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1、BuyBuy20122012Deutsche BankMarkets ResearchAsiaChinaHealth CareHealth CareIndustryChina HealthcareDate28 November 2012Industry UpdateJack Hu, Ph.DChina Edge P99: Monthly datatracker, November 2012Deutsche Bank monthly data tracker, November 2012Recent data suggest: 1) government healthcare spending
2、increased 2% YOY inOctober; 2) patient monitor and ultrasound exports from Shenzhen customsincreased 11% YOY in October; 3) 6-APA price and 7-ACA price was in linewith October and 4) TCM raw material pricing had a slight rebound after asharp decline over the past few months due to de-stocking. We ad
3、viseinvestors to exercise caution when interpreting these data points.Government healthcare spending up 2% YOY in OctoberGovernment healthcare spending was RMB47.9bn in October, representinggrowth of 2% YOY and -33% MOM, which is the lowest growth in the last tenmonths. While we continue to expect m
4、odest growth in 2012, the volatilitymay morph into a potential risk. We believe it would be negative for domesticmedical devices companies, such as Mindray (MR.N), if the decelerationcontinues.Research Analyst(+852) 2203 Companies FeaturedSihuan Pharmaceutical(0460.HK),HKD3.162011A 2012E 2013EP/E (x
5、) 20.3 13.5 11.6EV/EBITDA (x) 11.9 7.2 6.0Price/book (x) 1.7 1.7 1.6Shanghai Pharmaceuticals Hold(2607.HK),HKD14.602010A 2011E 2012EP/E (x) 16.6 15.5EV/EBITDA (x) 7.8 5.1Price/book (x) 0.0 1.2 1.3Shenzhen exports growth rebounded: 11% YOY growth in October 2012Exports of patient monitors and ultraso
6、unds from Shenzhen customs increased11% YOY and -19% MOM in October 2012, compared with 3%/1% YOYincreases in August/September 2012, respectively. Exports declined 3% YOY inJuly 2012. On a rolling three-month basis from August to October, shipmentsremain flat at 5% YOY. This new data point clearly s
7、uggests a quick rebound. IfThe United Laboratories(3933.HK),HKD3.82P/E (x)EV/EBITDA (x)Price/book (x)Buy2011A 2012E 2013E121.2 19.8 15.919.6 8.5 7.21.1 0.9 1.0such growth continues, we expect it is likely that 4Q12 international growthwill be better than that of 3Q12.6-APA and 7-ACA prices are in li
8、ne with last monthAs of November 2012, the 6-APA price reached RMB190/kg, which is in linewith the previous month and represents a 17% rebound from the nadir ofRMB160/kg in 2H11. As of November 2012, the 7-ACA price was RMB530/kg,in line with October 2012, and increased 22% from the nadir of RMB435/
9、kg inJanuary 2012. The peak price was RMB970/kg in June 2010. We estimate thenational breakeven price for 7-ACA at RMB500-550/kg. We believe prices haveincreased due to many companies suspending or halting production, as well asinventory de-stocking. In the past nine months, corn prices have increas
10、ed 1%.We remain cautious on the long-term pricing trend for 6-APA and 7-ACA.Mindray Medical (MR.N),USD33.282011A 2012E 2013EP/E (x) 16.8 18.6 16.4EV/EBITDA (x) 11.5 12.1 10.4Price/book (x) 2.6 2.9 2.6WuXi PharmaTech (WX.N),USD16.12 Buy2011A 2012E 2013EP/E (x) 12.0 11.8 10.8EV/EBITDA (x) 7.0 6.2 5.0P
11、rice/book (x) 1.5 1.9 1.5China Shineway (2877.HK),HKD11.78 Buy2011A 2012E 2013ETCM raw material prices: QKL and Shen Mai ingredients reboundSince the National Development and Reform Commission issued guidelines torelease stock and lower prices in July 2011, we saw a steep decline in prices.P/E (x)EV
