Investment Rating - The report downgrades the investment rating of CSPC Pharmaceutical Group (1093 HK) to **Neutral** from the previous rating, citing increased short-term performance uncertainty due to the impact of centralized procurement [1][2] Core Views - The 2Q24 performance was significantly impacted by centralized procurement, with revenue and net profit declining by 9.0% and 8.5% YoY respectively [1] - The sales of key new products, such as Irinotecan Liposome and Mingfule, fell short of expectations due to slower market expansion under regulatory scrutiny [1] - The company expects the negative impact of centralized procurement to persist until 2025, particularly affecting major products like Jinyouli and Duomeisu [1] - CSPC plans to focus on extending the DOT (Duration of Therapy) for Enbipu in both hospital and retail markets, with current retail sales accounting for less than 10% of total sales [1] - The company aims to have 10 NDAs (New Drug Applications) approved between 2H24 and 2025, including 2 in the US, to mitigate the impact of centralized procurement [1] Financial Performance - 1H24 revenue and net profit grew by 1.3% and 1.8% YoY, respectively, but 2Q24 saw a decline of 9.0% and 8.5% YoY [1] - The sales expense ratio improved significantly, dropping by 5.2 percentage points to 24.9% in 2Q24 due to better cost control and optimized sales team allocation [1] - R&D expenses increased by 5.9% in 2Q24 and 10.3% in 1H24, with ongoing Phase III studies for new drugs and indications [1] - The company forecasts stable or slightly lower sales expenses for 2024, with R&D expenses expected to grow by over 10% annually from 2024 to 2025 [1] Valuation and Forecast - The DCF target price is revised downward to HKD 6.30, representing a 12.0x 2025 P/E ratio, in line with the three-year historical average [2] - The 2024-2026 net profit forecasts are reduced by 11-29%, reflecting the ongoing impact of centralized procurement [2] - Revenue growth is expected to slow, with 2024E revenue projected at RMB 31,964 million, a 1.6% YoY increase, but down 10.0% from previous forecasts [5] - Gross margin remains stable at around 72.2% for 2024E, with net margin expected to decline slightly to 19.2% [5] Strategic Focus - CSPC is focusing on expanding the market penetration of Enbipu in both hospital and retail settings, with current DOT at around 20 days and retail sales accounting for less than 10% [1] - The company is preparing for the year-end national drug price negotiations, with six products, including RANKL, PD-1, and Irinotecan Liposome, expected to be included [1] - CSPC plans to push for the approval of 10 NDAs between 2H24 and 2025, including 2 in the US, to offset the impact of centralized procurement [1]

Investment Rating - The report maintains an "Overweight" rating for the company [2][4]. Core Insights - The company's revenue for 2024H1 is projected to be 16.284 billion yuan, reflecting a year-on-year growth of 1.3%, while the adjusted net profit is expected to be 3.217 billion yuan, up 1.7% year-on-year. The overall gross margin stands at 71.6%, an increase of 1.7 percentage points, primarily driven by the higher proportion of the pharmaceutical business [4]. - Despite short-term pressure on the pharmaceutical segment's revenue, the approval of multiple new drugs is anticipated to offset the negative impact of centralized procurement. The company continues to advance its pipeline, supporting a positive long-term outlook [4]. Summary by Sections Financial Performance - The company reported a revenue of 16.284 billion yuan for 2024H1, with a year-on-year increase of 1.3%. The adjusted net profit is projected at 3.217 billion yuan, reflecting a 1.7% increase year-on-year. The gross margin is at 71.6%, up 1.7 percentage points [4][7]. - Revenue forecasts for 2024-2026 have been revised down to 32.720 billion yuan, 34.852 billion yuan, and 37.121 billion yuan, respectively, from previous estimates of 35.029 billion yuan, 39.613 billion yuan, and 44.835 billion yuan [4]. Pharmaceutical Segment - The pharmaceutical segment shows steady growth, with revenue of 13.549 billion yuan, a 4.8% increase. Neurology products generated 5.236 billion yuan, up 15.0%, attributed to the approval of Mingfule for stroke indications [4]. - Oncology product revenue decreased by 10.2% to 2.683 billion yuan, primarily due to price declines from centralized procurement in the Beijing-Tianjin-Hebei region. The anti-infection product revenue increased by 7.7% to 2.307 billion yuan, while cardiovascular products saw a decline of 4.5% to 1.229 billion yuan [4]. Pipeline and Future Prospects - The company has a robust pipeline with several innovative products expected to be approved between 2024 and 2025, including Omalizumab for urticaria and Amphotericin B liposome for deep fungal infections [4]. - Key products such as Enlansumab for cervical cancer and albumin-bound paclitaxel are anticipated to contribute to revenue growth in the coming years [4].

