Investment Rating - The report upgrades the investment rating of the company to "Buy" with a target price of HKD 24.00, indicating a potential upside of 26.8% from the current closing price of HKD 18.92 [1][3][4]. Core Insights - The sales momentum for the drug Amelot is strong, with three major indications expected to be approved within a year. The company anticipates that these approvals will drive annual sales growth of over 20% from 2024 to 2025, reaching a sales target of RMB 6 billion by 2026 [1][2]. - The company is expected to benefit from compliance investigations affecting competitors, which may allow it to capture market share in first-line and second-line treatments [2]. - The company has a robust pipeline with several new products and indications expected to launch between 2025 and 2026, including an oral antifungal drug and multiple oncology products, supported by a cash reserve exceeding RMB 21 billion [2][3]. Financial Summary - Revenue projections for the company are as follows: RMB 12,704 million for 2024, RMB 13,334 million for 2025, and RMB 14,854 million for 2026, reflecting growth rates of 25.7%, 5.0%, and 11.4% respectively [5][11]. - Net profit estimates are RMB 4,364 million for 2024, RMB 4,052 million for 2025, and RMB 4,754 million for 2026, with corresponding growth rates of 32.9%, -7.1%, and 17.3% [5][11]. - The company’s earnings per share (EPS) are projected to be RMB 0.74 for 2024, RMB 0.68 for 2025, and RMB 0.80 for 2026, with a price-to-earnings (P/E) ratio of 23.9 for 2024 and 25.8 for 2025 [5][11].

Investment Rating - The report maintains a "Recommended" rating for the company with a target price of HKD 25.44 [1] Core Insights - The company achieved total revenue of HKD 6.506 billion, representing a year-on-year increase of 44.2%, and a net profit of HKD 2.726 billion, up 111.5% [1] - The sales revenue from innovative drugs and collaborative products reached HKD 5.032 billion, marking an 80.6% increase and accounting for 77.4% of total revenue, a new high [1] - The company has made significant progress in R&D, with several leading products in its pipeline, including approvals and ongoing clinical trials for various indications [1] - The ADC products in the pipeline show international potential, with breakthrough therapy designation from the FDA for one of the ADCs [1] Financial Summary - The company’s projected revenues for 2024, 2025, and 2026 are HKD 12.155 billion, HKD 12.439 billion, and HKD 14.470 billion, respectively, with year-on-year growth rates of 20.3%, 2.3%, and 16.3% [2] - The projected net profit for the same years is HKD 4.259 billion, HKD 3.945 billion, and HKD 4.669 billion, with growth rates of 29.95%, -7.39%, and 18.37% [2] - The company’s earnings per share (EPS) are expected to be HKD 0.55, HKD 0.72, HKD 0.66, and HKD 0.79 for the years 2024 to 2026 [2] Company Overview - The total market capitalization of the company is HKD 128.507 billion, with a total share capital of 593,565.01 million shares [4] - The company has a low debt ratio of 11.90% and a net asset value per share of HKD 4.70 [4]

Financial Performance - Revenue reached approximately RMB 6.506 billion, a year-on-year increase of 44.2%[5] - Revenue from innovative drugs and cooperative products reached approximately RMB 5.032 billion, a year-on-year increase of 80.6%, accounting for 77.4% of total revenue[5] - Profit reached approximately RMB 2.726 billion, a year-on-year increase of 111.5%[5] - Basic earnings per share were approximately RMB 0.46, a year-on-year increase of 111.4%[5] - Revenue for the first half of 2024 reached approximately RMB 6.506 billion, a year-on-year increase of 44.2%[9] - Net profit for the first half of 2024 was approximately RMB 2.726 billion, a year-on-year increase of 111.5%[9] - Earnings per share for the first half of 2024 were approximately RMB 0.46, a year-on-year increase of 111.4%[9] - Revenue from innovative drugs and partnered products reached