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　　机构：招商证券

　　评级：BUY

　　目标价：11.95港元

　　FY17 NP broadly in line with consensus but was behind our adj. est. by 7% . We noted the solid growth in UCG and legacy Yulin , which more than offset the decline in contrast media . Gross margin remained stable at 74%, thanks to greater operating leverage from Yulin which counterweighed the sales mix changes

　　Mgmt. guided a c.20% earnings p.a. growth in Yulin over 201820E underpinned by its broad TCM OTC portfolio. We trimmed our 2018E/19E earnings slightly by 2%/2% mainly as we lowered estimates for Shiduqing 

　　Our SOTP valuation retains a 20% M&A premium to reflect its external growth potential. Further, we lifted TP to HK$11.95 mainly reflecting the currency aPPreciation . Our new TP translates into 18x 2018 PER. Maintain BUY 

　　Solid growth in UCG and Yulin 

　　Legacy Consun reported revenue up 12% YoY, driven by steady growth of UCG . Meanwhile, Youxuantang Gantie recorded a significant 55% revenue growth, starting to show the results of effective academic promotions. While GDI fell -4% yoy in FY17, we noted it has recovered in 2H17 with 4% YoY growth and should accelerate to 5% growth thanks to Iopamidol’s approval in 1H18. Meanwhile, Legacy Yulin’s solid growth was largely powered by Zhenggushui and Jigucao Capsule . 

　　FY18/19E earnings trimmed; Maintain BUY on positive outlook, low valuation Mgmt. sounded optimistic about Yulin’s growth over next 3 years and guided c.20% sales growth per year during 2018-20E, backed by its broad TCM portfolio and continuously market expansion. Meanwhile, UCG growth was guided to be largely stable. We largely agree with mgmt. on the outlook, but slightly trimmed 2018/19E adj. earnings by 2%/2% as we lowered estimates for Shiduqing, which is a mature product. Our SOTP valuation use NPV for UCG, 16x PER for other RX and OTC products and 50% NAV discount for Yulin’s land redevelopment project as well as 20% premium to reflect the M&A potential. Company now trades at 13x 2018 PER vs peers’ 16x. 

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