Investment Rating - Maintain BUY rating with a revised target price of HKD 6.21 (down from HKD 8.51) [2][3] Core Views - CSPC Pharmaceutical reported moderate growth in 1H24, with total revenue increasing by 1.3% YoY to RMB 16.28 billion and net profit attributable to shareholders rising by 1.8% YoY to RMB 3.02 billion [1] - The company faces pricing pressure on key products like Jinyouli and Duomeisu due to the "3+N" provincial volume-based procurement policy, leading to significant price reductions [1] - New product sales targets for FY24 have been revised downward from RMB 3 billion to RMB 2 billion due to delays in hospital listings caused by regulatory challenges [2] - The company expects four assets to enter the National Reimbursement Drug List (NRDL) by the end of 2024, which could offset the decline in sales of oncology products [2] Financial Performance - In 2Q24, CSPC's revenue declined by 8.1% YoY and 20.8% QoQ to RMB 5.99 billion, while net profit attributable to shareholders increased by 42.2% YoY and 35.7% QoQ to RMB 2.19 billion [1] - Gross margin improved to 71.6% in 1H24, up from 69.9% in 1H23, driven by a higher proportion of revenue from finished drugs [1] - R&D expenses in 2Q24 reached RMB 1.37 billion, up 17.4% QoQ [1] - Sales of oncology, cardiovascular, and respiratory products declined by 30.6%, 27.0%, and 23.1% YoY, respectively, in 2Q24 [1] Product Performance - Jinyouli's price was reduced by 58.4% to RMB 666 per 3mg, while Duomeisu (10mg) and Duomeisu (20mg) saw price reductions of 10.0% and 21.8%, respectively [1] - NBP (Neurology Business Platform) performed well in 1H24, with sales of neurological products increasing by 4.2% YoY to RMB 2.53 billion, driven by strong growth in retail pharmacy channels [1] Future Outlook - CSPC expects new product sales to grow in 2H24 and 2025, with products like Mingfule (rhTNK-tPA), Duoni (Enoxaparin Liposome), and Anfulike (Amoxicillin B) contributing to growth [2] - The company anticipates that Mingfule will gain additional sales potential with the inclusion of acute ischemic stroke in the NRDL negotiations by the end of 2024 [2] - Revenue and net profit attributable to shareholders are forecasted to grow by 1.3% and 0.5% in FY24, and by 1.3% and -1.5% in FY25, respectively [2] Valuation - The DCF-based valuation has been revised downward to HKD 6.21, with a WACC of 11.78% and a terminal growth rate of 2.0% [2] - Sensitivity analysis shows a target price range of HKD 5.59 to HKD 7.13 based on varying WACC and terminal growth rate assumptions [6]

23 Aug 2024 CMB International Global Markets | Equity Research | Company Update CSPC Pharmaceutical (1093 HK) HK) Legacy products faced pricing pressures Moderate growth in 1H24. In 1H24, CSPC's total revenue increased by 1.3% YoY to RMB16.28bn and the attributable net profit increased by 1.8% YoY to RMB3.02bn, accounting for 46% and 45% of our previous full-year estimates. For 2Q24, the total revenue was RMB5.99bn (-8.1% YoY, -20.8% QoQ) and the attributable net profit was RMB2.19bn (+42.2% YoY, +35.7% QoQ ...

