Simcere Pharmaceutical Group

Simcere Pharmaceutical Group (SCR - Snapshot Report) saw revenues soar 37.1% as sales of generic pharmaceutical products stayed hot in China. The company has surprised on estimates 4 consecutive quarters by an average of 23.54%. Simcere is cheap. It's trading at only 5.6x forward earnings.

Company Description

Simcere Pharmaceutical Group is a Chinese-based manufacturer of generic pharmaceuticals and a patented anti-cancer drug, Endu, for the Chinese market.

The company currently manufactures 50 products including antibiotics, the anti-cancer medication, Endu, and a first-to-market generic stroke management medication. Simcere has more than 12 products in the pipeline.

Third Quarter Revenue Jumped 37.1%

On Nov 6, Simcere Pharmaceutical Group reported third-quarter earnings that beat Wall Street estimates by 15.79%. Net income rose 24.7% to RMB91.2 million (US$13.4 million) from RMB73.1 million in the third-quarter 2007.

Revenues surged 37.1% to RMB443.4 million (US$65.3 million) from RMB323.4 million in the year ago period. Revenue for the first 9-months climbed 31.4% year-over-year.

Sales of Endu, the anti-cancer medication, grew 3% from the third-quarter of 2007. The company attributed the slower sales to a restructuring of the sales force and an expanded program to supply the drug free of charge for patients participating in clinical studies. 9-month sales were up 19.2% from 2007.

Stroke medications saw sales up 49.5% and branded generic products jumped 26.9% from the third-quarter 2007.

Share Repurchase Program

Under the terms of its share repurchase program, recently approved by its board of directors, Simcere will repurchase $50 million of its issued and outstanding ADS shares on the open market at prevailing market prices over the next 12 months.

2008 Guidance Outlook

Given its performance year-to-date, Simcere is maintaining its revenue target of RMB1.7billion to RMB1.8 billion. It is also maintaining its net income target in the range of RMB390 million to RMB 400 million.

2008 Consensus Estimates Rise

Given the solid third quarter and the maintenance of the guidance forecast, consensus estimates for the fourth-quarter are unchanged at 22 cents per share. Full-year consensus estimates are up a penny to 90 cents in the last 30 days.

Analysts expect 2008 year-over-year earnings growth of 32.72%.

Value Fundamentals

Simcere Pharmaceutical Group is a Zacks #1 Rank (strong buy) stock. It's trading at 5.6x forward earnings. SCR's price-to-book is 1.16. The company has a solid 1-year return on equity (ROE) of 18.29%.