Yunnan Baiyao (000538.SZ): Composite Ownership Reform to Accelerate Development April 17, 2018 444

Investment Summary

We highlight that: 1) stable growth in the distribution business and notable hike in terms of health product segment; 2) rising selling expenses paving way for future growth; 3) composite ownership reform to accelerate development. We fine turn our model to factor into expenses hiking, therefore adjust EPS estimates to be RMB3.4 in 2018E. Given target PE 33x, we derive TP of RMB112. (Closing price at 13 Apr 2018)

Business Overview

Composite Ownership Reform to Accelerate Development

In 2017, Yunnan Baiyao Holdings Limited (YBH) introduced New Huadu and Jiangsu Yuyue (both private firms) as strategic investors, and three entities holds 45%/45%/10% of YBH respectively. Thus YBH and the listing company both transfer into enterprises without one actual controller. After adjustments in 2017, we expect that the reform will further motivate its staff and enhance company competitiveness.

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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