瑞信-全球-生物制药行业-生物制药行业投资策略：核心共识-2019.10-21页.pdf

Out on a Limb Our key above/below consensus ideas Credit Suisse(Hong Kong)Limited Manish Nigam +852 2101 7067 manish.nigamcredit- Vaibhav Jain +852 2101 7061 vaibhav.jaincredit- Sabrina Shao +852 2101 6305 sabrina.shaocredit- October 2019 DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS.US Disclosure:Credit Suisse does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.Out on a Limb:Long and short ideas Methodology 2 We highlight key above/below consensus long/short ideas from CS AxJ universe.We screened our AxJ coverage universe for large,liquid companies,where CS analysts earnings estimates are materially above/below consensus estimates.Out of our coverage universe of 900 stocks(excluding Japan,Australia),we shortlisted 400 stocks with market cap over US$5 bn+and 6M ADTV of US$5 mn+.In the case of ASEAN markets,we relax the criteria to include stocks with slightly lower market cap and liquidity.For each company,we outline our investment thesis(positive/negative),identify why we are different from the street,and highlight key catalysts on the horizon.We expect these companies to outperform/underperform over the next three to six months as respective catalysts/events play out.We also note that our earlier basket(equal-weighted)of ten stocks()outperformed MSCI Asia ex-Japan by 700 bp over the past four months,with eight out of ten stocks beating the benchmark.Oct 2019 3 Out on a Limb:Long and short ideas Rationale behind higher/lower-than-consensus earnings Oct 2019 Note:LC Local currency.Priced on 16-Oct-2019.O Outperform.U Underperform.For Mar/Jun year-end companies,2019E implies FY20 and so on.Source:Company,IBES,CS estimates In case of BeiGene,CS estimate of losses are lower than Consensus(shown as a+ve number).2019E2020ELONG IDEASBeiGeneBGNE.OQHealthcareO15.1 157.5 25%10%45%NmWe have similar expectations on topline growth.However,we expect R&D spend to moderate over next three years as many later stage assets will have lower clinical trial expenses.Dialog GroupDIAL.KLEnergyO4.7 4.0 15%16%22%18.5 Faster ramp-up of Phase 2(Pengerang terminals)and early recognition of revenues from Phase 3 Lens Tech.300433.SZTechO7.4 14.9 12%-17%6%91.6 We expect better ASP upgrade trend from enhanced casing spec and GM improvement from companys better execution,supporting a strong earnings recoveryNaver035420.KSTechO21.5 19200024%28%36%19.3 Consensus concerns on potential softness in NAVERs shopping-driven search business is unjustified.NAVER should benefit from growth of its own shopping platformSamsung SDI006400.KSTechO12.7 28500030%20%16%35.2 New xEV model launches of clients likely to benefit Samsung SDIs growth.We also expect market share gains with China OEMs amidst NEV subsidy cutSime DarbySIME.KLMulti IndustryO3.7 2.7 15%15%27%18.9 Industrial division will benefit from resilient Met coal price,resulting in demand for parts and new equipment.Auto division to benefit from model upcycle(3-series)Xinjiang Goldwind 2208.HKIndustrialsO7.1 13.5 44%14%19%20.9 We believe that turbine gross margin will bottom out in 2H19(v/s later as expected by consensus).We are also more positive on Chinas wind installations in 2019-20SHORT IDEASBangkok Dusit BDMS.BKHealthcareU12.3 20.0 -15%-10%-8%2.3 Street seems complacent on upcoming revenue and margin pressures(CS margin 140bps lower v/s street)due to competition from upcoming newcomerNetmarble251270.KSTechU6.5 62,000 -31%-10%-14%16.5 We are skeptical on performance of long tail games.Further,new game launches can get delayed as mgmt.seems more focused on non core expansionSATS LtdSATS.SIIndustrialsU4.1 4.1 -18%-9%-12%(2.1)We expect