The supply of APIs remained tight in December due to strengtheningenvironmental regulations, temporary suspension of production forwinter, increasing raw material costs and seasonality 。 Prices of APIs, intermediates and rawmaterials continued to rise in December 2017, and we expect pricesfor most APIs and intermediates to remain high in 2018.
Antibiotic intermediate and API prices rise further. In December,ASPs for 6-APA, 7-ACA, amoxicillin, penicillin-G and erythromycinthiocyanate rose 0%, 0%, 1%, 3% and 0% MoM or 31%, 30%, 37%,60% and 14% YoY to Rmb230/kg, Rmb450/kg, Rmb195/kg,Rmb82.5/BOU and Rmb360/kg. We expect antibiotic intermediateand API prices to remain stable or rise slightly in the near term.
Vitamin prices continued to rise. Domestic prices of vitamin C hitRmb72.5/kg on January 2, 2018, up 4% MoM or 45% YoY; exportedvitamin C prices in November rose to US$7.02/kg, up 0.24% MoM or115% YoY. We expect prices to further rise in the near term as AnhuiTiger Biotech will not complete construction of its new productionfacility until mid-2018.
Caffeine prices stable. The price of caffeine was flat MoM and up48% YoY at Rmb93.5/kg. According to Healthoo, SSY Group isupgrading its caffeine production facility by transferring capacity froma Tianjin company 。 We expect that the short-termimpact from this should be limited.
Corn and coal prices stable. The latest corn price wasRmb1.95/kg, up 1% MoM and up 1% YoY. The most recent coal price was Rmb630/tonne, up 2% MoM and up 6% YoY.
Valuation and recommendation
We expect CSPC, TUL, and Kelun Pharma to benefit from this round ofAPI price increases. Maintain earnings forecasts and BUY ratings.
New production capacity; raw material price hike or shortage; failureto pass environmental examinations. □ .B.o. .Y.U./.P.e.n.g. .Z.O.U./.J.i.n.g. .Q.I.A.N.G .中.国.国.际.金.融.股.份.有.限.公.司