Tianjin Pharmaceutical Da Ren Tang Group Corp Ltd (TIAN SP): Panic buying of drugs in China

TianjinZhongXin12.22

  • Entry – 1.06 Target – 1.16 Stop Loss – 1.01
  • Tianjin Pharmaceutical Da Ren Tang Group Corporation Limited produces and sells traditional Chinese medicine, western medicine, health products, and healthcare instruments. The Company also manufactures gene-related biopharmaceutical products. Tianjin Pharmaceutical markets its products under the Great Wall, Cypress, and Health brand names.

    The company’s A-shares (600329 CH) are trading at 26.9x currently, while SG-listed shares are trading at 7.0x. The average of the historical 5-year PE is 7.7x.
    The Group’s businesses cover a wide range of products including Chinese patent medicine, Chinese medicinal drinks, Chinese medicinal raw materials, biotechnology medicine, chemical raw material medicine and preparations, and nutritional and health products. It has over 800 medicinal products in over 20 types of formulations.

  • Surge in Covid cases. With the new Year coming up and pent-up frustrations from the strict Covid-zero policy, many residents will take this opportunity to leave their homes and provinces to physically interact with others.

    Additionally, with the current lack of need for testing, Covid-infected patients may not be aware and spread the virus. These factors will lead to a sharp increase in Covid numbers in sporadic parts of China, causing hospitals to be overcrowded and a shortage of medicinal supplies.

  • China opening up. Although China has eased its Covid-zero policy, the reopening of its economy has resulted in huge excess demand for medical supplies. In fact, most pharmaceutical stores have been wiped clean of Covid-related medical supplies by Chinese residents in most provinces. As such we believe that the company which produces such medicinal products is an excellent buy in China’s current environment. This overdemand means that these pharmaceutical companies can potentially ramp up capacity in the near term.

  • The company’s A-shares (600329 CH) are trading at 26.9x currently, while SG-listed shares are trading at 7.0x. The average of the historical 5-year PE is 7.7x.

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