[ET Net News Agency, 15 July 2019] HSBC Global Research initiated coverage on Beijing
Tong Ren Tang Chinese Medicine (03613) with a "buy" rating and a target price of HK$20.
The research house said Tong Ren Tang achieved 19% CAGRs in both revenue and net profit
from 2014 to 2018 by expanding its global presence and growing sales of two key products,
namely Angong Niuhuang Pills (ANP) and Ganoderma Lucidum Spores Powder Capsules (GLSPC).
HSBC believes the Tong Ren Tang branded ANP products enjoy strong competitiveness. It
believes that sales of these two key products will continue to grow steadily for the
foreseeable future and that the company's strong brand name, reputation and disciplined
growth strategy can sustain premium pricing and stable profit margins.
HSBC forecast a 16% revenue CAGR over the coming three years, moderating from 20% in
2018 (when there was an ANP price hike) and leading to a similar profit CAGR over the same
period. Moreover, it forecast that the company will progressively raise its dividend
pay-out ratio, as in 2014-18. (KL)