Industry insiders analyze that the price of standard heparin raw materials from Jianyou Co., Ltd. has surged due to the decrease in the number of pigs being slaughtered and environmental pressure affecting the upstream crude heparin. In the coming years, the company's standard heparin raw material business is expected to enter a phase of simultaneous increase in both volume and price.
Jianyou Co., Ltd.'s heparin raw materials are entering a phase of simultaneous increase in both volume and price, with advance stocking to fully enjoy the benefits of price increases. Regarding heparin prices, the upstream crude heparin has surged due to the decrease in the number of pigs being slaughtered and environmental pressure. Based on the company's judgment on the future price trend of crude heparin, it has established a low-price inventory of crude heparin in advance, effectively resisting cost increases and even benefiting from this wave of price rises; in terms of heparin volume, the company has strict quality control and has always supplied high-quality clients such as Pfizer, Gland, and Sandoz in Europe and the United States. In recent years, Pfizer's inventory adjustment strategy has been completed, and procurement has increased year by year. At the same time, the company has developed a new client, Sanofi, whose enoxaparin sodium formulation is the largest selling product among low molecular weight heparin formulations, with sales peaking at $4.243 billion. Although original research sales have shrunk in recent years with the entry of generics, sales in 2016 still reached $1.811 billion. It is expected that the downstream demand for raw materials from Sanofi will be the largest, and once the company establishes a long-term cooperative relationship with Sanofi, its export volume is expected to reach a new level. In the coming years, the company's standard heparin raw material business is expected to enter a phase of simultaneous increase in both volume and price.
2. Potential leader in the export of enoxaparin sodium injection in the future.
The application for enoxaparin sodium injection in the United States has begun internationalization, making it a potential leader in the export of injection formulations in the future. There is a scarcity of global sterile injection production capacity, and the company currently has two FDA-certified injection production lines (one self-built and one acquired). At the same time, through the acquisition of Jianjin, it obtained an FDA-certified injection production line, an excellent formulation R&D application team, and Sagent's overseas sales channels (developed in cooperation with Sagent). In May 2014, the company submitted an application to the FDA for enoxaparin sodium injection, which is currently under review. If approved smoothly, it is expected to be approved by the end of 2018. This product has huge market potential, with original research and generics each accounting for about half of the market, and the overall market size is $3-4 billion. Once this product is launched, the shared rights will bring significant benefits to the company, and there are also a large number of formulations in the dual application R&D stage between China and the United States.
3. Investment recommendations.
We are optimistic about the company's short, medium, and long-term logic. In the short to medium term, it will benefit from the simultaneous increase in volume and price of raw materials, and in the long term, it will benefit from the expansion of domestic and foreign formulations. It is expected that the company's revenue from 2017 to 2019 will be 1.028 billion, 1.466 billion, and 1.840 billion respectively, with net profits of 308 million, 445 million, and 568 million respectively, and EPS of 0.74, 1.07, and 1.36 yuan, corresponding to PE ratios of 30, 21, and 16 times. The growth potential is outstanding; we give an initial buy-A investment rating, with a 6-month target price of 26.25 yuan, equivalent to a dynamic price-to-earnings ratio of 25.00 times in 2018.