United Labs (3933 HK, HK$2.90) - Time to take profits

Earnings preview.  ULI (3933 HK) will announce results on  7 Apr (Tue).  We are looking for a net profit of HK$454.2m.

Our view.  We think that market consensus of HK$544.2m is on the high side.  The consensus number for core earnings has been dragged up by relatively aggressive estimates from a couple of brokerages.  Hence, we think that ULI's results announcement may disappoint the market.  The counter is trading at 6.4x FY12/08F and 5.7x FY12/09F P/E on consensus, but 7.7x FY12/08F and 6.8x FY12/09F P/E on SBI E2 estimates, which we think is fairly valued from a trading perspective in light of current market conditions.  We suggest investors to lock in profits now as we think that: 1) management is unlikely to announce anything that would surprise the market on the upside and act as short term catalysts and 2) avoid any uncertainty relating company's FY12/08 net profit disappointing the market.

Update on Monday, April 6, 2009 at 3:51PM by VAYUE.com Team

United Labs (3933 HK, HK$3.03) - new tax benefit has no substantial effect

News flow. ULI just announced that its Zhuhai (pay 18% tax rate before)and zhongshan plants(pay full tax before) has recieved accreditation as High-tech enterprise, which would allowed the two plants to pay 15% tax rate. However, the overall effective tax rate for the company would still be around 18%.

Our view. We think the new tax benefit has no substantial effect for the company. Given that market consensus HK$544.2m is on the high side. We think that ULI's results announcement may disappoint the market. The counter is trading at 6.7x FY12/08F and 5.9x FY12/09F P/E on consensus, but 8.0x FY12/08F and 7.1x FY12/09F P/E on SBI E2 estimates, nearly reaching our target price of HK$3.10. We suggest investors to lock in profits now as we think that: 1) management is unlikely to announce anything that would surprise the market on the upside and act as short term catalysts and 2) avoid any uncertainty relating company's FY12/08 net profit disappointing the market.