Bloomage Biotech 963.HK

Transcription

1 Bloomage Biotech 963.HK Beauty in the making Rating Current price Not Rated HK$13.10 Largest Hyaluronic Acid and derma filler provider in China Bloomage s dermal filler brand BioHyalux is the largest domestic dermal filler brand in China with 26% market share, following foreign brand Restylane with 32% market share. BioHyalux has strong sales network in China covering more than 4,000 clinics and hospitals with 120 sales person compared with for its competitors. It has recently launched new dermal filler with improved formula and Lidocaine which is easier to use and less pain for patient. Bloomage is also the largest HA raw material manufacturer in China with 65% market share, and 35% market share globally. HA raw material for medical/cosmetic/food segments accounted for 20%/70%/10% of total sales in its raw materials and with 85%/70%/20% gross margins respectively. Management believes overall HA raw materials revenue to grow by 10% for the upcoming 3 years driven by higher margin medical and cosmetic demands. Transform into integrated medical aesthetic solution provider Bloomage has been actively engaged in strategic acquisitions and forming JVs to expand its product offerings. Bloomage has acquired 33% stake in French high end derma filler Vivacy to supplement its derma filler product for the high end market in China from Vivacy has also granted exclusive distribution rights in Asia Pacific. Bloomage has also formed JV with Medytox, which has the largest market share (30%) in the botox end-market in Korea. Medytox s Neronox product is expected to obtained CFDA approval by 2018 in China, which will be the 3 rd botox brand obtaining such license. Bloomage will distribute Neronox products exclusively in China once it is ready. Bloomage is also engaging in providing Bio-Mesotherapy such as Aqua shining injections, ultherapy lifting machines distributions as well as other aesthetic devices to create a one stop provider of cosmetology product in China. Management expects overall end-products to grow by 30% CAGR over the next 3 years. Strong growth potential in the derma filler market in China China s derma filler market consumption is around 3-4m cc per year, licensed/parallel imports/fake products accounted for 20%/20%/60% of total market share. Derma filler market is forecasted to grow by CAGR of 45% during , driven by market penetration, increase dosage and parallel imports and fake products substitution. Bloomage is undervalued Bloomage is trading at 15.7x FY17PE vs its average forward PE of 21x since 2013 after it entered into the HA derma filler market. We suggest investors to accumulate stock on weakness as it is transforming into an integrated medical aesthetic solution provider. Company Visit 19 October 2016 Kenneth Li Kenneth.li@cinda.com.hk (852) Trading data 52-Week Range (HK$) 3 Mth Avg Daily Vol (m) No of Shares (m) Market Cap (HK$m) Major Shareholders (%) 11.38/ ,070 Ms Zhao (47.5%) Auditors KPMG Result Due FY16: Mar Company description Listed in 2008, Bloomage is the biggest HA raw material manufacturer in China. Its end product derma filler BioHyalux has the largest market share by domestic brand. The company has 717 people and over 80 of them are researchers. Bloomage focuses on product R&D as it spends 3-5% of revenue on research and development. Price chart Rmb mn (Dec YE) FY13A FY14A FY15A FY16E FY17E Revenue ,044 Operating profit Adjusted net profit PE (x) PB (x) Sources: Bloomberg consensus Sources: Bloomberg Page 1 of 3

2 Exhibit 1: Bloomage sales breakdown (1H16) Exhibit 2: Breakdown of world HA raw material by demand HA end products, 32% Others, 12% HA raw materials, 56% t E Medical grade Cosmetics Food Exhibit 3: Derma filler market share in China (2015) Exhibit 4: Korean botox market share (2013) Other 9 players, 16% Others, 14.9% Restylane, 32% Neuronox, 29.6% EME, 9% Dysport, 12.8% Yvoire, 17% Bloomage, 26% Botulax, 21.3% Botox, 21.3% Exhibit 5: Market size of derma filler in China Exhibit 6: Market share of medical grade HA raw materials m cc E 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 24% 19% 2% 6% 8% 9% 9% 11% 16% 11% 13% 18% 14% 20% 18% Eye drop Injectable Licensed products Parallel imports Fake products Shiseido Bloomage CPN Kewpie HTL Novozy Seikaga Others Page 2 of 3