approximately RMB 5.032 billion, accounting for 77.4% of total revenue, with a year-on-year increase of 80.6%[9] - Revenue from the anti-tumor segment reached approximately RMB 4.475 billion, accounting for 68.8% of total revenue[11] - Revenue from the anti-infective segment reached approximately RMB 701 million, accounting for 10.8% of total revenue[10] - Revenue from the central nervous system disease segment reached approximately RMB 733 million, accounting for 11.3% of total revenue[10] - Revenue from the metabolic and other diseases segment reached approximately RMB 597 million, accounting for 9.1% of total revenue[10] - The company's revenue for the first half of 2024 reached RMB 6,505.5 million, a significant increase from RMB 4,511.2 million in the same period of 2023[73] - Gross profit for the first half of 2024 was RMB 5,926.3 million, compared to RMB 3,975.8 million in the first half of 2023[73] - Net profit attributable to owners of the parent company for the first half of 2024 was RMB 2,725.5 million, a significant increase from RMB 1,288.8 million in the first half of 2023[73] - Basic earnings per share for the first half of 2024 were RMB 0.46, compared to RMB 0.22 in the same period of 2023[73] - The company's total comprehensive income for the first half of 2024 was RMB 2,810.2 million, up from RMB 1,752.8 million in the first half of 2023[75] - Total assets increased to RMB 28,239,914,000 as of June 30, 2024, compared to RMB 26,176,230,000 at the end of 2023[76] - Net current assets rose to RMB 23,973,895,000 from RMB 22,020,458,000 at the end of 2023[76] - Cash and bank balances decreased slightly to RMB 21,745,333,000 from RMB 22,434,691,000 at the end of 2023[76] - Total equity increased to RMB 27,903,275,000 as of June 30, 2024, up from RMB 25,794,773,000 at the end of 2023[77] - Profit for the period was RMB 2,725,525,000, a significant increase from RMB 1,288,848,000 in the same period last year[78] - The company declared dividends of RMB 768,760,000 during the period[78] - Property, plant, and equipment decreased to RMB 2,859,333,000 from RMB 3,045,060,000 at the end of 2023[76] - Trade receivables and bills decreased to RMB 2,938,415,000 from RMB 3,214,251,000 at the end of 2023[76] - Convertible bonds under current liabilities decreased significantly to RMB 40,255,000 from RMB 4,183,198,000 at the end of 2023[76] - The company's reserves increased to RMB 27,916,822,000 from RMB 25,903,350,000 at the end of 2023[77] - Operating cash flow increased to RMB 3,159,579 thousand in 2024, up from RMB 1,498,500 thousand in 2023, reflecting strong operational performance[79] - Net cash generated from operating activities rose to RMB 2,682,383 thousand in 2024, compared to RMB 1,146,167 thousand in 2023[79] - Investment activities generated a net cash flow of RMB 2,368,869 thousand in 2024, up from RMB 1,041,872 thousand in 2023, driven by higher proceeds from asset sales and reduced investments[80] - Cash and cash equivalents increased by RMB 854,923 thousand in 2024, reaching RMB 6,796,204 thousand at the end of the period[80] - Depreciation of property, plant, and equipment increased to RMB 198,163 thousand in 2024, compared to RMB 169,443 thousand in 2023[79] - The company redeemed convertible bonds worth RMB 4,183,198 thousand in 2024, significantly impacting financing cash flows[80] - Net cash used in financing activities was RMB 4,196,329 thousand in 2024, primarily due to the redemption of convertible bonds[80] - The company's cash and bank balances, unrestricted, stood at RMB 6,722,852 thousand in 2024, up from RMB 4,226,502 thousand in 2023[80] - Revenue from customer contracts for goods sales reached RMB 5,103,080 thousand, while cooperative income was RMB 1,402,421 thousand, totaling RMB 6,505,501 thousand for the six months ended June 30, 2024[88] - Investment income increased to RMB 84,646 thousand, up from RMB 42,090 thousand in the same period last year[88] - Government subsidies