lower than consensus revenue growth,which will also weigh on margins due to operating leverageSinopec Shanghai 0338.HKEnergyU5.3 2.0 -10%-40%-44%(44.2)We expect new industry capacities to get commissioned largely on schedule(v/s delay expected by consensus),which will bring unprecedented pressure in the industryRationale behind difference v/s Consensus earnings2018-20E%Eps CagrTP(LC)M.cap ($bn)Upside CS/Cons.EPS(%)CS RatingCompanyRICSector4 Out on a Limb:Long and short ideas Valuation table Oct 2019 Valuation tableValuation table Note:LC Local currency.Priced on 16-Oct-2019.O Outperform.U Underperform.For Mar/Jun year-end companies,2019E implies FY20 and so on.Source:Company,IBES,CS estimates M-cap 6M ADTOPriceTP2018-20EPE(X)PE(X)PB(X)EV/E(X)RoE Div.yieldCompanyRICCountry($bn)($mn)(LC)(LC)Upside Eps%Cagr 2019E2020E2019E2019E2019E2019ELONG IDEASBeiGeneBGNE.OQChina15.1 13.0 127 158 25%Nm(11.7)(17.1)2.5 (24.0)(21.4)-Dialog Group BhdDIAL.KLMalaysia4.7 6.7 3.47 4.00 15%18.5 29.9 26.3 4.6 33.5 15.6 1.2 Lens Technology300433.SZChina7.4 42.2 13.35 14.90 12%91.6 35.8 22.4 2.9 13.3 8.0 0.4 Naver035420.KSSouth Korea21.5 46.4 154,500 192,000 24%19.3 39.7 24.4 3.1 20.2 7.7 0.2 Samsung SDI006400.KSSouth Korea12.7 45.7 218,500 285,000 30%35.2 17.2 12.0 1.2 12.5 7.2 0.5 Sime DarbySIME.KLMalaysia3.7 3.5 2.30 2.65 15%18.9 13.8 11.7 1.0 7.0 7.5 4.8 Xinjiang Goldwind 2208.HKChina7.1 6.7 9.36 13.50 44%20.9 10.4 7.6 1.1 12.0 10.7 3.2 SHORT IDEASBangkok Dusit BDMS.BKThailand12.3 34.0 23.5 20.0 -15%2.3 37.4 35.3 4.6 22.6 12.4 1.3 Netmarble251270.KSSouth Korea6.5 23.9 90,400 62,000 -31%16.5 39.8 30.4 1.9 18.9 4.9 0.4 SATS LtdSATS.SISingapore4.1 6.6 4.97 4.10 -18%(2.1)24.7 24.0 3.3 17.0 13.5 3.8 Sinopec Shanghai 0338.HKChina5.3 5.4 2.21 2.00 -10%(44.2)13.0 13.0 0.7 10.8 5.7 3.9 Out on a Limb:Performance since last report Performance of our earlier recommendations 5 In our earlier report dated 18 June(),we had highlighted a list of ten Outperform-rated stocks,where CS analysts were ahead of consensus on their EPS estimates.The basket(equal weighted)of these ten stocks has outperformed MSCI Asia ex-Japan index by 700 bp,with eight out of ten stocks outperforming the benchmark.Poly Development,ENN Energy and China Gas delivered over 15%return;on the other hand,LG Electronics saw 14%pullback.Oct 2019 Note-Stock performance from 18th June(date of publishing Out on a Limb report)to 16-Oct-2019.Source:Company,Refinitiv,CS estimates Eight of ten stocks outperformed MSCI Asia ex Japan;three delivered+15%returnEight of ten stocks outperformed MSCI Asia ex Japan;three delivered+15%return 6 Long Ideas Oct 2019 7 Oct 2019 BeiGene(BGNE.OQ):Leading China oncology player with rich late stage pipeline RatingRating:OUTPERFORM|Target price:Target price:US$157.52(25%upside)AnalystAnalyst:Serena Shao SUMMARY VIEW:BeiGene is a commercial-stage biopharmaceutical company based in China dedicated to becoming a global leader in the discovery,development,and commercialisation of innovative,molecularly targeted,and immuno-oncology drugs for the treatment of cancer.INVESTMENT THESIS:We believe that BeiGene is a leading innovator in the China oncology space.It has three marketed products in China,three late-stage assets,and six early-stage clinical assets.BeiGene has two potential blockbuster drugs expected to launch before 2020,Zanubrutinib(BTK inhibitor)and Tislelizumab(anti-PD-1 antibody).We see Zanubrutinib/Tislelizumab as the major drivers of BeiGenes value through commercialisation in China and global markets.Its marketed products and other pipeline assets also allow BeiGene to develop internal combo therapies.The company has a strong management