2016 results in line with expectation

Changshan Biochemical Pharmaceutical announced its 2016results: revenue was Rmb1.118bn, up 22.10% YoY; net profitattributable to shareholders was Rmb175mn, up 12.28% YoY, orRmb0.19 per share. Per ten shares, Changshan proposedRmb0.15 cash dividends (including tax).

Trends to watch

Low calcium maintained rapid growth; dalteparin sodiumramped up.

Heparin API prices to rebound.

Accelerating R&D for new medicine; product pipeline worthattention.

Earnings forecast

Considering the cut in tender prices, we lower our earningsforecast by 5% from Rmb0.25 to Rmb0.23 per share for2017, and trim our earnings forecast by 11% fromRmb0.31 to Rmb0.28 per share for 2018.

Valuation and recommendation

The stock is trading at 34x/29x 2017/2018e P/E. We maintainour BUY rating and Rmb10.50 target price (46x/38x2017/18e P/E), implying 31.09% upside room from the currentprice.

Risks

Price cut for products; R&D for new products misses expectation.