decreased to RMB 21,918 thousand from RMB 38,061 thousand in the previous year[88] - Bank interest income remained stable at RMB 374,011 thousand compared to RMB 372,218 thousand in 2023[88] - The fair value gain on financial assets at fair value through profit or loss rose significantly to RMB 55,777 thousand from RMB 18,020 thousand in 2023[89] - The company's tax expense is calculated at a rate of 25% for Chinese subsidiaries, with certain subsidiaries enjoying a preferential tax rate of 15% due to high-tech enterprise status[92] - The company's revenue from GSK plc accounted for approximately 20% of total revenue, with no other single customer contributing more than 10%[86] - The company's identifiable operating assets and liabilities are primarily located in mainland China, where approximately 80% of revenue is generated[85] - The company's pre-tax profit for the six months ended June 30, 2024, was impacted by a net impairment loss on property, plant, and equipment of RMB 27,667 thousand[90] - Employee benefit expenses, including wages and salaries, increased to RMB 970,726 thousand from RMB 882,199 thousand in the previous year[90] - Total tax expense increased to RMB 392,661 thousand in 2024, up from RMB 211,035 thousand in 2023, with current tax expense rising to RMB 396,930 thousand from RMB 307,238 thousand[93] - The company declared a dividend of 14.22 HK cents per share for 2023, totaling approximately RMB 768,760 thousand, compared to 5.00 HK cents per share and RMB 268,852 thousand in 2023[94] - Basic earnings per share (EPS) for 2024 increased to RMB 0.46, up from RMB 0.22 in 2023, with diluted EPS also rising to RMB 0.46 from RMB 0.22[97] - The weighted average number of ordinary shares used for calculating basic EPS was 5,925,786,074 in 2024, slightly up from 5,923,743,166 in 2023[97] - Property, plant, and equipment (PPE) net book value decreased to RMB 2,859,333 thousand in 2024 from RMB 3,122,191 thousand in 2023, with additions of RMB 60,409 thousand and disposals of RMB 19,416 thousand[98] - Right-of-use assets increased to RMB 449,140 thousand in 2024 from RMB 246,494 thousand in 2023, with additions of RMB 225,805 thousand and depreciation expenses of RMB 11,713 thousand[100] - Lease liabilities decreased to RMB 79,417 thousand in 2024 from RMB 90,661 thousand in 2023, with new leases of RMB 6,137 thousand and payments of RMB 9,417 thousand[101] - Trade receivables decreased to RMB 2,904,048 thousand in 2024 from RMB 3,209,633 thousand in 2023, with 90.7% of receivables aged within 90 days[103][104] - Trade receivables and bills receivable increased significantly to RMB 34,367 thousand as of June 30, 2024, compared to RMB 4,618 thousand as of December 31, 2023[105] - The provision for impairment losses on trade receivables increased to RMB 37,547 thousand as of June 30, 2024, up from RMB 30,604 thousand at the beginning of the period[105] - The expected credit loss rate for trade receivables over 90 days past due increased to 5.80% as of June 30, 2024, compared to 0.94% for receivables within 90 days[106] - The company's financial assets at fair value through profit or loss decreased to RMB 320,875 thousand as of June 30, 2024, from RMB 512,409 thousand as of December 31, 2023[107] - Non-current financial assets at fair value through profit or loss increased to RMB 743,409 thousand as of June 30, 2024, up from RMB 684,706 thousand as of December 31, 2023[107] - The company's cash and bank balances decreased slightly to RMB 21,745,333 thousand as of June 30, 2024, from RMB 22,434,691 thousand as of December 31, 2023[110] - Trade payables and bills payable increased to RMB 174,562 thousand as of June 30, 2024, compared to RMB 163,763 thousand as of December 31, 2023[111] - The company's other payables and accrued expenses increased to RMB 2,410,159 thousand as of June 30, 2024, up from RMB 2,375,680 thousand as of December 31, 2023[112] - The company redeemed USD 590,622 thousand (RMB 