team,experienced sales force,and deep R&D capabilities.EARNINGS GROWTH DRIVERS:(1)Expected commercial launch of Zanubrutinib in 1H20 for mantle cell lymphoma(MCL)and chronic lymphocytic leukemia/small lymphocytic lymphoma(CLL/SLL)in China as a best-in-class BTK inhibitor and continued potential expansions into other indications,and(2)expected commercial launch of Tislelizumab in 2H19 for classical Hodgkin lymphoma(cHL)in China and continued potential expansions into other indications.VALUATION:Our multi-stage DCF model-derived target price for BeiGene is US$157.52,assuming 9.3%WACC and 3%perpetual growth rate.Our model assumes:(1)commercialisation of Zanubrutinib in 2020E,success rate-adjusted peak sales reached in 2027E,(2)commercialisation of Tislelizumab in 2019E,success rate-adjusted peak sales reached in 2030E,and(3)varying success rates depending on indication and clinical phase.Why are we more positive vs consensus WHY DO WE DIFFER VS CONSENSUS:The street is expecting similar top-line growth but much larger earnings loss in 2019/20/21E.We think that consensus estimates forecast a higher R&D spend but we think that R&D spend will decrease significantly in the next three years due to many later stage assets having reduced clinical trial expenses.NEAR-TERM CATALYSTS:There are three key catalysts worth noting:(1)expected NDA approval of Tislelizumab for cHL in China in 2H19,(2)Phase 3 top-line results of Zanubrutinib to Ibrutinib for Waldenstrms Macroglobulinemia(WM)in 4Q19,and(3)expected NDA approval of Zanubrutinib for MCL and CLL/SLL in China in 1H20.KEY RISKS TO OUR VIEW:(1)Delays in regulatory approval of key drugs including Tislelizumab and/or Zanubrutinib;(2)failures and/or primary objectives not reached in key clinical trial results;and(3)regulatory changes affecting the market/approval process for key drugs.Market cap:Market cap:US$15.1 US$15.1 bnbn|6M ADTO:US$13.0|6M ADTO:US$13.0 mnmn BeiGene is a leading oncology company based in China Note:Priced as of 16-Oct-2019.Source:Company data,Refinitiv,Credit Suisse estimates Source:Credit Suisse estimates We expect R&D expense as%of sales to decrease to 75%by 2021E.USD Mn-800-600-400-200020040060080010002019 E2020 E2021 ERevenueR&D ExpenseNet Loss8 Oct 2019 Dialog Group(DIAL.KL):A business with a moat RatingRating:OUTPERFORM|Target price:Target price:RM4.0(15%upside)AnalystAnalyst:Danny Chan SUMMARY VIEW:Dialog provides engineering,procurement,construction and commissioning(EPCC),and plant maintenance solutions to its clients.It is also one of the largest tank terminal owners(for crude and petrochemical products)in Malaysia,where the capacity is concentrated in the south of Malaysia in Johor.It also has some exposure to the upstream business.INVESTMENT THESIS:The expansion of Phase 3 in Pengerang,Johor,has been a crucial catalyst that we have been monitoring for a long period of time.With better visibility on the new capacity from a demand standpoint,we believe that Dialog could potentially double its net profit to RM1 bn within five years(FY24E),to be made possible by a solid management team.More importantly,Dialogs earnings will become more stable by then,as 60%of net profit will be derived from its tank terminal business.EARNINGS GROWTH DRIVERS:(1)Further expansion of storage capacity in Pengerang(Dialog could build up to 15 mn cbm of storage capacity vs our estimate of 9 mn cbm currently);(2)growth from EPCC division via Pengerang(captive business for Dialog);and(3)upside from recurring income via plant maintenance(higher the capacity operated,higher the upside potential).VALUATION:Our sum-of-the-parts(SOTP)target price for Dialog is RM4.00,pegged to