Tianjin Zhongxin set for ‘stellar’ year after raising drug price: UOB KayHian

Singapore five-dollar note Photo by Leslie Shaffer

Tianjin Zhongxin Pharmaceutical (TJZX) is set for a “stellar” year after a long-awaited price increase on a key drug, UOB KayHian said in a note on Monday.

It noted fourth quarter net profit climbed nearly 64 percent on-year, with full-year results beating the brokerage’s forecast by 4.5 percent.

“This is the first quarter where benefits from the long-awaited price hike for its key drug have kicked in, and results should sustain,” it said. “We anticipate a stellar 2018 and beyond.”

UOB KayHian pointed to a favorable industry outlook, the ongoing price hike for its key drug, Su Xiao, and fresh initiatives by the new management team.

“As management had previously explained, the price hike impact will be gradual with meaningful impact to be seen in 2018 and the full impact in 2019,” it said. “Furthermore, the new management team has rejuvenated the sales force and cultivated new channels such as e-commerce to drive sales volume. As such, we reiterate our view that TJZX is on the cusp of a multi-year growth story.”

It kept a Buy call and raised its target price to US$1.66 from US$1.52, pegged to peers’ average of 14.1 times 2018 price-to-earnings.

“While TJZX is smaller than its peers in terms of market capitalisation, its ROE is similar to the peer average while valuation is much cheaper,” the brokerage said. “We think TJZX is poised for a major turnaround as its blockbuster drug experiences a substantial price appreciation in the Chinese market.”

The stock ended Monday up 7.61 percent at US$0.99.