China Shineway revenues rose above expectations

Total sales rose by 24% y-o-y.

Shineway reported its 9M12 sales figures on 19 Oct. Total revenue grew 4% y-o-y to RMB1.5bn, in line with OSK's recast but 4% above Bloomberg consensus. Meanwhile, 3Q12¡¦s total sales rose by 24% y-o-y to RMB503m, also in line with OSK¡¦s estimate but 5% above Bloomberg consensus.

"We edge up our FY12F-FY14F earnings forecast by 1% each year, due to slightly higher sales assumptions. Despite rolling forward the starting point of our 10-year DCF valuation to FY13, we also downgraded our FY15F-FY24F earnings to factor in higher selling expenses and lower margins from OTC sales.This resulted in our TP falling by 4% to HKD12.20, implying a 10.0x FY13 PE (11.9x FY12 PE previously), in line with the stock¡¦s five-year forward mean PE of 10.5x vs. 9.0x currently. We maintain a NEUTRAL call on the stock, in view of the group's unexciting earnings outlook, said OSK.

Here's more from OSK:

Demand for injections. 3Q12 revenue of RMB503m (+24% y-o-y) was 1% above our estimate. Shineway reported 3Q12 injection sales at RMB335m (+21% y-o-y), 21% above our estimate, making up 67% of the Group¡¦s 3Q12 total revenue (vs. our estimate of 56% previously). Therefore, we raised our injection sales projections for 4Q12, FY12F, FY13F-FY14F by 12%, 9%, and 9% respectively.

The impact from 3Q12¡¦s encouraging injection sales were offset by disappointing sales of its soft capsules and granules, which were at RMB85m (flat growth y-o-y) and RMB65m (+12% y-o-y) respectively, 19% and 18% below our estimates. Our 3 Sept report noted that the continuous restructuring of its over-the-counter (OTC) sales platform was adversely affecting sales.

The process will be completed beyond this year, exceeding our end-2012 expectation. In view of the slow progress, we cut our total soft capsules¡¦ and granules¡¦ sales forecast for 4Q12, FY12F, FY13F-FY14F by 15%, 10%, 7%-8% respectively. In all, our FY12F/FY13F/FY14F revenue forecasts have increased by 1% for each financial year. The combined product sales from soft capsules and granules are now expected to contribute about 36% of the Group¡¦s FY12F revenue (vs. 40% previously), and eventually increase to 40% in FY14F.\