SHINEWAY PHARM-神威药业：每股净现金接近股价，维持高分红率

Investment Rating - The report assigns a Buy rating to Shenwei Pharmaceutical (2877 HK) with a target price of HK $18.00, representing a 106% upside potential from the current price of HK$ 8.75 [1][2] Core Views - Shenwei Pharmaceutical's exclusive products are growing steadily, and traditional Chinese medicine (TCM) formula granules are expected to recover growth after 2H24 [3] - The company's revenue and net profit are forecasted to grow at a CAGR of 11% and 10% respectively from 2023 to 2026 [3] - The target price is based on a DCF model with a WACC of 12.1% and a perpetual growth rate of 0.5%, implying a 2025E P/E of 11x, in line with the industry average [14] Financial Performance - In 1H24, Shenwei Pharmaceutical reported revenue of RMB 2.087 billion, down 13% YoY, while net profit grew 28% YoY to RMB 626 million [4] - Excluding one-time items, adjusted net profit declined 5% YoY to RMB 409 million [4] - Gross margin improved slightly by 0.1 ppts to 75.3% in 1H24 [4] - Free cash flow was RMB 489 million in 1H24, with an interim dividend of RMB 83 million and a trailing 12-month dividend yield of 40% [4] - Net cash per share stood at HK $7.64, representing 87% of the latest closing price [4] Product Performance - Injection sales declined 19% YoY to RMB 779 million in 1H24, with the flagship product Qingkailing down 9% YoY to RMB 366 million [4] - Soft capsule sales fell 18% YoY to RMB 289 million, while granule sales grew 4% YoY to RMB 345 million, driven by a 12% increase in Huamoyan granules [4] - TCM formula granule sales dropped 12% YoY to RMB 555 million in 1H24, with sales in Hebei and Yunnan hospitals down 1% YoY, accounting for 90.4% of total formula granule revenue [5] Forecast Adjustments - Revenue forecasts for 2024-26 were lowered by 5%/8%/8%, mainly due to weaker-than-expected injection and formula granule sales [11] - Gross profit forecasts for 2024-26 were revised down by 5%/8%/9%, while net profit and EPS forecasts were cut by 5%/8%/8% [13] - Injection revenue forecasts for 2024-26 were reduced by 8%/12%/13%, and formula granule revenue forecasts were lowered by 9%/13%/16% [12] Valuation - The DCF target price of HK$ 18.00 implies a 2025E P/E of 11x, in line with the industry average of 10x [14] - Shenwei Pharmaceutical trades at a discount to A-share peers, with a 2025E P/E of 6x vs. the A-share average of 20x [19]