United Laboratories (3933 HK): scale brings out profit -BUY(Unchanged)

to summarize…

-The results were better than expectation with top line up of 43.9% YoY and bottom line up of 212.8% YoY for 2H FY12/09A.

- Although ASP of 6-APA for 2H FY12/09A was dropped, the external sales growth of 44.5% YoY was driven by the volume increase while the profitability improved significantly benefiting from scale effect.

-Bulk medicine segment profit increased 204.7% YoY with both volume and margin improvement.

-It is likely that 6-APA and amoxicillin bulk medicine market would be still volatile in 2010, but the downside potential would be limited.

-Finished product line development well with first two months of 2010 increased around 25.0% YoY.

-Maintain BUY call with revised target price of HK$7.16 based on our scenario analysis.

ULI: scale brings out profit

United Laboratories (3933 HK): Warm 6-APA market -BUY (from HOLD)

Key points:

-6-APA market is warm now with price moved to RMB205/kg (excluding VAT).

-Finished product line growth would be strong. We estimate for 25% YoY growth.

-New products would be helpful supplement for FY12/10F and have potential to be key driver for ULI’s finished product line in the future.

-We revised up our net profit estimate for FY12/09F to HK$404.9m from HK$310.5m.

-Our scenario analysis suggest a fair price of HK$5.28 on base case, HK$6.64 on bull case, and HK$3.20 on bear case.

-We upgrade the counter to BUY from HOLD, with target price of HK$5.04, which was derived by applying an equal weight on each scenario.

United Labs: Warm 6APA market - BUY

United Lab (3933 HK, HK$3.27, HOLD) - Finished drugs are still the key

• Revenue increased 5.3% YoY with net profit drop of 55.2% affecting by drop in 6-APA price, increasing expenses and tax.
• 6-APA market is still competitive although some players are starting cutting their capacity.
• Finished product development is in line with the growth driver mainly from new drugs.
• 13 finished products are in the catalogue of essential drugs and management is positive on the development of finished products.
• Maintain HOLD call with target price of HK$3.19.

Finished drugs are still the key

United Laboratories (3933 HK): No Catalyst for 6-APA - HOLD (from BUY)

Key points:

- 6-APA and amoxicillin bulk medicine price remain weak with near term outlook remaining pessimistic. We revised down our estimate of the contribution from intermediate product and bulk medicine.

- Slightly revising up the operating profit factoring the lower cost in 2009 and revising down the top line factoring the effect from delay in issuing of catalogue of essential drugs.

- Finished products account for 79.1% of total EBIT.

- Downgrade the counter to HOLD call, revising SOTP target price to HK$3.19, representing 10.8x blended FY12/09F P/E.

United Laboratories (3933 HK): No Catalyst for 6-APA

United Labs (3933 HK, HK$3.08, BUY) - Receives SFDA approval for Avian flu prescription drug

ULI announced that they have received the SFDA approval for a new prescription antiviral drug (盐酸金刚乙胺颗粒) for prevention and treatment of the avian flu. ULI is still waiting for GMP approval, which may take around 3 months, meaning that the drug should be on launched onto the market in time for the peak flu season in the coming winter (starting from the month of November).

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