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Hutchison China MediTech soars

RESULTS: Hutchison China MediTech says there's more growth to come as the Chinese pharmaceuticals market shows no sign of slowing.
July 29, 2014

The collapse of Pfizer's attempted takeover of AstraZeneca was good news for Hutchison China MediTech (HCM). Chief executive Christian Hogg says Astra, which he believes has "some of the best oncology prospects in the world", was right to rebuff the US behemoth's advances.

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A close relationship with AstraZeneca is important for HCM and its research and development (R&D) division. The company plans to share six clinical programmes with the big pharma outfit by the end of 2014, testing various uses for cancer therapy, 'Volitinib'.

Although the company is paying close attention to its R&D work, it was the China healthcare division that financially dominated the first six months of 2014. A strong performance from the Shanghai Hutchison Pharmaceuticals joint venture helped drive net profit up by 20 per cent to $17.3m (£10.2m).

With the Chinese pharmaceuticals market expected to grow by 15 per cent per annum as state-sponsored healthcare spreads, Mr Hogg says the division should continue to expand rapidly. Falling raw material prices and the new low price drug list policy in China - which makes low price drugs more profitable and therefore a more attractive business venture for manufacturers - should also help boost profits.

Following upgrades, broker Panmure Gordon expects adjusted pre-tax profit of $17.5m this year, giving EPS of 19.3ȼ (from $12.1m and 13.9ȼ).

HUTCHISON CHINA MEDITECH (HCM)

ORD PRICE:960pMARKET VALUE:£508m
TOUCH:950-970p12-MONTH HIGH:1,105pLOW: 465p
DIVIDEND YIELD:nilPE RATIO:103
NET ASSET VALUE:178ȼNET CASH:£1m

Half-year to 30 JuneTurnover ($m)Pre-tax profit ($m)Earnings per share (ȼ)Dividend per share (p)
201317.66.79.0nil
201430.37.310.7nil
% change+72+9+19-

Ex-div: na

Payment: na

£1 = $1.69