Sino Biopharmaceutical: Reinitiating Coverage of One of the Largest Chinese Drugmakers

We reinitiate coverage of one of the largest Chinese drugmakers, Sino Biopharmaceutical. We downgrade the moat rating to none from narrow. However, we think Sino Biopharm is potentially moaty if it successfully transforms its diversified generic-dominant drug portfolio into a patent-protected portfolio. Our fair value estimate is HKD 3.01 per share, underpinned by a 7.5% revenue compound annual growth rate in the next five years. We think the shares are fairly valued currently. The key upside to our current valuation depends on whether Sino Biopharm brings out more patent-protected new drugs.