12、/EBITDA (x)Price/book (x)13.98.82.111.06.01.99.55.11.7Prices of honeysuckle and indigowoad root (the main ingredients used inShineways flagship product, Qing Kai Ling) increased 13% and 8% inNovember 2012, respectively, vs. the previous month. Shen Mais mainingredients, ophiopogon root and gadix gin
13、seng, were up 10% and 3%.We prefer multiples-based valuation; risks relate mainly to policy/regulationsWe use a multiples-based valuation approach in light of the sustainable growththat we expect from the sector. Industry risks relate mainly to governmentpolicies and regulatory changes in China, par
14、ticularly healthcare reforms,which could negatively affect pricing. Additional risks generally relate to risingRelated recent researchChina Edge P85: Monthly datatracker, July 2012China Edge P89: Monthly datatracker, August 2012China Edge P92: Monthly datatracker, September 2012China Edge P94: Month
15、ly datatracker, October 2012Date26 July 201227 August27 September01 November2012raw material costs and over-exposure to the EDL and RDL._Deutsche Bank AG/Hong KongDeutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors shouldbe aware that the firm
16、may have a conflict of interest that could affect the objectivity of this report. Investors shouldconsider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYSTCERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 072/04/2012.Nov-09Jan-10Nov-11Jan-12Jan-09Mar-0
17、9Jan-11Mar-11Jan-07Jan-08May-07Jul-07Mar-08May-08May-09Jul-09Mar-10May-10May-11May-12Jul-12Mar-07Mar-12Jul-08Sep-08Jul-11Sep-11Jul-10Sep-07Nov-07Nov-08Sep-10Nov-10Sep-09Sep-1260.254.447.949.356.228 November 2012Health CareChina HealthcareOctober healthcare spendingup 2% YOY2% YOY growth in OctoberAf
18、ter weak growth of 8% YOY in 2Q12, government spending growth rebounded to21% YOY in 3Q12. However, in October the growth dropped to 2% YOY again. Thisbreaks down to 14%/16%/14%/31% and 2% YOY in June/July/August/September andOctober 2012, respectively. Total government healthcare spending in Octobe
19、r wasRMB47.9 bn, up 2% YOY and -33% MOM. See Figure 4 for details on spending on amonthly basis.We highlight that the 2% YOY growth is in line with the 7% YOY growth for totalgovernment fiscal spending vs. 27% and 21% YOY growth for healthcare spending andtotal government fiscal spending in 1H12, re
20、spectively. We remind investors that 2012budgets for fiscal income and spending represent 9.5% and 14.1% growth vs. 2011 actualincome/spending growth of 21.3% and 21.2%, respectively. These data points confirm ourprojection of constraints in local government financing for healthcare spending, asment
21、ioned in our report, 2012 Outlook: A year of stabilization, published 12 December 2011.Figure 1: Monthly government spending on healthcare(January 2007 to October 2012)Figure 2: Annual government spending on healthcare(2000 to 2011)RM B b nM o nthlyYo Y %RMB bn150143.090%700637125118.6133.270%60026%
22、 CAGR (2000-11)50047510050%75502517.057.125.280.828.558.146.4 47.4 46.875.371.166.0 66.856.2 49.2 57.255.131.230%10%-10%40030020010049576478851041321992763990-30%0200020012002200320042005200620072008200920102011Source: CEIC; January and February 2011 data was extrapolated from YTD April 2011 data, a
23、s both monthswere not provided by the governmentPage2Source: CEICDeutsche Bank AG/Hong Kong1Q072Q073Q074Q071Q082Q083Q084Q081Q092Q093Q094Q091Q102Q103Q104Q101Q112Q113Q114Q111Q122Q123Q1228 November 2012Health CareChina HealthcareFigure 3: Quarterly government spending on healthcare (1Q07 to 3Q12)RM B b
