LIM & TAN Securities has initiated coverage on dual-listed healthcare and biopharmaceutical company Tianjin Pharmaceutical Da Ren Tang (TDRT) with a &ldquo buy&rdquo and a target price of US$1.60 &mdash representing a price-earnings ratio of 9.69 times, which is nearly half of its peers&rsquo average at 20.5 times.

 

&ldquo We like TDRT because of its strong economic moat that provides the company with a recurring income stream, high yield of 6.9 per cent after tax, strong balance sheet of net cash US$360 million and relatively undemanding valuations,&rdquo said analyst Ng Yong Rui.

 

&ldquo As a medical player, TDRT is a defensive counter that thrived even amid Covid-19 disruptions and geopolitical unrest and is expected to continue doing so.&rdquo

 

Ng&rsquo s optimism is evident as he noted the healthcare group&rsquo s list of over 600 products and full rights to their 390 patents &mdash with 5 of them protected by the state and 2 seen as China&rsquo s &ldquo treasure-class traditional Chinese medicine (TCM)&rdquo , which he thinks is what allowed the company to market and distribute products effectively in China.

 

In FY2021, TDRT reinvested a record of 161 million yuan (S$32.8 million) in research and development to maintain its economic moat, while 7 products were recently added under the National Medical Insurance &mdash bringing the total listed products to 223.

 

&ldquo This growing list contributes to a strong recurring income base as insurance becomes more accessible in China,&rdquo said Ng.

 

He also thinks the country&rsquo s biopharma industry would benefit from 3 macro trends: favourable political environment built around the 14th Five-Year Plan, China&rsquo s ageing population and World Health Organization recognising the potential benefits of TCM in Covid-19 treatment.