Morningstar

Shanghai Pharmaceuticals Holding Co Ltd Class H 02607

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Stock XHKG Rating as of
HK$12.00 +0.64 (5.63%)
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As of Delayed Price Open

Company Report

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Shanghai Pharma Earnings: Weaker Manufacturing Segment Outlook; Fair Value Cut, Shares Fairly Valued

Yurou Zheng

We cut our fair value estimate for narrow-moat Shanghai Pharmaceuticals, or SPH, to HKD 11.60 per share from HKD 13.50, following a disappointing 5.1% year-on-year growth in revenue. The miss is due to a sectorwide slowdown, which we think reflects weak macroeconomic conditions and also a larger-than-expected sensitivity to a cut in generic drug prices. As a result, we lower our 2024 sales growth rate to 6.5% from 10.7%. We believe SPH is fairly valued, and its faster-than-peer growth is reflected in its current share price.

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Price vs Fair Value

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02607 is trading at a 49% premium.
Price
HK$11.36
Fair Value
HK$66.90
Uncertainty
Medium
1-Star Price
HK$11.28
5-Star Price
HK$6.28
Economic Moat
Gsrcnv
Capital Allocation
Vdshnwqb

Bulls Say, Bears Say

Bulls

Price cuts for VBP are more lenient, raising SPH’s operating margin.

Bears

The current cycle of interest-rate cuts in China reverses, leading to higher short-term interest servicing costs for SPH.

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Trading Information

Previous Close Price
HK$11.36
Day Range
HK$11.48–12.00
52-Week Range
HK$10.04–12.88
Bid/Ask
HK$12.00 / HK$12.02
Market Cap
HK$44.38 Bil
Volume/Avg
5.5 Mil / 3.1 Mil

Key Statistics

Price/Earnings (Normalized)
9.86
Price/Sales
0.15
Dividend Yield (Trailing)
4.65%
Dividend Yield (Forward)
4.65%
Total Yield
4.65%

Company Profile

Shanghai Pharmaceuticals is the second-largest medical distributor in China by revenue. It is vertically integrated and provides healthcare services in research and development, manufacturing, distribution, and retail. As of 2023, medical distribution is the largest segment, accounting for 89.8% of total revenue. It also has coverage of 31 provinces and cities nationwide.
Sector
Healthcare
Industry
Medical Distribution
Stock Style Box
Large Value
Total Number of Employees
49,234
Website
https://www.sphchina.com

Competitors

Valuation

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Metric
02607
03320
01099
Price/Earnings (Normalized)
 9.866.446.43
Price/Book Value
 0.560.650.72
Price/Sales
 0.150.120.09
Price/Cash Flow
 4.112.603.34
Price/Earnings
02607
03320
01099

Financial Strength

Metric
02607
03320
01099
Quick Ratio
 1.021.031.07
Current Ratio
 1.331.371.35
Interest Coverage
 5.245.657.57
Quick Ratio
02607
03320
01099

Profitability

Metric
02607
03320
01099
Return on Assets (Normalized)
 1.90%3.88%3.87%
Return on Equity (Normalized)
 5.98%21.04%21.65%
Return on Invested Capital (Normalized)
 3.83%6.76%8.28%
Return on Assets
02607
03320
01099

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—Jqpps$9.2 Bil
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