3 Exhibit 7: Bloomage product chain Exhibit 8: Key financial figures Income statement Cash flow Year to Dec (RMB mn) FY11A FY12A FY13A FY14A FY15A Year to Dec (RMB mn) FY11A FY12A FY13A FY14A FY15A Revenue Pre-tax profit Gross profit (reported) Taxes paid (27) (20) (25) (44) (39) EBITDA Depreciation Depreciation (10) (10) (13) (14) (30) Associates EBIT CFO bef. WC change Net interest income (exp.) Change in working cap (7) (28) 32 (41) (92) Associates Cashflow from operation Exceptionals/others CAPEX (14) (47) (114) (118) (267) Profit before tax Free cash flow (74) Tax expenses (24) (23) (31) (36) (48) Dividends 0 (8) (9) (10) (11) Minority interest (0) 0 Balance sheet adj Net profit Sharse issued Dividends Others Net cash flow 56 (68) Balance sheet Net cash (debt) start Year to Dec (RMB mn) FY11A FY12A FY13A FY14A FY15A Net cash (debt) at year-end Cash & equiv Trade receivables Ratios Other receivables Year to Dec (RMB mn) FY11A FY12A FY13A FY14A FY15A Inventories Growth rate (%) Other current assets Revenue Fixed assets EBITDA Intangible assets EBIT Investment, associates etc Net profit Total assets ,199 Fully diluted EPS Margins (%) Account payables Gross margin (reported) Other payables EBITDA Short-term debt EBIT Other current liabs Net margin Long-term debts Other ratios Deferred tax and others ROE (%) Other long-term liabs (1) (1) 0 (9) (16) ROA (%) Total liabilities ,007 Net gearing (%) (65.1) (32.1) (23.6) (25.0) (14.9) Interest coverage (x) Share capital Receivables days Reserves ,189 Payables days Shareholders' equity ,192 Inventory days Minorities Effective tax rate (%) Total equity ,192 Net cash (debt) Page 3 of 3

4 Exhibit 9: Peer comparison Bloomberg Mkt Cap PER (x) P/B (x) code (HKD mn) FY15A FY16E FY17E FY15A FY16E FY17E COSMETIC PEERS MEDY-TOX INC KS 17, ESTEE LAUDER EL US 248, SHISEIDO CO LTD 4911 JP 77, AVON PRODUCTS AVP US 21, L'OREAL OR FP 796, UNILEVER PLC-ADR UL US 1,006, Average 361, HK BIOTECH GENSCRIPT BIOTEC 1548 HK 4, SHANGHAI HAOHA-H 6826 HK 5, SHANGHAI FUDAN-H 1349 HK 6, LEE'S PHARM 950 HK 4, Average 5, BLOOMAGE BIOTE 963 HK 4, Source: Bloomberg, CIRL Exhibit 10: Forward P/E band Source: Bloomberg, CIRL Page 4 of 3

5 Rating Policy Stock Rating Sector Rating Rating Definition Buy Outperform HSI by 15% Neutral Between -15% ~ 15% of the HSI Sell Underperform HSI by -15% Accumulate Outperform HSI by 10% Neutral Between -10% ~ 10% of the HSI Reduce Underperform HSI by -10% Analysts List Hayman Chiu Research Director (852) hayman.chiu@cinda.com.hk Kenneth Li Senior Research Analyst (852) kenneth.li@cinda.com.hk Lewis Pang Senior Research Analyst (852) lewis.pang@cinda.com.hk Wilfred Yuen Research Analyst (852) johnny.yum@cinda.com.hk Chloe Chan Research Analyst (852) chloe.chan@cinda.com.hk Johnny Yam Research Assistant (852) johnny.yum@cinda.com.hk Analyst Certification I, Kenneth Li hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was / were, is / are or will be directly or indirectly, related to the specific recommendations or views expressed in this report / note. Disclaimer This report has been prepared by the Cinda International Research Limited. Although the information and opinions contained in this report have been compiled or arrived at from sources believed to be reliable, Cinda International cannot and does not warrant the accuracy or completeness of any such information and analysis. The report should not be regarded by recipients as a substitute for the exercise of their own judgment. Recipients should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision. The report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Any opinions expressed in this report are subject to change without notice. The report is published solely for information purposes, it does not constitute any advertisement and should not be construed as an offer to buy or sell securities. Cinda International will not accept any liability whatsoever for any direct or consequential loss arising from any use of the materials contained in this report. This document is for the use of intended recipients only, the whole or a part of this report should not be reproduced to others. Page 5 of 3