Company Update: Dawnrays Pharmaceutical 20204Q

Is Dawnrays business ready for the new dawn?

It is almost coming to a year since we released our first report on Dawnrays Pharmaceutical (Dawnrays). We had updated our thoughts on 20202Q and a trading update.

Dawnrays business model is seriously upended by the changes within the industry but they had navigated the changes in the industry deftly.

If you had gotten in at HKD 0.92 when we had published our report, you would have gotten a more than 50% gain coupled with a total dividend of HKD 0.115 (4Q dividend is coming soon) which would have been a dividend yield of 12.5%!

The pandemic did not really affect Dawnrays operation. The centralised procurement had been a more significant denominator in their result. As an outsider looking into the company finances, it has been hard to estimate the range of lower prices, higher volume and profitability.

It takes a leap of faith to believe that the economies of scale will work out. Since that risk is mostly mitigated for now, we think the investment community will looking at Dawnrays with a different lens soon.

Thesis shift/drift:

The thesis will slowly shift as Dawnrays core business stabilised. With the core risk fading away, the investment narrative will shift from centralised procurement risk to the recurring nature of Dawnrays generic business.

Majority of their drug sales are in the

  • Anti-hypertensive (High blood)

  • Anti-hyperlipidemic (High cholesterol)

  • Antiviral (Hepatitis)

  • Antibiotic (________)


Revenues are recurring in nature. Being the only few chosen winner in the centralised procurement space for these drugs only meant that Dawnrays could count on a stable source of recurring revenue for many years to come.

With a prudent acquisition, manufacturing and distribution strategy, Dawnrays could even be a consolidator within the niche segment of the generic drug industry within China.

Economies of scale:

It is good to see the the intermediates and bulk medicine segment moving into the black on an operational basis. This little profit also indicate that Dawnrays is getting more efficient in their manufacturing processes due to scale.*


  1. The successful manufacturing and distribution of their new gout medicine will create another line of drugs which is recurring in sales. There is a good chance that they may also dominate this line of drugs.

  1. AK102 is at the final stage of development and could really fortified Dawnrays hold on the anti-hypertensive segment.

  1. They have also been ramping up investment on the side. Thou we cannot be sure what is going to happen, it is good to see the management toeing the line with the Chinese government policy and also trying new things while keeping risk in control.


Dawnrays’s dawn may just be coming and as shareholders we are hopeful that the growth for the company will be happening for a much longer time.

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*Do take note that intermediates and bulk medicine segment will continue to be mildly profitable as they feed into the finished drug segment.