Hot Stock Analysis: China Biologic Products Holdings Inc. (NASDAQ: CBPO)

Dorothy Owen

I am Dorothy Owen and I give “Seeking Review” an insight into the most recent news hitting the “Healthcare” sector in Wall Street.

I have been an independent financial adviser for over 11 years in the city and in recent years turned my experience in finance and passion for journalism into a full time role. I perform analysis of Companies and publicize valuable information for shareholder community.

Address: 454 Cottrill Lane, Saint Louis, MO 63108, USA
Phone: (+1) 314-388-9712
Email: dorothy.owen@seekingreview.com
Dorothy Owen

BEIJING, August 10, 2019 – Shares of China Biologic Products Holdings Inc. (NASDAQ: CBPO) showed the bearish trend with a lower momentum of -0.33% to $96.72. The company traded total volume of 91.88K shares as contrast to its average volume of 139.57K shares. The company has a market value of $3.77B and about 38.91M shares outstanding.

China Biologic Products Inc. (CBPO) reported first-quarter earnings of $37.70M. The Beijing-based company said it had net income of 94 cents per share. Earnings, adjusted for non-recurring costs, were $1.11 per share.

First Quarter 2019 Financial Performances:

Cost of sales increased by 31.2% to $44.20M in the first quarter of 2019 from $33.70M in the same quarter of 2018. As a percentage of total sales, cost of sales increased to 34.1% from 30.0% in the same quarter of 2018, mainly because of reduced sales prices for most of the Company’s plasma products, increased plasma collection costs, and increased depreciation expenses because of the launch of the Company’s new facility in Shandong in February 2018.

Gross profit increased by 8.6% to $85.60M in the first quarter of 2019 from $78.80M in the same quarter of 2018. Gross margin was 65.9% and 70.0% in the first quarter of 2019 and 2018, respectively.

Total operating expenses in the first quarter of 2019 increased by $1.80M, or 4.5%, to $41.60M from $39.80M in the same quarter of 2018. This increase mainly consisted of a boost of $3.20M in general and administrative expenses, partially offset by a decrease of $2.00M in selling expenses. As a percentage of total sales, total operating expenses reduced to 32.0% in the first quarter of 2019 from 35.4% in the same quarter of 2018.

Selling expenses in the first quarter of 2019 reduced by $2.00M, or 9.7%, to $18.70M from $20.70M for the first quarter of 2018. As a percentage of total sales, selling expenses reduced to 14.4% for the first quarter of 2019 from 18.4% in the same quarter of 2018. The decrease in selling expenses is mainly because of a decrease in marketing and promotion expenses related to placenta polypeptide products, which are partly offset by increased selling expenses for plasma products.

General and administrative expenses in the first quarter of 2019 increased by $3.20M, or 18.4%, to $20.60M from $17.40M in the same quarter of 2018. As a percentage of total sales, general and administrative expenses increased to 15.9% for the first quarter of 2019 from 15.5% for the same quarter of 2018. The increase in general and administrative expenses was mainly a combined result of the increased allowance for doubtful accounts receivable and increased depreciation expenses for the Company’s new facility in Shandong, which was partially offset by the decrease in share-based compensation expenses.

Research and development expenses in the first quarter of 2019 increased by $0.60M, or 35.3%, to $2.30M from $1.70M in the same quarter of 2018. In the first quarter of 2019 and 2018, the Company received government grants totaling $0.40M and $0.10M, respectively, and the Company recognized them as a reduction of the research and development expenses. Excluding this impact, research and development expenses increased by $0.90M for the first quarter of 2019 from the same quarter of 2018. As a percentage of total sales, research and development expenses, excluding the impact of these recognized government grants, increased to 2.1% for 2019 from 1.6% contrast to the same quarter of 2018.

Income from operations in the first quarter of 2019 increased by 19.4% in RMB terms, or 12.8% in USD terms, to $44.00M from $39.00M in the same quarter of 2018. Operating margin reduced to 33.9% in the first quarter of 2019 from 34.7% in the first quarter of 2018.

Income tax expense in the first quarter of 2019 increased by $1.20M, or 17.9%, to $7.90M from $6.70M in the same period of 2018. The effective income tax rate was 15.0% and 15.1% for the first quarter of 2019 and 2018, respectively.

