Stock Valuation: Sino Biopharmaceutical Ltd (1177)

Name of Company Country of Origin/ Exchange Traded Sector Stock Price
Healthcare – Biotechnology – Biotechnology HKD7.30
@ 29 Sep 2018
COMPANY PROFILE Sino Biopharmaceutical Ltd is an integrated biotechnology company. It is engaged in the manufacture, sale and distribution of modernized Chinese medicine products and western medicine products. It also provides related healthcare and hospital business.

Sino Biopharmaceutical is an integrated biotechnology company. Sino applies advanced modernized Chinese and biomedical technology in order to research, develop, manufacture, and market a vast array of Chinese medicines and chemical medicines. The company’s products can be grouped under the two major therapeutic categories of hepatitis and cardio-cerebral diseases. It also actively develops medicines for treating tumors, diabetes, and other diseases. Sino actively seeks cooperation through international partnerships.

Stock Code 1177
Valuation Analysis Below

Sino Biopharmaceutical PE

The Price Earnings (PE) Ratio is the most frequently used valuation indicator for a stock. However, there are times when this ratio cannot be used e.g. when the company reports a loss or profit is so minimal that it results in an abnormally high PE Ratio. Or Net Profit After Tax may be volatile and it is better to use Earnings Before Interest and Tax (EBIT) to value the company. We use the PE Band or Market Cap/EBIT Band to show whether a stock is overvalued or undervalued based on its historical valuation.
At the price of HKD7.30 as at 29 Sep 2018, Sino Biopharmaceutical Ltd is trading at a PE Ratio of 27.0 times last 12 months earnings.  This is a 2.0% premium to current fair Price to Earnings Ratio of 26.4 times. (Price based on the fair PE of the company is indicated by the red line.)
Is the stock overvalued? One should not just look at one indicator to determine the fair value of a stock.
ProThinker believes in using a combination of valuation methods to decide whether a stock is over or undervalued? The five ratios we use are Price to Earnings, Price to Sales, Price to Cash Flow, Price to Book and Dividend Yield. We use multiple methods to value a stock because each has its benefits as well as shortcomings. Price to Earnings and Price to Cash Flow Ratios relate stock price to profitability but are meaningless when the comany has negative earnings or cash flows. Price to Sales Ratio is more stable because sales are never negative. However, this does not tell us whether the company is able to sell profitably. Price to Book Ratio gives us an indication as to how much we are paying for the company’s assets but it is not directly related to the company’s profitability. Dividend Yield cannot be used for companies that are paying little to no dividends.
While it is important to value stocks based on multiple valuation methods, this often leads to differing views on valuation. One indicator may suggest that a stock is overvalued while another suggest that it is undervalued. This does not help an investor who needs to make a definite decision whether to buy, hold or sell the stock. That is why we advocate the use of a Composite Valuation Indicator, which is derived from the best combination of the five indicators above. A Composite Valuation Indicator will give you ONE conclusion on whether a stock is under or over valued.
To find out more about our valuation methodology, click here. 
Source of Data: Company description, historical financial statements data and price data are from or Estimates are from – Thomson Reuters.
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