24、 n250Q uarterly sp end ing (LHS)YO Y g ro wth (RHS)240.280%211.0200195.1168.6181.8182.460%150124.9111.5102.7151.1129.340%10088.076.920%500Source: CEICDeutsche Bank AG/Hong Kong0%Page328 November 2012Health CareChina HealthcareFigure 4: Monthly government spending on healthcare (January 2008 to Octob
25、er 2012)RMB bnJan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11May-11Jun-11Jul-11Aug-11Sep-11Oct-11Nov-11Dec-
26、11Monthly9.48.015.015.817.023.118.219.025.220.523.680.812.112.821.624.624.233.626.920.128.521.031.0143.011.713.424.332.332.238.228.535.547.434.258.1118.618.518.539.946.456.266.047.449.254.446.860.2133.2MOM %-84%-15%89%5%8%36%-21%5%32%-19%15%243%-85%6%68%14%-2%39%-20%-25%42%-26%47%361%-92%14%81%33%0%
27、19%-25%24%34%-28%70%104%-84%0%115%16%21%17%-28%4%11%-14%29%121%YOY %61%15%46%8%73%33%28%28%48%54%34%42%28%61%43%56%42%45%48%6%13%3%31%77%-3%5%13%31%33%14%6%77%66%63%88%-17%58%38%64%44%75%73%66%39%15%37%4%12%Annual total275.7399.4474.5636.7YOY %39%45%19%34%YTD9.417.432.448.265.288.4106.6125.6150.8171
28、.3194.9275.712.124.946.471.095.2128.8155.7175.8204.4225.4256.4399.411.725.149.481.7113.8152.1180.6216.1263.5297.8355.9474.518.537.076.9123.3179.5245.5292.9342.1396.5443.3503.5636.7YOY %61%36%41%28%37%36%35%34%36%38%37%39%28%43%43%47%46%46%46%40%36%32%32%45%-3%1%6%15%20%18%16%23%29%32%39%19%58%47%56%
29、51%58%61%62%58%50%49%41%34% of annual3%3%5%6%6%8%7%7%9%7%9%29%3%3%5%6%6%8%7%5%7%5%8%36%2%3%5%7%7%8%6%7%10%7%12%25%3%3%6%7%9%10%7%8%9%7%9%21%Jan-12Feb-12Mar-12Apr-12May-12Jun-12Jul-12Aug-12Sep-12Oct-1231.231.266.849.357.275.355.156.271.147.9-77%0%114%-26%16%32%-27%2%27%-33%69%69%68%6%2%14%16%14%31%2%
30、31.262.5129.3178.6235.8311.1366.2422.4493.5541.469%69%68%45%31%27%25%23%24%22%Source: CEIC; January and February 2011 data was extrapolated from YTD April 2011 data, as both months were not provided by the governmentPage4Deutsche Bank AG/Hong KongMay-08May-09May-10May-11May-12Jan-08Mar-08Jan-09Mar-0
31、9Jan-10Mar-10Jan-11Mar-11Jan-12Mar-12Jul-08Jul-09Jul-10Jul-11Sep-08Sep-09Sep-10Sep-11Jul-12Nov-08Nov-09Nov-10Nov-11Sep-1228 November 2012Health CareChina HealthcareShenzhen customs data onequipment exports11% YOY growth in October 2012In this section, we track monthly and quarterly export shipments
32、(the total of black andwhite ultrasound, color ultrasound and patient monitors) from Shenzhen customs data.Shenzhen is a tier-one city in Guangdong, Chinas southernmost province, and the closestChinese city to Hong Kong.Annual growth was 26% in 2009, 28% in 2010 and 22% in 2011. The data is seasonal
33、, as1Q typically represents about 20% of annual shipments, while 4Q typically representsabout 30% of annual shipments.Ultrasound and patient monitor shipments worth USD33.4m were recorded in October2012, an increase of 11% YOY and -19% MOM, which was a rebound from the 3% YOYgrowth in September 2012
34、.On a rolling three-month basis from August to October 2012, growth was 5% YOYcompared with the same period in 2011, lower than the 24% YOY increase from Augustto October 2011.Flat YOY growth in 3Q12 Shenzhen shipment data3Q12 saw a 0% YOY increase compared with a 19% YOY increase in 2Q12 and 8% YOY
35、in 1Q12 (see Figure 7 for quarterly details). We note that 3Q11, which saw 36% YOYgrowth, served as a strong base for comparison for 3Q12.Figure 5: Monthly Shenzhen customs export data (as ofOctober 2012)Figure 6: Annual Shenzhen customs export data (as ofOctober 2012)US m60Monthly export (LHS)YOY g
