JPM Downgrades Shineway To Underweight Vs Neutral

JPMorgan downgrades Shineway Pharmaceutical (2877.HK) to Underweight vs Neutral after 3Q10 results show slowing growth. House expects more margin pressure as more drugs it sold added to essential drug list program starting 2011; drugs on list have to have their margins lowered. House also cuts target price to HK$20.00 vs HK$21.00 after lowering FY10-FY11 sales by 9.6%-15.8% on weak 3Q10 sales. "In our view, the margin pressure for Shineway is greater than that of its peers due to its portfolio of cheaper products and its above-average margins," says JPM. Adds, prefers United Laboratories (3933.HK) because of its exciting new product portfolio (which includes diabetic insulin) and lower risk of any margin compression that comes from new government initiatives. Shineway Pharmaceutical last down 1.2% at HK$25.55