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Tianjin ZhongXin Pharma poised for turnaround: UOB

PC Lee
PC Lee • 2 min read
Tianjin ZhongXin Pharma poised for turnaround: UOB
SINGAPORE (Jan 10): Tianjin ZhongXin Pharmaceutical Group is poised for a major turnaround, says UOB Kay Hian.
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SINGAPORE (Jan 10): Tianjin ZhongXin Pharmaceutical Group is poised for a major turnaround, says UOB Kay Hian.

After several years of absence, Tianjin ZhongXin held its first corporate roadshow in Singapore last Thursday to highlight new developments.

"It reaffirmed the margin-positive reforms, provided details and reported on its progress," says analyst Edison Chen in a Wednesday report.

In line with Tianjin ZhongXin's earlier China investor plant trip, management continued to share in its first corporate roadshow in Singapore the progress and details on its reforms and how they are going to set the stage for a stellar 2018.

"We note that the new management is more shareholder-friendly and interested in investor concerns," says Chen.

In five months since its appointment, Chen said the new management consolidated departments and businesses which clearly show better operating effectiveness when together.

For example, the procurement process at Bozhou Industrial Park, No. 6 Chinese Medicine Plant and Tianjin Chinese Medicinal Slices Co. was merged to reap purchasing economies.

Also, the sales forces of Le Ren Tang and Long Shun Rong were consolidated to facilitate cross-selling to customers and promote best practices.

Meanwhile, Tianjin ZhongXin also answered investors’ concerns over key product, Su Xiao Jiu Xin pill, particularly the price hike which took three years of negotiations with 28 provinces and the Ministry of Human Resources & Social Security to ensure the hike is implemented in all medical institutions across China.

In addition, approval was sought to increase social security reimbursement to ensure Su Xiao remains affordable and cost-competitive for end consumers.

"We note that while the process is long and laborious, it is not without benefit," adds Chen.

UOB is reiterating its 'buy' on the stock with a PE-based target price of US$1.52, pegged to peers’ average of 14.1 times FY18 earnings.

As at 4.31pm, the stock is trading at US$1.00, or 60% discount to its A-share price of US$2.32.

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