New capacity should boost earnings growth
Pacific Hospital Supply (PAHSCO) regained momentum after shaking off decelerating growth in developed markets, thanks to growing demand in China/ emerging pharma markets. We believe the recent share price rally was due to its lower valuation vs. peers, but the following catalysts are yet to be fully factored in: 1) new capacity to come online by 2H16F should ease current capacity limitations; and 2) new product launches in 2H17F should boost long-term growth. We forecast 2016/17F EPS of NT$6.4/6.8; the lower EPS growth in 2017 is due to increased depreciation & plant relocation expenses. We like PAHSCO’s long-term prospects & assign a BUY rating. Our TP of NT$150 is derived from the average of a 2016F P/E of 23x and a DCF-based TP (FCF CAGR of 17.8% for 10 years; 5% terminal growth rate; WACC 11.1%).
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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