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Tencent (00700) performance surge, Unicom (00762) mixed change promotion, Tian Ge Interactive (01980) was smashed, entering the performance-intensive Hong Kong stocks TMT sector, seems to be particularly lively.

In contrast to the network stocks, the pharmaceutical sector has recently been “quiet”. Except for the few medical penny stocks that have been disclosed, most of them are still in a state of being inactive. Of course, "it will be shot when the shot is made." Recently, Yisheng Biotech (01061), with a market value of nearly 2.4 billion Hong Kong dollars (the same unit), has become a pioneer in the biomedical sector and submitted its 2017 interim transcript.

Zhitong Finance APP observation, Yisheng Biotechnology in the first half of 2017, turnover of 438 million yuan, an increase of 20.2%; gross profit of about 358 million yuan, an increase of 21.1%. The net profit attributable to owners of the company was 77.12 million yuan, an increase of 24.41% year-on-year; the basic earnings per share was 13.72 HK cents, and the interim dividend was proposed to be 0.025 yuan per share.

Both revenue and net profit increased, and dividends were declared. Originally thought to activate the trading volume of the Yisheng Biotech secondary market (155 trading ranges from January 3, 2017 to the present, the total transaction volume of the stock was 2,694,800, involving an amount of 108 million yuan). I never thought that the stock price was too strong. There are more funds for outflows.

Two products make the company profitable

In the 2017 mid-year exam, Yisheng Biotech, which has a profit for the period, still maintains its consistent style. The revenue is up 20.2% and the net profit is 24.41%. Among them, the company's bio-pharmaceutical contribution was about 349 million yuan, and the sales of third-party products were about 78.7 million yuan, an increase of 18.1% and 57.4% respectively over the same period of 2016.

Zhitong Finance APP found that in biopharmaceuticals, the contribution of surgical products and ophthalmic products is not inconsistent. During the period, surgical products recorded a revenue of approximately 213 million yuan, representing an increase of 28.5% over the same period in 2016, mainly due to a 26.7% and 58.1% increase in sales of Beifu and Jifuxin series and third-party products, respectively.

Ophthalmology products contributed a total of approximately 214 million yuan to Yisheng Biotech, an increase of 19.4% over the same period of last year. The increase was due to an increase of 8.4% and 57.2% in the sales of Beifushu series and third-party products respectively.

The total revenue of the two products is almost equal to the total revenue of Yisheng Biotech. What is the beginning of Beifuji and Beifushu? In 1996, Zhuhai Dongda Group wholly established Dongda Bio-Pharmaceutical Co., Ltd. With the deepening of operations and the emphasis on research and development, the company invested nearly 30 million RMB to study the two new drugs of Beifuji and Beifushu.

You should know that in 1996, in the case of a handful of "ten thousand households", take 30 million real money to do research and development of new drugs, but I think the company's top management is very optimistic about these two drugs.

However, after 30 million yuan, a small number, so Zhuhai Dongda Group introduced a $28 million investment from IPC (Private) Investment Co., Ltd., a Singapore-based businessman, Yan Mingchi, to hold IPC 50.42%. As a result, Zhuhai Dongda Group became a "Chinese-foreign joint venture."

After more than two years of development, Yan Mingchi family established Yisheng Bio-Pharma in Hong Kong and merged Zhuhai Dongda Group into Yisheng Bio-Pharma through step-by-step change of equity. Finally, it changed its Dongda to Zhuhai billion with a controlling stake of 70%. Shengmu, Beifuji and Beifushu have naturally become important assets of Yisheng Biopharmaceuticals.

After years of market promotion, Beifuji, a surgical wound repair product, has already entered a stage of rapid development. Similarly, Yisheng Biotech pioneered the concept of ophthalmic wound repair and successfully opened the domestic ophthalmology repair market, which made the Beifushu ophthalmology series develop rapidly in recent years. Currently, sales account for the top five sales of ophthalmic prescription drugs in the country. The market share of growth factor ophthalmic drugs is close to 70%. In other words, 100 patients who need to use ophthalmic repair products, 70 people will use Beifushu, expand this ratio, do you hear the money "sound"!

From the perspective of market share, Beifuji and Beifushu are undoubtedly the most important revenue points of the company. In addition, during the period, the sales of flagship bio-pharmaceuticals of Yisheng Biotech increased by 18.1% compared with the same period of last year, while the sales of third-party products during the period ended June 30, 2017 increased by 57.4% compared with the same period of last year.

Perhaps due to excessive income reliance on the above two products, after the release of the results, the stock price of Yisheng Biotech has not changed the overall downward trend. As of August 4, nearly 4 trading days, the stock only rose 0.48%, with a turnover of 905,000 shares, involving an amount of 3,186,300 yuan.

