U/G - A surge in GM; bright outlook
​1Q16 GM of 40.9% beat our/the Street’s estimates by 9 ppt, mainly thanks to 1) higher CUR; and 2) optimization of shipment regions, with higher exposure to the US market. We were conservative on the stock previously as its low-margin UV absorber sales accounted for 34% of 1Q16 sales (vs. 31% in 2015), which we believe could hurt overall GM. Nonetheless, the company posted better than expected GM due to higher CUR and margin expansion of its API products (55% in 1Q16 vs. 49% in 4Q15). Given the positive shipment outlook of its cholesterol-lowering/ phosphate-reducing products (Sevelamer & Colesevelam), we raise our 2016F sales estimate by 12% to NT$3.35 bn with GM of 39.2% (+7 ppt), and EPS of NT$5.24 (vs. NT$4.15 previously). We lift our TP from NT$91 to NT$105, based on 20x 2016F EPS.
Formosa Laboratories, Inc. is a Taiwan-based company principally engaged in the development, production and distribution of ultraviolet (UV)-proof active ingredients, bulk pharmaceutical chemicals, antibody drug conjugates, as well as the provision of customized services. The Company primarily provides UV-proof active ingredients series products, vitamin D derivative series products, anti-inflammatory analgesic series products, steroid, anti-cancer drugs, cholesterol phosphate binding agents, nuclear magnetic resonance (NMR) reagents, respiratory disease drugs, central nervous system drugs, immune system regulators and weight loss drugs, as well as customized research and development and original equipment manufacturing (OEM) services. The Company distributes its products to Europe, the Americas, Asia and other markets.
Yuanta is a Taiwan-headquartered brokerage with a growing presence in Asia, especially across Greater China. Our team of 140+ provides cutting-edge analysis on key sectors, spread across offices in Taiwan, Hong Kong, Shanghai (A-Share), Seoul and Jakarta. With an ever-expanding coverage universe of 400+ companies, we provide in depth analysis with unique local color to investors. Consistently being voted the Best Investment Consulting Firm in Taiwan in the AsiaMoney broker poll is evidence of our strength. We target providing an extensive range of research, from small, to mid-sized, to large cap. We bring you the big, well-covered names, as well as going off the beaten track to research the less-familiar companies.
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