报告名称：Biostime(01112.HK)Unsustainable high growth;maintaining Sell
报告类型：港股研究
报告日期：2016-04-03
研究机构：德意志银行
股票名称：BIOSTIME
股票代码：01112
页数：14
简介：Risk-reward not attractive; Sell
We estimate that the current valuation implies a 34x 2016 P/E for its nutritionalsegment. We think the valuation has priced in the market’s bullish view on itsnear-term growth, while overlooking various risks on the business (i.e.regulation, sustainability of high margins and P&L impact from financialconsolidations). In addition, we do not expect the infant formula business torecover in 2016. We continue to see material downside potential: maintain Sell.
Nutritional segment: deceleration growth and rising expense ratio
First, we expect nutritional segment sales growth to slow down from 166% in2H15 to 17% in 2H16, on increasing competition and already high channelpenetration. Second, we have concerns on whether its high EBITD margin(21ppts higher than global peers) is sustainable: its SG&A/sales is 16ppts lowerthan Blackmore’s in FY15. Third, regulation remains a key risk for its saleschannels in China, which represent c.50% of its total sales.
Infant formula: intensive competition continues in 2016
The e-commerce channel has lowered the entry barrier for IMF business, andwe expect the industry’s high margin to continue to be squeezed due tointense competition. Meanwhile, the new food safety law could trigger anotherround of market de-stocking. We think that Biostime is still under pressure tore-match its pricing with its branding in order to compete with global brands.
Earnings revisions; new TP at HK$16.8
We revise up our earnings forecast for 2016-17 by 37-41%, mainly to factor ina higher sales growth forecast for nutritional segments. Our DCF-based pricetarget rises to HK$16.8. However, we believe its current valuation, at 24x2016E P/E (implying 19x P/E for infant formula and 34x P/E for nutritionalsegments), has priced in the market’s high expectation for near-term growth.We maintain Sell. Upside risks: 1) more favorable regulation of nutritionalproducts; and 2) better-than-expected nutritional product margin.

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