石药集团（1093 HK） | 2024 年 8 月 22 日 香港股市 | 医药 石药集团（1093 HK） 上半年业绩逊预期，下调 24-26E 收入与盈利预测 二季度成药业务收入环比下降，2024 年上半年业绩逊预期 公司 2024 年上半年收入同比增加 1.3%至 162.8 亿元（人民币，下同），股东净利润同 比增加 1.7%至 32.2 亿元，业绩逊预期。分板块看，主要业务成药业务收入同比增加 4.8%，功能食品及其它产品的收入同比下跌 25.2%，原料药业务则下降 5.9%。由于疫情 后维生素 C 与抗生素需求并未显著下滑，原料药业务收入好于预期。尽管如此，由于肿 瘤药领域津优力二季度集采后降价过半后销量未能如期增长等原因，二季度成药业务 收入环比减少两成，导致上半年成药业务收入增速逊预期。咖啡因持续降价等因素导 致功能食品收入下降。除此以外，公司加大研发投入，上半年研发费用率从去年同期 的 14.3%上升至 15.6%，导致上半年盈利增速逊预期。 神经系统收入维持稳健增长，但肿瘤药仍面对挑战 公司成药业务中神经系统与肿瘤药收入总共占近六成。上半年神经系统药物收入同比 增长 15.0%，管理层表 ...

Investment Rating - The report maintains a "Buy" rating for the company, citing attractive valuations and the potential for multiple new drug approvals and pipeline data readouts [3][5] Core Views - The company reported H1 2024 revenue of RMB 16.284 billion (YoY +1.3%) and net profit attributable to shareholders of RMB 3.020 billion (YoY +1.8%), slightly below market expectations [2] - Gross margin improved by 1.7 percentage points to 71.6% in H1 2024 [2] - The pharmaceutical business grew by 4.8%, driven by core products in six major disease areas, while VC API and antibiotic API businesses declined by 5.4% and 6.4%, respectively [2] - R&D expenses reached RMB 2.542 billion in H1 2024, accounting for 18.8% of pharmaceutical revenue, with 19 projects in Phase II/III clinical trials and 7 projects under regulatory review [3] - The company is transitioning from a traditional pharmaceutical company to an innovative one, with multiple new drugs expected to be approved, driving future growth [3] Financial Performance - Revenue for 2024E is projected at RMB 32.747 billion, with a growth rate of 4.12% [4] - Net profit for 2024E is forecasted at RMB 6.218 billion, with a growth rate of 5.86% [4] - EPS for 2024E is estimated at RMB 0.52, with a P/E ratio of 10x [4] - The company's total assets are expected to grow from RMB 41.770 billion in 2022 to RMB 69.133 billion in 2026E [9] Business Segments - The pharmaceutical business generated revenue of RMB 13.55 billion in H1 2024, with CNS drugs contributing RMB 5.24 billion (YoY +15.0%) [3] - Anti-tumor products revenue declined by 10.2% to RMB 2.68 billion in H1 2024 [3] - Cardiovascular products revenue decreased by 4.5% to RMB 1.23 billion, while anti-infective, respiratory, and digestive/metabolic products showed mixed performance [3] R&D and Innovation - The company has a robust R&D pipeline, including platforms for nano-formulations, mRNA vaccines, ADCs, monoclonal antibodies, bispecific antibodies, and PROTACs [3] - Key products under regulatory review include omalizumab, batoclimab, and meloxicam nanocrystal injection in China, and irinotecan liposome and amphotericin B liposome in the US [3] Valuation and Forecast - The report revised down the 2024-2025 net profit forecasts to RMB 6.22 billion and RMB 6.55 billion, respectively, reflecting a 15.7% and 22.8% reduction from previous estimates [3] - The 2026E net profit is projected at RMB 6.90 billion, with a P/E ratio of 9x [3]

Investment Rating - The report maintains a "Buy" rating for the company, citing attractive valuations and the potential for multiple new drug approvals and pipeline data readouts [3][5] Core Views - The company's revenue for the first half of 2024 reached RMB 16.284 billion (YoY +1.3%), with net profit attributable to shareholders of RMB 3.020 billion (YoY +1.8%) [2] - The gross profit margin increased by 1.7 percentage points to 71.6% in H1 2024 [2] - The pharmaceutical business grew steadily, with revenue from the central nervous system drugs increasing by 15.0% YoY to RMB 5.24 billion [3] - R&D expenses reached RMB 2.542 billion in H1 2024, accounting for 18.8% of pharmaceutical revenue, with 19 projects in Phase II/III clinical trials and 7 projects under regulatory