China Drugmaker's 65% Rally Just Start for Bullish Analysts

(Bloomberg) -- China’s top-performing drugmaker stock may be about to head even higher.

At least eight brokers lifted their price targets on CSPC Pharmaceutical Group Ltd. after the company reported a 43 percent surge in first-quarter profit on Friday. The result beat the market’s already high expectations, according to Credit Suisse Group AG, which raised its target by 24 percent -- the most bullish among analysts tracked by Bloomberg. The stock has surged more than 65 percent this year, the best performer on the Hang Seng China Enterprises Index.

“The re-rating of CSPC will continue this year because it has a strong pipeline,” said Alex Jiang, senior analyst at UOB-Kay Hian Ltd., who raised his target on the company by 6 percent to HK$29.02. The company management said on a call Friday it plans to launch in the second half a popular cancer drug, or so-called PD-1, along with three other important generic drugs, according to Jiang.

There’s been no shortage of good news for CSPC: The company’s 2017 results beat analyst estimates, Hang Seng Indexes Co. said it will include the stock to the city’s benchmark gauge, and investors have turned bullish on the sector amid U.S.-China trade tension concerns. The stock climbed 3.8 percent to record high in Hong Kong on Monday.

While analysts are turning bullish, the stock’s valuation is starting to look expensive. It’s now trading at about 40 times estimated forward earnings, the second-highest on the Hang Seng China Enterprises Index.

©2018 Bloomberg L.P.

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