Net income attributable to the Company increased by 26.5% in RMB terms, or 19.3% in USD terms, to $37.70M in the first quarter of 2019 from $31.60M in the same period of 2018. Net margin increased to 29.1% in the first quarter of 2019 from 28.1% in the same period of 2018. Diluted net earnings per share increased to $0.94 in the first quarter of 2019 contrast to $0.92 in the same period of 2018.

Non-GAAP adjusted income from operations increased by 10.5% in RMB terms, or 4.2% in USD terms, to $52.20M in the first quarter of 2019 from $50.10M in the same period of 2018.

Non-GAAP adjusted net income attributable to the Company increased by 14.3% in RMB terms and 7.7% in USD terms, to $44.50M in the first quarter of 2019 from $41.30M in the same period of 2018. Non-GAAP net margin reduced to 34.3% in the first quarter of 2019 from 36.7% in the same period of 2018. Non-GAAP adjusted net income per diluted share reduced to $1.11 in the first quarter of 2019 from $1.21 in the same period of 2018.

Non-GAAP adjusted income from operations for the first quarter of 2019 excludes $6.30M in non-cash employee share-based compensation expenses, and $2.10M in amortization expense of intangible assets and land use rights related to the acquisition of TianXinFu.

Non-GAAP adjusted net income and diluted earnings per share for the first quarter of 2019 exclude $5.50M in non-cash employee share-based compensation expenses, and $1.40M in amortization expense of intangible assets and land use rights related to the acquisition of TianXinFu.

As of March 31, 2019, the Company had $99.00M in cash on hand and demand deposits, $653.80M in time deposits, and $171.20M in short term investments.

Net cash offered by operating activities for the first quarter of 2019 was $32.20Mas contrast to $23.30M for the same period of 2018. The $8.90M increase in net cash offered by operating activities was a combined result of the increase in both net income and non-cash expenses, which mainly include depreciation expenses and allowance for doubtful accounts receivable.

Accounts receivable increased by $11.60M during the first quarter of 2019 as contrast to $15.50M during the same period of 2018. The accounts receivable turnover days for plasma products increased to 100 days during the first quarter of 2019 from 84 days during the same period of 2018, reflecting longer credit terms to hospitals as a result of the nationwide implementation of healthcare reform measures and intensified competition in the distributor channel.

Inventories increased by $4.00M in the first quarter of 2019, which was milder than the increase of $10.80M in the same period of 2018, mainly comprised of increased raw material plasma both out-sourced and from the Company’s own collection stations.

Net cash used in investing activities for the first quarter of 2019 was $214.70M as contrast to $135.50M for the same period of 2018. During the first quarter of 2019, the Company paid $7.90M for the acquisition of property, plant and equipment, intangible assets and land use rights, and the Company also purchased time deposits and short-term investments in the amount of $937.40M. This was partly offset by $730.60M from the maturity of time deposits and short term investments. Net cash used in investing activities in the first quarter of 2018 mainly consisted of $264.70M payment for purchase of time deposits and short term investments, $11.30M for the acquisition of property, plant and equipment, intangible assets, and land use rights, which was partly offset by $97.70M cash received upon acquisition of TianXinFu and the maturity of $42.80M time deposits and short term investments.

Net cash used in financing activities for the first quarter of 2019 was $60.00M as contrast to net cash offered by financing activities of $0.30M for the same period of 2018. In the first quarter of 2019, $60.00M was remitted to an investment bank by the Company to execute the formerly approved share repurchase program on behalf of the Company. As of March 31, 2019, 415,356 shares had been repurchased at a total amount of $36.80M with the remaining $23.20M as down payment to the investment bank for further repurchases. Net cash offered by financing activities in the first quarter of 2018 represented proceeds of $0.30M from stock options exercised.

The Company offered gross profit margin of 68.60% while beta factor was 1.26. The stock, as of recent close, has shown the weekly upbeat performance of 0.94% which was maintained at 27.41% in this year.

Dorothy Owen

Dorothy Owen

I am Dorothy Owen and I give “Seeking Review” an insight into the most recent news hitting the “Healthcare” sector in Wall Street. I have been an independent financial adviser for over 11 years in the city and in recent years turned my experience in finance and passion for journalism into a full time role. I perform analysis of Companies and publicize valuable information for shareholder community. Address: 454 Cottrill Lane, Saint Louis, MO 63108, USA Phone: (+1) 314-388-9712 Email: dorothy.owen@seekingreview.com