36、rowth (RHS)80%(USD mn)450403.85060%4004040%350300257.5330.1343.4302010020%0%-20%-40%250200150100500204.320082009201020112012YTDSource: Shenzhen customs statistics (the total of black & white ultrasound, color ultrasound and patientmonitors)Deutsche Bank AG/Hong KongSource: Shenzhen customs statistic
37、s (the total of black & white ultrasound, color ultrasound and patientmonitors)Page5-4%28 November 2012Health CareChina HealthcareFigure 7: Monthly and quarterly Shenzhen customs export data (as of October 2012)Mon thl y dataUS$ m2008200920102011Jan13.613.720.131.1Feb8.714.219.019.6Mar16.118.230.936
38、.1Apr17.919.623.528.8May16.416.727.925.9Ju n18.722.732.435.5Ju l14.221.824.935.5Aug15.121.928.832.6Sep23.825.225.940.0Oct14.822.128.430.2Nov18.828.830.940.2Dec26.132.637.348.2T otal2 04 .32 57 .53 30 .14 03 .8201223.330.040.735.430.741.234.332.941.4Mon thl y: Ye ar-ov e r-ye ar grow thJanFebMarAprMa
39、yJu nJu lAugSepOctNovDecT otal2009201020110%47%55%63%34%3%13%70%17%10%19%23%2%68%-7%22%43%10%53%14%42%45%31%13%6%3%54%49%29%6%53%7%30%25%14%29%26%28%22%2012-25%53%13%23%19%16%-3%1%3%Qu arte rly dataQu arte rly: Year-ov er-ye ar grow thUS$ m1Q2Q3Q4QT otal1Q2Q3Q4QT otal200820092010201138.546.069.986.7
40、52.959.083.890.253.269.079.7108.159.783.596.7118.72 04 .32 57 .53 30 .14 03 .82008200920102011n/a20%52%24%n/a11%42%8%n/a30%16%36%n/a40%16%23%n /a26%28%22%201294.0107.4108.620128%19%0%Source: Shenzhen customs statistics (the total of black & white ultrasound, color ultrasound and patient monitors)Dat
41、a directionally correlates to Mindray international sales growthOctober data point shows rebound to Mindrays international revenue growth in 4Q12The historical trend shows that actual reported growth is directionally correlated toShenzhen data. In 1Q11, 2Q11, 3Q11, 4Q11, 1Q12 and 2Q12 , MR reported
42、internationalrevenue growth of 30%, 18%, 26%, 21%, 17%, 21% and 12% compared withShenzhens export growth of 24%, 8%, 36%, 23%, 8%, 19% and 0%, respectively(Figure 8). The October data point suggests a rebound to Mindrays international salesgrowth in 4Q12.Figure 8: Shenzhens customs export growth vs.
43、 Mindray Medicals internationalrevenue growth70%Shenzhen expor tsMi ndr ay s i nter nati onal60%50%61%52%40%40%42%36%30%20%10%20%11%30%6%17%27%18%16%20%16%30%24%18%8%26%23%15%17%8%21%19%12%0%1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12-1%0%-10%Source: Shenzhen customs s
44、tatistics (the total of black & white ultrasound, color ultrasound and patient monitors); Mindray Medical company data, DeutscheBank estimatesPage6Deutsche Bank AG/Hong KongJul-07Jul-08Jul-09Jul-10Jul-11Jul-12Oct-07Oct-08Oct-09Oct-10Oct-11Apr-07Apr-08Apr-09Apr-10Apr-11Apr-12Oct-12Jan-07Jan-08Jan-09J
45、an-10Jan-11Jan-12Nov-10Nov-11May-10May-11May-12Nov-12Jul-10Jul-11Mar-10Mar-11Mar-12Jan-10Jan-11Jan-12Jul-12Sep-10Sep-11Sep-1228 November 2012Health CareChina HealthcareActive pharmaceuticalingredient (API) pricingBoth 7-ACA and 6-APA prices rebounded from a two-year nadir6-APA (aminopenicillanic aci
46、d) is the core active pharmaceutical ingredient (API) used inpenicillin antibiotics. It is a by-product of corn. 7-ACA (aminocephalosporanic acid) is thecore API used in cephalosporins antibiotics. For a description of these antibiotics, refer toour reinstating coverage report on The United Laborato
47、ries (3933.HK), published on 18November 2010.6-APA price is in line with the previous monthCurrently, 6-APA pricing is RMB190/kg, which is in line with the previous month andnear the bottom of historical levels of RMB163-350/kg. Prices declined 29% in 2011 andcontinue to decline MOM; however, there
