included in the National Reimbursement Drug List by negotiation and will see a rapid growth of sales volume. With continuous marketing efforts made, the company is expected to reverse the declining growth rates of revenue and performance. The controlling shareholder plans to increase up to 2%`s shares in half a year since June 15, showing its confidence in the new development phase. We give the company an estimation of 28x EPS in 2017 and the target price is RMB20.2, with the “Buy” rating maintained.

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