$SINOPHARM (01099.HK)$ Sinopharm is principally engaged in p...

Sinopharm is principally engaged in pharmaceutical and medical devices distribution business. The Company operates its business through four segments. Pharmaceutical Distribution segment is engaged in the distribution of pharmaceutical products to hospitals, other distributors, retail pharmacy stores and clinics. Medical Devices segment is engaged in the distribution of medical devices, as well as provides installation and maintenance services. Retail Pharmacy segment is engaged in the operation of chain pharmacy stores. Other Business segment is engaged in the distribution of laboratory supplies, manufacture and distribution of chemical reagents, production and sale of pharmaceutical products.

China has abandoned its long-lasting Zero-COVID measures and is actively normalising its economic activities. However, public concerns about ensuring infections result in the restocking of medicines for COVID and related respiratory treatments. The inventories of flu treatment drugs and other related OTC medicines are running low or even running out. Retail pharmacies are seeing a rush to re-stocking and ensuing jump in sale volumes.

The Chinese New Year travel rush will kick start in one month. This will be the first rush after China lifted COVID restrictions. The peak of this wave of infections has yet come. As the death rate of Omicron is around 0.3% to 0.4%, hundreds of thousands of patients are expected to be hospitalised in the next couple of months. Accordingly, the healthcare system will be under pressure, and the demand for related medical devices like oxygen tanks will jump.

Total revenue for 9M22 increased by 13.8% YoY to RMB54.5b in 9M22. Operating profit attributable to shareholders of the parent company rose by 13.8% YoY to RMB1.9b. Profit attributable to the parent rose by 8.1% YoY to RMB769m.

The updated market consensus of the EPS growth in FY22/23/24 is -2.6%/9.4%/9.0% YoY respectively, translating to 6.8×/6.2x/5.7x forward PE. The current PER is 7.2x. Bloomberg consensus average 12-month target price is HKD22.14.