4,183,198 thousand) of convertible bonds on January 22, 2024[113] - Convertible bonds as of June 30, 2024, consist of a debt portion of RMB 37,495 thousand and an embedded derivative portion of RMB 2,760 thousand, totaling RMB 40,255 thousand[114] - The company issued 2,300,000 new ordinary shares under the Restricted Share Unit (RSU) plan on April 19, 2024, with a purchase price of HKD 2.60 per share[116] - As of June 30, 2024, the company had 27,512,890 unvested RSUs, with 11,397,590 RSUs granted during the period[118] - The company recognized share-based payment expenses of RMB 67,587 thousand for the six months ended June 30, 2024[119] - The fair value of RSUs granted on June 27, 2024, was estimated at HKD 13.10 per share using a binomial model[120] - Treasury shares as of June 30, 2024, amounted to 1,315,065 shares, valued at RMB 13,599 thousand[123] - Capital commitments for property, plant, and equipment as of June 30, 2024, totaled RMB 67,609 thousand[124] - Transactions with related parties included RMB 17,151 thousand from the sale of property, plant, and equipment to Jiangsu Hengrui Pharmaceuticals[128] - The total compensation paid to key management personnel was RMB 83,904 thousand, a decrease from RMB 95,502 thousand in the previous period[130] - The fair value of financial assets measured at fair value through profit or loss was RMB 1,064,284 thousand, down from RMB 1,197,115 thousand at the end of 2023[131] - The fair value of debt investments measured at fair value through other comprehensive income was RMB 33,964 thousand, up significantly from RMB 4,596 thousand at the end of 2023[131] - The fair value of convertible bonds was RMB 40,255 thousand, a sharp decrease from RMB 4,222,940 thousand at the end of 2023[132] - The company declared a final dividend of HKD 14.22 cents per ordinary share, totaling RMB 768,760,000, on July 17, 2024[140] - The company entered into a licensing agreement with Guangzhou Lupeng Pharmaceutical for LP-168, with potential payments of up to RMB 729 million, plus royalties up to double digits based on future net sales[140] - The fair value of trade receivables was estimated using a discounted cash flow model with annual discount rates ranging from 3.28% to 3.62%[135] - The fair value of financial assets measured using significant unobservable inputs (Level 3) increased to RMB 777,373 thousand from RMB 689,302 thousand at the end of 2023[137] - The fair value of embedded derivatives in convertible bonds increased slightly to RMB 2,760 thousand from RMB 2,743 thousand at the end of 2023[139] - The company issued $600 million zero-coupon convertible bonds due in 2026, listed and traded on the Hong Kong Stock Exchange with bond code 40546[142] - The report period covers the six months from January 1, 2024, to June 30, 2024[144] - The company's restricted share unit (RSU) plan was conditionally approved and adopted on May 27, 2019, with details provided in the prospectus[144] - The company is involved in the development of antibody-drug conjugates (ADC) and BCR-ABL tyrosine kinase inhibitors (TKI)[141] - The company has a strategic focus on chronic kidney disease (CKD) and central nervous system (CNS) therapies[141] - The company collaborates with Amgen and GSK, indicating potential partnerships in drug development[141][143] - The company's ESG (Environmental, Social, and Governance) initiatives are overseen by a dedicated committee under the board of directors[142] - The company's shares are listed and traded on the Hong Kong Stock Exchange Main Board[141] - The company's financial reporting adheres to the Hong Kong Stock Exchange Listing Rules and Corporate Governance Code[143] - The company's operations include subsidiaries in the British Virgin Islands and China, with significant investments in pharmaceutical R&D[141][143] R&D and Clinical Trials - R&D expenses were approximately RMB 1.196 billion, a year-on-year increase of 28.7%, accounting for 18.4% of