China Tracker - Details for China Biologic Products (CBPO)

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 China Biologic Products
 Analyst Coverage
2011-07-12Rodman & RenshawDowngradeUnder Reviewn/a

Pending a thorough re-evaluation of our model, once the impact of the shutdown is quantifiable, we are placing our rating and target price Under Review. Our previous rating was Market Outperform with a 12-month target price of $16/share.

2010-12-06Brean MurrayReiterationBuy$20.00

New President Strengthens Management Team. CBPO filed an 8-K after market close on Dec. 3rd announcing its appointment of Stanley Lau as president. Stanley has many years of successful senior management experience at Baxter, Pfizer, and Merck in China. We believe the addition of an experienced healthcare industry veteran to the management team will help the company grow and scale up in the future, taking advantage of a favorable blood plasma industry trend in China.

Independent Investigation Results. The independent investigation finally came to an end. The investigation report addressed all five allegations in detail (see 8-K filed on Dec. 3rd). Although we are surprised that the independent board didn’t recommend any action for the management to take, we trust they probably picked the right course of action. The results certainly left some doubts for investors. In our view, two things are clear: - Du Zuying’s claim of CBPO’s ownership is invalid. - Some investors will have lingering concerns about management and board members’ background.

Move on to focus on solid fundamentals. The 11-month independent investigation is final. We believe the allegations are not affecting CBPO’s fundamental operation, which will drive the stock price in the long run. We recommend risk-tolerant investors move to the next phase to focus on its fundamentals. Recall that CBPO reported 3rd quarter revenue of $36 million (+33.2% YoY), which beat both Street consensus of $33.6 million and our estimate of $32.9 million. Net income of $13.7 million exceeded Street conse nsus of $8.5 million and our estimate of $9.8 million. We think the company’s full-year guidance is achievable given its >20% revenue growth rate for the last three quarters. We forecast FY10 revenue, adj. net income and adj. non-GAAP diluted EPS to be $148.6 million, $38.9 million and $1.46, respectively .

Warburg Pincus stock purchase should be next catalyst. Warburg Pincus’s CBPO stock purchase has been held up by the investigation. After release of the investigation results, Warburg Pincus’s stock purchase should be the next catalyst for the stock. As we mentioned in our June 28th note, Warburg Pincus will pay $13/share for a 12.5% stake in CBPO. We believe the successful transaction will help improve CBPO’s corporate governance as the reputable private equity firm requested a board seat along with the share purchase.

Stock is still attractive. The stock is trading at 8x and 7.2x our FY10 and FY11 adj. non-GAAP diluted EPS estimates of $1.46 and $1.63. The stock is undervalued given its solid fundamental performance. The recent depressed stock price has already incorporated some risks associated with the investigation results. Although we expect stock price to be volatile near-term, we believe in the long-term potential of the company. We maintain our Buy rating and $20 target price.

Valuation: The stock is trading at 8.0x and 7.1x our FY10E and FY11E adj. non-GAAP diluted EPS estimates of $1.46 and $1.63, with $2.4 cash/share on balance. We maintain our Buy rating and $20 target price, which is derived by applying a 12x multiple to our 2011 adj. non-GAAP diluted EPS estimate of $1.63. Risks: Litigation risk; competition risk; regulatory risk; clinical trial risk; country risk.

2010-12-06Rodman & RenshawReiterationOutperform$17.00

The company issued an 8-K to release results of an investigation conducted by a Special Independent Committee, which was appointed in response to allegations surfaced in January 2010. With limited access to relevant official records, the Special Committee could neither confirm nor exclude the allegation regarding the identity of Tung Lam, CEO of Shandong Taibang (a primary operating subsidiary of CBPO). The Special Committee found no evidence that the seed capital to establish CBPO originated from embezzled funds. We believe the company's business should not be impacted by the findings of the Committee. Therefore, we maintain our Market Outperform rating with a 12-month target price of $17 per share.

2010-11-16Rodman & RenshawReiterationOutperform$17.00
2010-08-16Rodman & RenshawReiterationOutperform$17.00

We project $145MM in revenues and $40MM in net income to the controlling interest ($34MM adjusted for non-cash change in fair value of derivative liabilities) for 2010. We maintain our Market Outperform rating and a 12 – month target price of $17 / share. The price target is derived from an NPV analysis with a 15% annual discount rate and a 5% terminal value growth rate.

2010-05-17Rodman & RenshawReiterationOutperform$17.00

We project $145MM top line and $37MM adjusted net income for 2010.

2010-05-13Brean MurrayReiterationBuy$20.00

We expect the two plasma collection stations, with an additional 80 metric tons of plasma collection capacity, to begin contribute to revenue starting 2H11, and we have adjusted our FY11 and FY12 revenue growth rate estimates to 27% and 36%, respectively. We expect that EPS can benefit more than 5% and 14% for 2011 and 2012, respectively, because of operational leverage and economies of scale. We have adjusted our FY11 adjusted diluted EPS forecast to $1.69 from $1.59.

2010-05-12Rodman & RenshawReiterationOutperform$17.00

The government’s approval of additional plasma stations for the first time in Shandong province suggest an endorsement of China Biologic Products' quality controls. Once completed, the company is expected to own seven of eight plasma collection stations in the province. We expect that the two new collection stations would contribute to growth beginning in 2011. We project $145MM top line and $32MM adjusted net income for 2010.

2010-03-26Brean MurrayReiterationBuy$19.00

We maintain our Buy rating and are raising our target price from $15 to $19, based on 12x our 2011 adjusted non-GAAP EPS estimate.

2010-03-24Rodman & RenshawReiterationOutperform$17.00

We project $145MM top line and $32MM adjusted net income for 2010.

2010-01-27Rodman & RenshawReiterationOutperform$17.00
2010-01-27Brean MurrayReiterationBuy$15.00
2009-12-14Brean MurrayInitiationBuy$18.00
2009-11-25Rodman & RenshawInitiationOutperform$17.00
Healthcare & Drugs
READ: Score Cards Explained
DETAILS: Safety/Risk Model for CBPO
Current Price:  n/a
F10k Day (2008-02-06): -100.00%$4.01
2009 Close: -100.00%$12.08
2010 Close: -100.00%$16.39
2011 Close: -100.00%$10.46
High (2012-07-20): -100.00%$11.00
Low (2012-05-25): -100.00%$7.07
Market Capitalization: n/a
Total Shares: 25.68 mill
Float: n/a
Avg Volume: 22.50 k
Short Interest: 1.10 mill
Short Ratio: 17.49%49.0 d
Last Quarter: 2011-03-31
Revenue (MRQ): 34.47 mill
Net Income (MRQ): 7.97 mill
Op. Cash Flow (MRQ): 2.88 mill
all financial data provided without warranty