Wednesday, September 29, 2010

C&O Pharm

C&O Pharm: UOBK HK initiates on the China Healthcare sector with Overweight. Says macro drivers imply too good to ignore, as long term industry growth to be driven by i) ageing population, ii) rising disposable income, iii) increasing drug demand, iv) strong govt support. Notes govt support and continued reforms likely to be near term catalysts, underpinned by govt plans to spend RMB850bn by 2011 to expand basic medical insurance coverage, which should trigger increased demand for healthcare as affordability and accessibility is improved. Further implementation of policies such as the Essential Drug System, centralized tendering, drug price regulation and new Good Manufacturing Practices should also trigger consolidation and phase out smaller, inefficient players…

Tips China Shineway (2877 HK, TP HK$34.60 ), Guangzhou Pharma (874 HK) as Buys.
In Singapore, C&O Pharm is the only PRC drug manufacturer that offers exposure to this sector. Stock trades at 10.3x FY10E PE, less than half that of its HK listed peers. Street rates as Buy with targets ranging $0.62-0.69.

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