revenue[5] - The company obtained clinical trial approval for HS-10501 tablets for the treatment of type 2 diabetes and adult obesity[6] - The company obtained clinical trial approval for HS-10398 capsules for the treatment of IgA nephropathy and membranous nephropathy[6] - Seven innovative drugs and nine corresponding indications have been included in the National Reimbursement Drug List[12] - Ameile® (Aumolertinib) has been included in eight national-level clinical guidelines and won the 24th China Patent Gold Award[13] - Hengmu® (Aimitenofovir Tablets) achieved a 48-week, 96-week, and 144-week data release in Phase III clinical trials, demonstrating long-term efficacy and safety for chronic hepatitis B treatment[16] - Hengmu® was included in the 2023 National Reimbursement Drug List (NRDL) and received an A-level recommendation in the 2024 Primary Liver Cancer Diagnosis and Treatment Guidelines[16] - Xinyue® (Inebilizumab Injection) achieved primary clinical endpoints in a Phase III trial for IgG4-related diseases (IgG4-RD) in June 2024[17] - Xinyue® was included in the 2022 NRDL and received an A-class recommendation in the 2021 Chinese Guidelines for Diagnosis and Treatment of Neuromyelitis Optica Spectrum Disorders[17] - Shengluolai® (Pegmolesatide Injection) was approved for two indications in June 2023 and included in the 2023 NRDL, offering a monthly dosing regimen for improved patient compliance[18] - Shengluolai® was included in the 2024 Chinese Expert Consensus on Long-Acting Erythropoiesis-Stimulating Agents for Renal Anemia[18] - Mailinda® (Morpholinyl Nitroimidazole Sodium Chloride Injection) was successfully renewed in the NRDL in December 2023 and recommended in the 2019 Chinese Guidelines for Diagnosis and Treatment of Abdominal Infections[19] - The company submitted 21 domestic patent applications and 49 overseas patent applications, with 29 domestic and 20 overseas patents granted as of June 30, 2024[20] - Over 50 ongoing clinical trials for more than 30 innovative drug products were conducted as of June 30, 2024[21] - Key new drugs approved for clinical trials include HS-10501 (for type 2 diabetes and obesity), HS-10398 (for IgA nephropathy and membranous nephropathy), and HS-10504 (for advanced NSCLC)[21] - HS-20094, a GLP-1 and GIP receptor dual agonist, demonstrated good safety, tolerability, and efficacy in reducing blood sugar and weight in a Phase IIa study for type 2 diabetes patients[22] - HS-20093, a B7-H3 targeted ADC, showed strong anti-tumor activity in recurrent or refractory bone and soft tissue sarcoma, surpassing existing clinical standards, and received

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company has successfully transformed through innovation, achieving significant revenue and profit growth. In the first half of 2024, the company reported revenue of 6.506 billion RMB, a year-on-year increase of 44.2%, and a net profit of 2.726 billion RMB, up 111.5% [4] - The company has established a leading position in major unmet medical needs, particularly in the oncology sector, with product revenue reaching approximately 4.475 billion RMB, accounting for 68.8% of total revenue [4][5] - The company is actively pursuing international expansion and has enriched its pipeline through business development (BD) collaborations, including a significant agreement with GSK [6][7] Summary by Sections Market Performance - The company's stock has shown a relative increase of 18.38% over one month and 30.97% over three months compared to the market [2] Financial Performance - For the first half of 2024, the company achieved a revenue of 6.506 billion RMB, with a gross margin of 89.80% and a net profit margin of 32.44% [4][15] - The projected revenue for 2024-2026 is 12.25 billion, 12.64 billion, and 14.885 billion RMB, with year-on-year growth rates of 21.24%, 3.21%, and 17.73% respectively [7][15] Product Development - The company has over 50 ongoing clinical trials for more than 30 innovative drug products, with several products already included in the national medical insurance directory [4] - The company’s innovative drugs, particularly in the oncology and metabolic disease sectors, are showing promising results in clinical trials [5][6] Business Development - As of June 30, 2024, the company has introduced 11 collaborative projects, with 9 in clinical stages and 2 in commercialization [6] - The company has signed multiple BD agreements, including a notable one with GSK that includes an upfront payment of 185 million USD [6][7]