Quote screenshot source: Futu Securities

Sales expenses are higher due to policy

At the same time of revenue growth, Zhitong Finance APP also found that the sales expenses of Yisheng Biotech have increased significantly.

During the period, the company's distribution and sales expenses were approximately 247 million yuan, compared with approximately 202 million yuan in the same period last year, an increase of 22.3%. As explained in the financial report, the increase in distribution and sales expenses was mainly attributable to the higher cost of the expansion of the sales and marketing team and the growth of the operations expanded by the support of pharmaceutical business expansion.

According to the analysis of Zhitong Finance APP, the company's sales expenses increased, or related to the current domestic medical environment. Especially after the implementation of the "two-vote system", most pharmaceutical companies are under pressure from higher channel costs. Due to the two-vote requirement, all products must be opened higher, which will increase the company's taxes and fees.

At the same time, under the pressure of drug bidding and price reduction, to occupy more retail markets, companies must increase the construction of sales channels and engage in "academic promotion", which will also lead to an increase in overall costs. Because prescription drugs must be prescribed by doctors to be sold to patients, academic forums, seminars, and exchanges help doctors to accurately understand drug suitability and mechanism of action, making doctors more clinically targeted. Therefore, whoever gets the approval of the doctors who hold the prescription right will be able to gain a foothold in the prescription drug market.

However, since it is an "academic conference", it is naturally inevitable that the relevant travel expenses between the salespersons such as doctors, dealers and other client units will be invited. During the period, the company's ophthalmology sales team and surgical sales team had about 560 and 720 representatives respectively, and held or participated in more than 210 seminars and 780 marketing activities in major provinces and cities nationwide.

After talking about sales expenses, let’s take a look at administrative expenses. During the period, the company's administrative expenses were about 17.4 million yuan, compared with about 20.7 million yuan in the same period last year. Specifically, the decrease in administrative expenses was mainly due to the translation of the balances denominated in currencies other than the functional currency during the period under review, resulting in an exchange gain of approximately $2.1 million. In a word, the result of “changes in currency exchange rates” is one of the reasons for the decline in administrative expenses of many Hong Kong stock companies.

Product reserve process is accelerating

Revenue depends on Beifuji and Beifushu. Obviously, it is not the best choice. Yisheng Biotech will accelerate the research and development of new products in recent years. After all, he was born out of research and development results.

During the period, the company obtained CFDA approval to commercialize a single dose of preservative-free tobramycin eye drops, which is expected to be launched at the end of 2017. With the proprietary technology advantages of bFGF, the company plans to develop a series of quality products and lay the foundation. Leading the market in the field of wound repair biopharmaceuticals (through the research on novel vascular endothelial growth factor nanobodies for nano-antibody platforms for the treatment of cancer and age-related macular degeneration);

Co-operation and licensing agreements, share subscription agreements and warrants subscription agreements with the US biotechnology company Abpro. The series of new therapeutic products for ophthalmology and surgery will be developed with a number of candidate antibodies from Abpro, as well as new drugs for the company for the oncology treatment business;

The company has established a “blowing and filling” platform, and is now able to develop a series of preservative-free single-dose drugs, such as treatment for eye damage, eye bacterial infections, eye fatigue, dry eye and respiratory diseases. The product will be approved within the next 3 years;

In addition, the company invested $5 million in ACimmune, which specializes in the treatment of Alzheimer's disease (AD) in Alzheimer's disease, in which antibody drugs are at the international frontier, and an antibody strain currently being developed has entered Phase III clinical trials. Stage is the most promising drug for the treatment of AD. Plans for the introduction of other new products are continuing.

The product reserve process is accelerating, and it will obviously increase R&D investment. In fact, in the middle of 2017, Yisheng Biotech confirmed the research and development cost of 3.35 million yuan. In the industry comparison, this number is not much, even rare.

Don't look at the amount of money invested so far, but Yisheng Biotech still holds a “regulation” of R&D investment funds. On July 6, 2016, the company entered into a convertible loan agreement with the International Finance Corporation. Accordingly, IFC agreed to lend and the company agreed to borrow convertible bonds with a total principal amount of 150 million yuan and bear interest at an annual interest rate of 1.9%. The net proceeds from the convertible loan amounted to approximately $145 million and are intended to be used for the company's strategic investment and development of the biopharmaceutical business, as well as for general working capital needs.

During the period, Yisheng Biotech has used 106 million yuan. Among them, 80 million yuan was used to repay the main bank loans, 26.1 million yuan was used for working capital, and the remaining 38.9 million yuan will be invested in research and development. If you do not change the use of funds, it is expected that the company's investment in the second half will increase, and ultimately enhance the product reserve energy.

Based on the rapid growth of Yisheng Biotechnology for 5 years, the existing products Beibeiji, Beifushu's strong performance and good product reserves, the company is expected to maintain rapid growth in the next three years, investors May be positive. (Tian Yuxuan / Wen)

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