CY20E earnings.Our model assumes:(1)9 mn cbm of storage capacity in Pengerang;(2)EPCC for Phase 3 to kick off in 2H CY19;and(3)storage rates for Dialogs tank terminals to remain resilient(SG$7 per cbm).Why are we more positive vs consensus WHY DO WE DIFFER VS CONSENSUS:The street is expecting gradual ramp up of Phase 2,but in reality,the ramp up will be immediate given the take or pay structure.More importantly,Dialog will start to recognise EPCC revenue for Phase 3 in 2H CY19(one year ahead),given that it has secured BP as an anchor client recently.NEAR-TERM CATALYSTS:There are three key catalysts worth noting:(1)further expansion of Phase 3;(2)higher-than-expected contract value for EPCC(mainly from Phase 3 and overseas;and(3)higher-than-expected storage rates as demand picks up due to implementation of IMO 2020.KEY RISKS TO OUR VIEW:(1)Oil price continues to deteriorate(10%of Dialogs earnings are exposed to the upstream business);(2)Phase 3 fails to kick off materially;and(3)storage rates.Market cap:Market cap:US$4.7 bn US$4.7 bn|6M|6M ADTO:US$6.7 ADTO:US$6.7 mnmn Dialog Group provides EPCC services and plant maintenance solutions to its clients.It is also one of the largest tank terminal owners in Malaysia and has some exposure to the upstream business.Note:Priced as of 16-Oct-2019.Source:Company data,Refinitiv,Credit Suisse estimates Source:Company data,Credit Suisse research Dialogs tank terminal business should continue to grow significantly over time (10)-10 20 30 40 50 60 702Q153Q154Q151Q162Q163Q164Q161Q172Q173Q174Q171Q182Q183Q184Q181Q192Q193Q19RMmnSPV3 achieved commercial status9 Oct 2019 Lens Tech(300433.SZ):Beneficiary of glass casing upgrade in 5G cycle RatingRating:OUTPERFORM|Target price:Target price:Rmb14.9(12%upside)AnalystAnalyst:Kyna Wong SUMMARY VIEW:With the smartphone glass cover sector entering an up-cycle,with several sustainable upgrades such as two-side-glass,2.5D glass cover/back,and 3D glass cover/back,we see Lens Tech as a key beneficiary of glass casing upgrade in the 5G cycle with higher precision and materials change.INVESTMENT THESIS:We expect a structural casing ASP upgrade trend driven by 5G smartphones.We see Lens benefiting from improving execution,production efficiency,better cost control and high utilisation across major manufacturing plants in 3Q19.The earnings recovery is solid proof of operational improvement.We also expect a relieving capex burden in 2019-21.EARNINGS GROWTH DRIVERS:We anticipate rising casing ASP due to(1)rising precision from unibody design;(2)increasing strength,and(3)more colour options.We also expect GM recovery for 2020-21.In the Android camp,we expect Lens Tech to gain share given the complexity of casing design for 5G phones.We expect YoY growth in earnings from 3Q19 driven by key customers restocking in 2H19 with enhanced glass casing spec,and a low base in 1H20.VALUATION:We upgraded Lens Tech to OUTPERFORM from Neutral on 10 Oct ahead of the companys profit alert,and further raised 2019-21E EPS on 14 Oct on better-than-expected ASP upgrade and GM improvement.Our new TP of Rmb14.9 is based on 25x P/E and 2020E EPS.Why are we more positive vs consensus WHY DO WE DIFFER VS CONSENSUS:Our 2020-21E EPS numbers are above consensus from our channel check as we see a better ASP upgrade trend from enhanced casing spec and GM improvement from the companys better execution,supporting a strong earnings recovery.NEAR-TERM CATALYSTS include companys 3Q19 results(21 Oct),new smartphone launches with more complex glass casing designs and colours,especially for 5G smartphones.KEY RISKS TO OUR VIEW:(1)Worse-than-expected demand for key client products;(2)pro