Investment Rating - The report upgrades the investment rating for the company from "Hold" to "Buy" [3][4]. Core Views - The company reported a strong performance in the first half of 2024, with revenue exceeding expectations, driven primarily by the oncology drug segment, which saw a revenue increase of 75.1% year-on-year [2]. - The forecast for revenue and net profit for 2024-2026 has been adjusted upwards due to the strong performance in the oncology segment, with expected revenue growth from 61.6 billion RMB in 2023 to 90.8 billion RMB in 2026, representing a CAGR of 13.8% [2][3]. Summary by Sections Financial Performance - The company's revenue for the first half of 2024 increased by 44.2% to approximately 6.506 billion RMB, with the core pharmaceutical sales rising by 13.8% to 5.1 billion RMB after excluding project prepayments [2]. - The net profit attributable to shareholders surged by 111.5% to 2.73 billion RMB, driven by a 3.0 percentage point increase in gross margin and a 3.5 percentage point decrease in the sales expense ratio [2]. Earnings Forecast - The revenue forecast for 2024 has been raised by 2.2%, while the forecasts for 2025 and 2026 have been slightly lowered by 4.1% and 0.1%, respectively [2]. - The net profit forecasts for 2024, 2025, and 2026 have been increased by 5.5%, 0.1%, and 4.6%, respectively, reflecting the strong growth in the oncology drug segment [2]. Target Price - The target price has been raised to 23.40 HKD, reflecting the upward adjustments in profit forecasts [3][5].

Investment Rating - The report assigns a Neutral rating to the company with a target price of HKD 20.40, indicating a potential upside of 12% from the current price of HKD 18.22 [1][6]. Core Insights - The company's 1H24 revenue and profit exceeded market expectations, leading to an upward revision of the 2024-26 profit forecasts by 12-17% [1]. - The strong performance was driven by a 44% year-on-year revenue growth and a 111% increase in net profit, primarily due to the sales growth of the innovative drug Ameluz [1][2]. - The report highlights that the innovative drug revenue grew by 81%, increasing its share of total revenue from 61.8% in 1H23 to 77.4% in 1H24 [1]. - The company maintains guidance for double-digit growth in non-BD operating revenue for the full year [1]. Financial Forecast Changes - Revenue forecasts for 2024, 2025, and 2026 have been adjusted to RMB 12,637 million, RMB 13,265 million, and RMB 14,630 million respectively, reflecting increases of 2.7%, 2.7%, and 4.3% compared to previous estimates [3]. - Net profit forecasts for the same years have been revised to RMB 4,451 million, RMB 4,040 million, and RMB 4,690 million, showing increases of 11.5%, 15.6%, and 16.7% respectively [3]. - The gross profit margin is expected to remain stable at around 90.5% for 2024, with slight variations in subsequent years [3]. Sales Performance - The oncology line revenue (excluding BD) grew by 24%, with the core product Ameluz expected to achieve over 20% sales growth for the year [2]. - The anti-infection and neurology lines saw revenue increases of 17% and 5% respectively, while the generic drug segment faced a decline of approximately 15% due to competitive pressures [2]. - The company anticipates the launch of several new products in the coming years, including Chitosan and additional indications for Ameluz and other innovative drugs [2].