review [3] Financial Performance - Revenue for 2024E is projected at RMB 32.747 billion, with a growth rate of 4.12% [4] - Net profit for 2024E is forecasted at RMB 6.218 billion, with a growth rate of 5.86% [4] - EPS for 2024E is expected to be RMB 0.52, with a P/E ratio of 10x [4] Business Segments - Pharmaceutical business revenue in H1 2024 was RMB 13.55 billion (YoY +4.8%), driven by central nervous system drugs and anti-tumor products [3] - VC raw material business revenue declined by 5.4% YoY, while antibiotic raw material business revenue fell by 6.4% YoY [2] - Functional food and other business revenue decreased by 25.2% YoY [2] R&D and Innovation - The company has a robust R&D pipeline, including platforms for nano-formulations, mRNA vaccines, ADC, monoclonal antibodies, and PROTAC [3] - Key products such as omalizumab, batoclimab, and meloxicam nanocrystal injection are under domestic regulatory review, while irinotecan liposome and amphotericin B liposome are under US regulatory review [3] Market Data - The company's total market capitalization is HKD 67.363 billion, with a total share capital of 11.86 billion shares [6] - The stock price has shown a 7% increase over the past year, with a 3-month turnover rate of 33.8% [6][7] Financial Projections - Revenue for 2026E is projected at RMB 35.743 billion, with a growth rate of 4.59% [4] - Net profit for 2026E is forecasted at RMB 6.898 billion, with a growth rate of 5.24% [4] - EPS for 2026E is expected to be RMB 0.58, with a P/E ratio of 9x [4]

Financial Performance - Revenue for the first half of 2024 was RMB 16.28 billion, an increase of 1.3% compared to the same period last year[3]. - Shareholders' profit attributable to the company was RMB 3.22 billion, up 1.7% year-on-year[3]. - Basic earnings per share based on shareholders' profit attributable to the company was RMB 27.17, reflecting a 2.2% increase from the previous year[2]. - The company declared an interim dividend of HKD 0.16 per share, representing a 14.3% increase compared to the same period last year[4]. - The company recorded a net loss of RMB 108 million in the first half of 2024, compared to a net profit of RMB 20 million in the first half of 2023[43]. - The group reported a net profit attributable to shareholders of RMB 3,020,374 thousand for the first half of 2024, up from RMB 2,966,987 thousand in the same period of 2023, representing a growth of about 1.8%[47]. - Basic earnings per share for the first half of 2024 was RMB 25.51, compared to RMB 24.95 in the first half of 2023, indicating an increase of approximately 2.2%[52]. - The company's total comprehensive income for the six months ended June 30, 2024, was RMB 3,973,266 thousand, compared to RMB 3,076,096 thousand for the same period in 2023, representing an increase of approximately 29.2%[53]. Revenue Breakdown - The pharmaceutical business recorded revenue of RMB 13.55 billion, a growth of 4.8% year-on-year[7]. - The revenue from the Nervous System segment reached RMB 5,236 million, representing a 15.0% increase[8]. - The revenue from the Oncology segment was RMB 2,683 million, showing a decline of 10.2%[8]. - The revenue from the Anti-infection segment increased to RMB 2,307 million, up by 7.7%[8]. - The revenue from the Metabolism segment surged by 55.4% to RMB 647 million[8]. - Sales revenue for the product Erelzi® (Nintedanib) significantly increased due to effective promotion strategies and strong market demand, while sales for Qixin® (Oseltamivir) declined due to reduced market demand[19]. - Sales revenue for the digestive metabolism segment increased significantly compared to the same period last year, particularly for the products Oubaituo® (Esomeprazole) and Debixin® (Omeprazole)[21]. - The geographical