48、are 17% rebound from the nadir ofRMB160/kg in 2H11.The range between January 2010 and December 2011 was RMB163/kg (December2011) to RMB230/kg (November to December 2010). Current prices are still near two-year lows.Outlook for 2012The prices of 6-APA in China were relatively sluggish during 1H10, re
49、aching troughlevels of RMB175/kg in April 2010. Subsequently, there were signs of recovery as pricespeaked at RMB230/kg in December 2010, about 8% lower and 41% higher than the2009 peak and trough levels of RMB250/kg and RMB163/kg, respectively, as shown inFigure 9 and Figure 10. However, we expect
50、6-APA prices to continue to decline in1H12, given volume pressure from antibiotics usage and capacity expansions that willlikely increase supply. We also expect volumes to pick up again in 2H12, given thedeceleration of inflation and a lower base in 2H11 amid the implementation ofrestrictions on the
51、 use of antibiotics.Figure 9: 6-APA (January 2007 to November 2012)(RM B/kg)5004003002001000Source: HDeutsche Bank AG/Hong KongFigure 10: 6-APA (January 2010 to November 2012)(RM B/kg)5004003002001000Source: HPage7Oct-07Oct-08Oct-09Oct-10Oct-11Apr-07Apr-08Apr-09Apr-10Apr-11Apr-12Oct-12Jan-07Jan-08Ja
52、n-09Jan-10Jan-11Jan-12Jul-07Jul-08Jul-09Jul-10Jul-11Jul-12May-10May-11May-12Mar-10Mar-11Mar-12Jan-10Jan-11Sep-10Sep-11Jan-12Nov-10Nov-11Sep-12Nov-12Jul-10Jul-11Jul-12100028 November 2012Health CareChina Healthcare7-ACA price is in line with the previous monthFrom November 2010, prices declined every
53、 month until February 2012, when theywent up 9%. Prices of 7-ACA are still near five-year lows. The price of 7-ACA in Chinawas RMB530/kg as of November 2012, in line with the previous month and up 22%from the nadir of RMB435/kg in January 2012, but down 43% since end-2010. Pricesdeclined as a result
54、 of the limited usage restriction on cephalosporin antibiotics in Chinaand the large capacity increases of 7-ACA facilities. However, we believe the recentuptick in 7-ACA prices is a result of lower supply as several 7-ACA producers areceasing or halting production.Figure 11: 7-ACA (January 2007 to
55、November 2012)(RM B/kg)10008006004002000Source: HFigure 12: 7-ACA (January 2010 to November 2012)(RM B/kg)10008006004002000Source: HCorn prices had a sharp decrease vs. the previous monthSince the beginning of 2009, corn prices in China have increased 74% to RMB2,570/toncurrently. They hit a new hig
56、h in the 38th week of 2011, when the price wasRMB2,600/ton. Since then, prices have dropped 8% to current levels at RMB2,395/ton.Despite a significant rise in corn prices, 6-APA prices have not followed the same path.Thus, we conclude that 6-APA prices are, instead, largely determined by supply andd
57、emand.Figure 13: Weekly corn prices in China(RM B/ton)3000250020001500W1 W5 W9 W13 W17 W21 W25 W29 W33 W37 W41 W45 W49 W1 W5 W9 W13 W17 W21 W25 W29 W33 W37 W41 W45 W49 W1 W5 W9 W13 W17 W21 W25 W29 W33 W37 W41 W45 W49 W1 W5 W9 W13 W17 W21 W25 W29 W33 W37 W41 W452009201020112012Source: China JCIPage8D
58、eutsche Bank AG/Hong Kong28 November 2012Health CareChina HealthcareFigure 14: Weekly corn prices in ChinaWeekly dataRMB/ton2009201020112012W11475182520602395W51500182520752405W91550182521302420W131650190021602470W171650194022202485W211625200023002498W251625192523502502W291725197523752530W3317252025
