Piper Jaffray Comments On Simcere Pharmaceutical Following Earnings Report

Simcere Pharmaceutical's SCR 4Q10 earnings results disappointed Piper Jaffray on margin leverage and new products sales trends, and argue against the notion of significant margin leverage and accelerating new product sales on the stock. Specifically, operating margin declined during the quarter on both Y/Y and Q/Q basis; new product sales declined Q/Q and were largely flat Y/Y, both trends making a near-term turnaround a risky proposition.

Piper reduced its sales and operating income projections for 2011, but increased net income projection due to a reversal in minority interests. Piper maintains a Neutral rating for now, as it believe lack of guidance from the company has led to a wide variation of analysts' estimates and the difficulty of modeling minority interests makes it difficult to gauge Street expectations for 2011.

Piper Jaffray has a $10 PT and Neutral rating on SCR

SCR closed Monday at $12.49