breakdown of revenue shows that mainland China accounted for RMB 14,256,973 thousand, up from RMB 13,841,284 thousand in the previous year, indicating a growth of 3.00%[63]. Research and Development - R&D expenses increased by 10.3% year-on-year to RMB 2.542 billion, accounting for 18.8% of the pharmaceutical business revenue, with over 60 key drugs in clinical or application stages[25]. - Two innovative drugs received approval for new indications in China, and 22 clinical trial approvals were granted, along with five generic drugs receiving registration certificates[26]. - The company has 10 drugs in research with first-in-class indications and 12 new indications that have received clinical trial approvals[27]. - The company is expanding its clinical research pipeline with multiple ongoing trials for various cancer treatments and diabetes management[30][31]. - The company is focusing on developing new therapies targeting specific cancer types and metabolic disorders[30][31]. Market Strategies - The company is actively pursuing strategies such as hospital expansion, market penetration, and professional academic promotion to drive growth in its pharmaceutical products[7]. - The company is focusing on expanding its market presence in county-level markets to provide quality medications to grassroots populations[6]. - The company has established a professional marketing team of over 10,000 people, enhancing its market penetration efforts[6]. - The company is actively pursuing market expansion through clinical trial approvals and new product developments in North America and China[29][30]. Shareholder Actions - The company completed a share buyback totaling HKD 387 million in the first half of 2024, with a maximum buyback amount approved of HKD 1 billion[4]. - The company repurchased a total of 62,978,000 shares during the reporting period, with a total cost of RMB 387,464,000[88]. - The highest repurchase price per share was HKD 6.58, while the lowest was HKD 5.66, indicating a strategic approach to enhance shareholder value[88]. Financial Position - The company's total assets as of June 30, 2024, amounted to RMB 26,466,251 thousand, a slight decrease from RMB 26,744,945 thousand at the end of 2023[54]. - The company's total liabilities increased to RMB 10,435,307 thousand from RMB 10,182,573 thousand, representing an increase of approximately 2.5%[55]. - The company's equity attributable to owners was RMB 34,850,964 thousand, up from RMB 33,203,208 thousand, indicating an increase of about 4.9%[55]. - The company's cash and cash equivalents, including bank deposits, were RMB 8,374,689 thousand, down from RMB 12,015,223 thousand at the end of 2023, reflecting a decrease of approximately 30.3%[54]. Operational Efficiency - Cash inflow from operating activities for the first half of 2024 was RMB 1.425 billion, an increase from RMB 1.32 billion in the first half of 2023, marking a growth of about 7.9%[49]. - The company’s cash flow from operating activities was RMB 6,385,631 thousand, an increase from RMB 5,978,313 thousand, reflecting improved operational efficiency[82]. - Sales and distribution expenses for the first half of 2024 were RMB 4.777 billion, a decrease of 2.5% from RMB 4.902 billion in the first half of 2023[44]. - Administrative expenses increased by 18.1% to RMB 633 million in the first half of 2024, up from RMB 536 million in the same period of 2023[44]. Compliance and Governance - The company has adhered to the corporate governance code as per the Hong Kong Stock Exchange regulations throughout the reporting period[84]. - The company’s interim results for the six months ended June 30, 2024, have been reviewed by external auditors, ensuring compliance and accuracy in financial reporting[85].