59、24202580W371775200025752570W411725201025002410W451750207524002390W49180020502360YTD22%12%15%Weekly: Y ear-ov er-year growthW1W5W9W13W17W21W25W29W33W37W41W45W49T otal20102011201224%13%16%22%14%16%18%17%14%15%14%14%18%14%12%23%15%9%18%22%6%14%20%7%17%20%7%13%29%0%17%24%-4%19%16%0%14%15%14%15%Source: C
60、hina JCIDeutsche Bank AG/Hong KongPage9Oct-08Oct-09Oct-10Oct-11Apr-08Apr-09Apr-10Apr-11Apr-12 Oct-12Jan-08Jan-09Jan-10Jan-11Jan-12Jul-08Jul-09Jul-10Jul-11Jul-12May-10May-11May-12Mar-10Mar-11Mar-12Jan-10Jan-11Sep-10Sep-11Jan-12Nov-10Nov-11Sep-12Nov-12Jul-10Jul-11Jul-1228 November 2012Health CareChina
61、 HealthcareTCM raw material pricesPrices slightly reboundHoneysuckle (flos lonicerae) was up 13% from the previous monthHoneysuckle, or flos lonicerae, is a key element for treating influenza, and the major rawmaterial in Qing Kai Ling products.As of November 2012, the price was RM90/kg, up 13% MOM.
62、 Currently, the price is74% below the peak level of February 2010. Following this peak, prices dropped andwere stable between August 2010 and April 2011. However, since then, prices havefallen 63%.We believe prices could fall further to January 2008 levels, the lowest we have seen.Prices increased f
63、rom RMB70/kg in January 2008 to RMB340/kg in February 2010.Then, seasonally weak demand dragged the price down to RMB187/kg in June 2010,and it picked up slightly thereafter in the peak influenza A season.Figure 15: Flos lonicerae (January 2008 to November2012)RM B/kg400350300250200150100500Source:
64、Zhong Guo Yao Cai Shi ChangFigure 16: Flos lonicerae (January 2010 to November2012)RM B/kg400350300250200150100500Source: Zhong Guo Yao Cai Shi ChangIndigowoad root (radix isatidis) increased 8% vs. the previous monthIndigowoad root, or radix isatidis, is another major raw material used in Qing Kai
65、Lingproducts and is often used for laryngitis and pharyngitis.The roots price rose significantly from November 2009 (at RMB13/kg) and peaked inMay 2010 (at RMB27.25/kg). Since then, prices have declined 67% to RMB9/kg as ofNovember 2012, down 25% since end-2010. In November 2012, prices were up 8% v
66、s.the previous month, after a significant MOM drop of 14% in December 2011. Industrysources say that oversupply issues were the main cause of the recent decline.Page10Deutsche Bank AG/Hong KongMar-08Mar-09Mar-10Mar-11Mar-12Sep-08Sep-09Sep-10Sep-11Dec-08Dec-09Dec-10Dec-11Sep-12Jun-08Jun-09Jun-10Jun-1
67、1Jun-12May-10May-11May-12Mar-10Mar-11Mar-12Jan-10Jan-11Sep-10Sep-11Jan-12Nov-10Nov-11Sep-12Sep-12Nov-12Nov-12Jul-10Jul-11Jul-12Jul-12Oct-08Oct-09Oct-10Oct-11Apr-10Apr-11Apr-12 Oct-12Apr-08Apr-09Jan-10Jan-11Jan-12Jan-09Jan-08Jul-09Jul-10Jul-11Jul-12Jul-08May-10May-11May-12Mar-10Mar-11Nov-10Nov-11Mar-
68、12Jan-10Jan-11Sep-10Sep-11Jan-12Jul-10Jul-1128 November 2012Health CareChina HealthcareFigure 17: Radix isatidis (March 2008 to November 2012)RM B/kg302520151050Source: Zhong Guo Yao Cai Shi ChangFigure 18: Radix isatidis (January 2010 to November2012)RM B/kg302520151050Source: Zhong Guo Yao Cai Shi
69、 ChangOphiopongon root (radix ophiopogonis) was increased 10% vs. previous monthOphiopongon root, or radix ophiopogonis, is often used with red ginseng to reduceperspiration and moisten the lungs and body. It is a major ingredient in Shen Maiproducts.The root has been a hot topic in the TCM raw mate
70、rials market as its price rose sharply,by 908%, from the trough levels of March 2008 to the July 2011 peak, as a result of asubstantial reduction in planting area. Since the end of 2010, prices have decreased35% to RMB55/kg currently. The large price increase restrained demand, whichdepressed prices
