SIPI focuses on medicine industry
Though SIPI may sell its crown jewel, its share price still rises. The upward trend of SIPI’s shares is due to its sales with Brilliance Group on Feb 6.
After hitting the peak point of 14.15 yuan last Friday, SIPI shares ended with 13.21 yuan a share.
Approved by the shareholders of SIPI, the 1.06 billion yuan’s sale between its subsidiary and Brillance will be helpful for its core pharmaceutical business. It is said that SIPI’s subsidiary has owned 21.17% stake in Hong Kong-listed Lianhua.
In the statement, SIPI is expecting a 548 million yuan pre-tax profit from the asset sale.
Analysts said SIPI is going to invest the drug production and marketing because from which it can gain a higher profit margin than supermarket operations.
Hong Lu, an analyst with Essences Securities, said that SIPI will be able to develop faster and have more income from the sale of Lianhua.
However, the company’s developing speed will be slowed down because of the loss of income from Lianhua, which took up over half of its whole income of 13.9 billion yuan in 2007.
Jiang Weina, an analyst with Industrial Securities, thought the company can’t afford the loss. While some analysts said the loss can be evened up by its concentration on drug business.
This move is considered to be a reconstruction effort of SIPI, despite Lianhua made major profit of the company, said Li Jinlei, an analyst with Guojin Securities.
Analysts are confident that SIPI will have a good performance in its core business this year.
Meanwhile an analyst named Xu Jun from Orient Securities estimates that SIPI would earn 0.45 and 0.54 yuan per share in 2008 and 2009 separately without asset injection plan.
Xu said in a report that this long-awaited asset will make sure a great performance this year.
The company was supposed to inject assets of the Hangzhou-based Chiatai Qingchunbao into their list. However, it was paused because the approval procedures were not finished in time last September.
SIPI holds about 55% stake in Chiatai Qingchunbao, which is regarded as the 3rd largest producer of pharmaceuticals, and is famous for anti-aging tablets.
The development, production and the sale of medicines and medicine-related business make up of SIPI’s core operations. And the last one takes up 82% of its revenue.
SIPI includes 3 major pharmaceutical companies, which are Changzhou pharmaceutical, Changzhou Techpool Bio-Pharma Co and Shanghai Medical Instrument Co.
In accordance with the investment consulting firm Investoday, Changzhou Pharma, specializing in producing chemicals, raw material for Chinese medicines and formulated products, is expected to make a 20% growth in net profit for 2008, compared with 73.75 million yuan in 2007.
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