Sino Biopharmaceutical’s Full-Year Earnings Outperform on Lower Sales Expenses; Shares Undervalued

Narrow-moat Sino Biopharmaceuticals, or SBP, reported full-year earnings that exceeded our expectations due to significantly lower sales and distribution expense. Revenue for the second half and full year was CNY 13.6 billion and CNY 28.8 billion, respectively, or 8.6% and 7.1% growth. Although the top line was within 2% of our expectations, operating profit margin (calculated with cost of sales, other expenses, and sales, general, and administrative expenses) was 20.4% for the full year, which is a 4.8 percentage point improvement over 2021 and 2 percentage points better than our expectation. This was primarily driven by lower sales expenses in the second half. However, we expect this to be temporary as the company will likely need to increase spending to prepare for new product launches.