Investment Rating - The report maintains an "Accumulate" rating for the company [5][12]. Core Views - The company reported a revenue of 8.982 billion RMB for Q1 2024, representing a year-on-year growth of 11.5%. The adjusted net profit was 1.724 billion RMB, also up by 11.6%. The overall gross margin improved to 72.3%, an increase of 3.8 percentage points, primarily driven by the higher contribution from the pharmaceutical business [5]. - The revenue from the pharmaceutical segment exceeded expectations, reaching 7.561 billion RMB, a growth of 17.7%. Notably, the revenue from neurological products was 2.707 billion RMB, up by 27.4%, attributed to the approval of a new indication for a key product [5][6]. - The company is optimistic about the future growth of innovative drugs, maintaining revenue forecasts of 35.029 billion RMB, 39.613 billion RMB, and 44.835 billion RMB for 2024, 2025, and 2026 respectively, reflecting growth rates of 10%, 13%, and 13% [5][6]. Summary by Sections Financial Performance - For Q1 2024, the company achieved a revenue of 8.982 billion RMB, with a year-on-year increase of 11.5%. The adjusted net profit was 1.724 billion RMB, also showing an increase of 11.6%. The gross margin stood at 72.3%, up by 3.8 percentage points [5]. - The pharmaceutical segment's revenue was 7.561 billion RMB, marking a 17.7% increase. The revenue from neurological products was 2.707 billion RMB, up by 27.4% [5][6]. Product Pipeline and Innovation - The company has several innovative products expected to contribute to revenue growth in 2024, including Omabizumab for urticaria and Amphotericin B liposome for deep fungal infections. Multiple core products are anticipated to support future growth [6]. - The report highlights the successful progress of the research pipeline, with several key products expected to receive approval in 2024 and 2025 [6].

Investment Rating - Maintain BUY rating for CSPC Pharmaceutical with a revised target price of HK$8.51, up from HK$7.76, indicating a potential upside of 21.0% from the current price of HK$7.03 [2][4]. Core Insights - CSPC reported strong double-digit growth in 1Q24, with revenue of RMB8.98 billion, representing an 11.5% year-over-year increase and an 18.4% quarter-over-quarter increase. The attributable net profit was RMB1.61 billion, up 12.9% YoY and 17.0% QoQ [2]. - The gross profit margin in 1Q24 increased to 72.3%, up from 68.5% in 1Q23, primarily due to a higher proportion of revenue from finished drugs [2]. - Sales of finished drugs grew 17.7% YoY to RMB7.56 billion, driven by strong performance in CNS products (+27.4% YoY), oncology products (+11.6% YoY), anti-infection drugs (+9.8% YoY), and cardiovascular drugs (+22.3% YoY) [2]. - CSPC expects new products to significantly contribute to revenue, with management forecasting RMB3.5-3.6 billion from new products in 2024 [2]. Financial Summary - For FY24E, CSPC's revenue is projected to reach RMB35.065 billion, reflecting an 11.5% YoY growth, while attributable net profit is expected to be RMB6.867 billion, a 13.1% increase YoY [3][8]. - The earnings summary indicates a consistent growth trajectory, with revenue and net profit forecasts for FY25E at RMB38.970 billion and RMB7.516 billion, respectively [3][8]. - The company maintains a strong financial position with a net gearing ratio projected to improve from (37.3%) in FY23A to (51.2%) in FY26E [3]. Product Development and Pipeline - CSPC has seven new NDAs under review, including significant products like PD-1 and omalizumab, which are expected to enhance the company's product portfolio [2]. - The company is actively pursuing new indications and has completed enrollment for Phase 3 studies for several products, including TG103 for obesity and semaglutide for diabetes [2]. Market Performance - CSPC's market capitalization stands at HK$83.78 billion, with an average turnover of HK$273.1 million over the past three months [3]. - The stock has shown a 1-month performance of +6.5% and a 3-month performance of +15.2% [3].