Investment Rating - The report assigns a "BUY" rating to the company, indicating a potential return exceeding 15% over the next 12 months [15]. Core Insights - The company reported strong growth in innovative drug sales, with a revenue of 6.51 billion RMB in the first half of the fiscal year 2024, including a 185 million USD upfront payment from GSK related to the licensing of HS-20093 [1]. - The innovative drug sales accounted for 77% of total revenue, with a year-on-year growth of 31.6% when excluding collaboration revenue [1]. - The company plans to distribute approximately 40% of its net profit of 2.73 billion RMB as dividends [1]. - The target price for the company's stock has been raised to HK$24.11 from HK$22.06, reflecting a 17% upside from the current price of HK$20.60 [1]. Financial Performance - For FY24E, the company expects total revenue to grow by 21% to 12.23 billion RMB, with organic revenue growth projected at 14.3% and 14.1% for FY24E and FY25E, respectively [3][4]. - The net profit is expected to increase by 33.3% to 4.37 billion RMB in FY24E, followed by a decrease of 25.1% in FY25E [4][12]. - The company has improved cost efficiency, with sales expense ratio decreasing to 33.7% from 37.5% in FY23 [1]. Product Pipeline and Growth Drivers - The company is expanding the indications for aumolertinib, with new drug applications accepted for postoperative adjuvant therapy and maintenance treatment for locally advanced unresectable non-small cell lung cancer [1]. - Aumolertinib's sales are expected to grow by 22% by the end of FY24, reaching 438 million RMB, with a target of 600 million RMB by 2026 [1]. - The company is also advancing its ADC pipeline, with HS-20093 showing promising early signals in clinical trials for small cell lung cancer [3]. Market Position and Competitive Landscape - As an early entrant in the third-generation EGFR-TKI market in China, the company is well-positioned to capture market share with its innovative products [1]. - The company is expected to submit another NDA for aumolertinib in combination with chemotherapy in Q4 2024, differentiating itself from domestic competitors [1]. Valuation Metrics - The report provides a DCF valuation with a target price of HK$24.11, based on a weighted average cost of capital of 8.52% and a terminal growth rate of 3.5% [5][7]. - The company's P/E ratio is projected to be 25.6x for FY24E, reflecting a strong growth outlook [12].

Investment Rating - The report maintains a "BUY" rating for Hansoh Pharma, with a target price of HK$24.11, reflecting a 17.0% upside from the current price of HK$20.60 [2][3]. Core Insights - Hansoh Pharma demonstrated strong sales growth in innovative drugs, reporting RMB6.51 billion in revenue for 1H24, with RMB5.10 billion from product sales, marking a 13.8% year-over-year increase [2]. - The company continues to expand its innovative drug pipeline, particularly with aumolertinib, which is expected to drive significant revenue growth [2]. - Cost efficiency has improved, as indicated by a decrease in selling and administrative expense ratios [2]. Revenue and Profitability - For FY24E, total revenue is expected to increase by 21% year-over-year to RMB12.23 billion, with organic revenue growth projected at 14.3% [2][3]. - Net profit is anticipated to rise by 33.3% to RMB4.37 billion in FY24E, before decreasing by 25.1% in FY25E [2][3]. - The gross profit margin is projected to remain strong at 90.16% for FY24E [9]. Product Sales and Pipeline - Innovative drugs accounted for 77% of total revenue in 1H24, with a 31.6% year-over-year growth in sales from these products [2]. - Aumolertinib is set to expand its indications, with expected approvals by mid-2025, potentially becoming the first domestic EGFR-TKI for new indications [2]. - The company is also advancing other innovative drugs, including HS-20093 and HS-20089, with ongoing clinical trials [2]. Financial Metrics - The report outlines a significant increase in R&D expenses, which rose by 29% year-over-year to RMB1.20 billion, representing 23.4% of product sales [2]. - The earnings summary indicates a projected EPS of RMB0.74 for FY24E, with a P/E ratio of 25.6 [3][8]. - The company's market capitalization is reported at HK$122.27 billion, with an average turnover of HK$66.3 million over the past three months [4].

