Wuyi, an integrated manufacturer of branded prescription and over-the-counter drugs in Fujian Province in the PRC, launched Perilla Oil Capsule in March 2008. Perilla Oil Capsule is an exclusive new drug used to manage high blood cholesterol, and the company claims it is more effective and has fewer side effects than existing products in the market. It accounted for 5.1% of Wuyi’s sales and almost 7% of the company’s gross profit for 1H FY08, based on only three months of sales. We forecast Perilla Oil Capsule to raise Wuyi’s earnings-growth rate to 24.1% for FY09 and 26.2% for FY10, up from 14.6% for FY08.
Wuyi is trading currently at below book value and at 0.9x its net cash. It is also trading at a PER of 2.4x on our FY09 earnings forecast, and offers a forward dividend yield of 8.0%, based on the company’s target of paying out at least 25% of net profit as dividends.
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