Shares in Hubei Hongcheng General Machinery, a pharmaceutical maker controlled by Chinese billionaire Cao Longxiang, fell by 8.7% to a seven-month low at the Shanghai Stock Exchange yesterday on worries that its share price had gotten ahead of the company’s earnings prospects.
Hubei Hongcheng General Machinery shifted its main business from valves to pharmaceuticals last December when it purchased Cao-controlled Jumpcan in an all-stock deal worth 5.6 billion yuan, or $903 million.
After the purchase, Cao, together with son Cao Fei and wife Zhou Guodi, own 584.6 million shares, or 74.8%, of Hongcheng, worth $1.9 billion after a discount for collateralized shares.
Jumpcan, once a small state-own enterprise, is currently one of China’s 100 largest pharmaceutical manufacturers with 170 products. Cao Longxiang is Hongcheng’s chairman; Cao Fei is the vice chairman. The company is trading at roughly 30 times projected 2014 earnings, analysts said.
Hubei Hongcheng ‘s revenue rose 28% in 2013 to 2.4 billion yuan, or $387 million. Net profit was 402.7 million yuan, or $65 million, up 69%
Cao Longxiang, 56, holds an EMBA from Peking University.
-- with Maggie Chen
-- Follow me on Twitter @rflannerychina