Investment Rating - Buy (Maintained) [2] Core Views - The company's 2024 interim results exceeded expectations, driven by significant growth in innovative drug revenue and successful transformation into an innovation-driven growth cycle [2] - The company's revenue and profit surged due to the recognition of a USD 185 million upfront payment from GSK in the first half of the year [2] - Innovative drug revenue grew rapidly, accounting for 77.4% of total revenue in H1 2024, with a year-on-year increase of 80.6% [2] - The company's R&D pipeline is robust, with global strategic布局 and accelerated international BD collaborations, providing long-term support for innovation transformation [2] Financial Performance - H1 2024 total revenue reached RMB 6.506 billion, a year-on-year increase of 44.2%, with net profit of RMB 2.726 billion, up 111.5% year-on-year [2] - Operating income, excluding milestone payments, was RMB 5.103 billion, up 13.83% year-on-year [2] - Revenue breakdown: Oncology (68.8%), CNS (11.3%), Anti-infectives (10.8%), Metabolism & Others (9.1%) [2] R&D and Innovation - Seven approved innovative drugs and nine indications have been included in the national医保目录 [2] - Core product Ameile (阿美替尼) has seen its third and fourth indications for NSCLC NDA accepted in July and August 2024, respectively [2] - The company's R&D pipeline includes领先 global progress in dual-target GLP-1, B7-H4 ADC, and B7-H3 ADC, with total授权金额 exceeding USD 1.7 billion [2] Profit Forecast and Valuation - Forecasted total revenue for 2024-2026: RMB 11.874 billion, RMB 12.714 billion, and RMB 14.827 billion, respectively [2][3] - Forecasted net profit for 2024-2026: RMB 3.524 billion, RMB 3.704 billion, and RMB 4.103 billion, respectively [2][3] - ROE for 2024-2026 is projected at 12.1%, 11.3%, and 11.2%, respectively [3] Stock Data - Closing price on August 28, 2024: HKD 20.60 [4] - Year-to-date high/low: HKD 20.75/HKD 9.43 [4] - Total market capitalization: HKD 122.274 billion [4]

Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected price increase of over 15% in the next 6-12 months [3]. Core Insights - The company reported strong mid-year results for 1H24, with revenue, net profit attributable to shareholders, and adjusted net profit reaching 6.506 billion, 2.726 billion, and 2.684 billion RMB respectively, representing year-on-year growth of 44.17%, 111.47%, and 118.39% [1]. - Innovative drug sales accounted for nearly 80% of total revenue, with significant contributions from the ADC (antibody-drug conjugate) segment, leading to a doubling of net profit [1]. - The company has made substantial progress in expanding its product pipeline, particularly with its core product Amelot, which is the first domestic third-generation EGFR-TKI [2]. Summary by Sections Performance Review - In 1H24, the company achieved a revenue of 6.506 billion RMB, a 44.2% increase year-on-year, with innovative drugs and collaborative product sales reaching 5.032 billion RMB, up 80.6% [1]. - The ADC breakthrough includes collaborations with GSK, resulting in upfront payments of 85 million and 185 million USD for two products [1]. - Seven innovative drugs and nine indications have been included in the national medical insurance catalog [1]. Product Development - The core product Amelot has received approval for new indications, enhancing its market potential [2]. - The company is focusing on core areas such as oncology, metabolism, and autoimmune diseases, with a rich pipeline of products [2]. - The self-developed GLP-1/GIP dual agonist has shown promising safety and efficacy data presented at the 2024 ADA annual meeting [2]. Financial Forecast and Valuation - The revenue forecast for 2024 and 2025 has been adjusted downwards by 2.61% and 13.03% to 11.6 billion and 11.9 billion RMB respectively, while the net profit forecast for 2024 has been increased by 22% to 4 billion RMB [3]. - The expected revenue for 2026 is projected to be 13.7 billion RMB, with net profit anticipated at 3.9 billion RMB [3]. - Key financial metrics include a projected P/E ratio of 26.99 for 2024 and a P/B ratio of 3.64 [5].