71、 thereafter, in our view.In 2011, prices peaked twice at RMB139/kg in April 2011 and RMB145/kg in July2011. Since the July 2011 peak, prices have declined 62% to RMB55/kg currently.Moreover, following the price rebound in the past few months, we have seen a sharpdecrease of 32% from RMB80/kg to curr
72、ent levels in January 2012.Figure 19: Radix ophiopogonis (January 2008 toNovember 2012)RM B/kg160140120100806040200Source: Zhong Guo Yao Cai Shi ChangDeutsche Bank AG/Hong KongFigure 20: Radix ophiopogonis (January 2010 toNovember 2012)RM B/kg160140120100806040200Source: Zhong Guo Yao Cai Shi ChangP
73、age11May-11May-12May-10May-09Mar-11Mar-12Mar-10Mar-09Jan-11Jan-12Jan-10Jan-09Sep-11Sep-12Sep-10Sep-09Nov-11Nov-12Nov-10Nov-09Jul-11Jul-12Jul-10Jul-09May-10May-11May-12Mar-10Mar-11Mar-12Jan-10Jan-11Jan-12Sep-10Sep-11Sep-12Nov-10Nov-11Nov-12Jul-10Jul-11Jul-1228 November 2012Health CareChina Healthcare
74、Gadix ginseng (red ginseng) increased 3% from the previous monthRed ginseng, or gadix ginseng, is a major ingredient in Shen Mai products and is usedto invigorate the central nervous system, leading to increased energy and circulation.There was a sharp price increase throughout 2010 to August 2011,
75、peaking atRMB215/kg and prices have since declined 19% to RMB175/kg in November 2012.There is low visibility in determining near-term prices. Prices are now at RMB175/kg,similar to the levels seen at the end of 2010.Figure 21: Gadix ginseng (January 2008 to November2012)RM B/kg250200150100500Source:
76、 Zhong Guo Yao Cai Shi ChangPage12Figure 22: Gadix ginseng (January 2010 to November2012)RM B/kg250200150100500Source: Zhong Guo Yao Cai Shi ChangDeutsche Bank AG/Hong KongAppendix 1Important DisclosuresAdditional information available upon requestFor disclosures pertaining to recommendations or est
77、imates made on securities other than the primary subject of thisresearch, please see the most recently published company report or visit our global disclosure look-up page on ourwebsite at http:/ CertificationThe views expressed in this report accurately reflect the personal views of the undersigned
78、 lead analyst about thesubject issuers and the securities of those issuers. In addition, the undersigned lead analyst has not and will not receiveany compensation for providing a specific recommendation or view in this report. Jack HuEquity rating keyEquity rating dispersion and banking relationship
79、sBuy: Based on a current 12- month view of total share-holder return (TSR = percentage change in share pricefrom current price to projected target price plus pro-jected dividend yield ) , we recommend that investors45040035030025055 %38 %buy the stock.Sell: Based on a current 12-month view of total
80、share-holder return, we recommend that investors sell thestockHold: We take a neutral view on the stock 12-months20015010050012 %BuyHold15 %6%11 %Sellout and, based on this time horizon, do notrecommend either a Buy or Sell.CompaniesCoveredCos.w/BankingRelationshipNotes:1. Newly issued research reco
81、mmendations and targetprices always supersede previously publishedresearch.2. Ratings definitions prior to 27 January, 2007 were:Buy: Expected total return (including dividends)of 10% or more over a 12-month periodHold: Expected total return (includingdividends) between -10% and 10% over a 12-month
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