2024-07-11 13:01Investment Rating - The report maintains a "Buy" rating for China Biologic Products (1177 HK) with a target price of HKD 4.80, indicating a potential upside of 69.7% from the current closing price of HKD 2.83 [1][10]. Core Views - The report highlights a strong certainty of revenue and net profit growth exceeding 10% in 1H24, driven by the continued sales growth of new oncology products and robust performance in core surgical products [1]. - The company aims to complete five business development (BD) transactions in 2024, with four expected in 2H24, focusing on mid-to-late stage or near-commercialization products [1]. - The impact of recent drug price regulations on sales is limited, with no significant price discrimination between retail and hospital channels [1]. Financial Performance Summary - Revenue is projected to grow from RMB 26,199 million in 2023 to RMB 29,395 million in 2024, reflecting a year-on-year growth of 12.2% [4][11]. - Net profit is expected to increase from RMB 2,332 million in 2023 to RMB 2,844 million in 2024, marking a growth of 20.2% [4][11]. - The company maintains a dividend payout ratio of over 30% and plans to continue share buybacks after the interim report [1]. Product Updates - Established products like Flurbiprofen gel patch are expected to see a 20% sales increase, compensating for price reductions due to provincial procurement [2]. - New products, particularly biosimilars, are rapidly gaining market share, with innovative drugs projected to contribute 43% to total revenue [2]. - The report anticipates the launch of several new products by 2025, including CDK2/4/6 inhibitors and KRAS G12C inhibitors, which will strengthen the company's position in the oncology market [2]. Valuation and Forecast Adjustments - The report raises the net profit forecast for 2024-2026 by 2-3% to reflect stronger visibility in performance recovery, maintaining a DCF target price of HKD 4.80 [2][5]. - The company is expected to achieve a price-to-earnings (PE) ratio of 25 times and a price-to-earnings growth (PEG) ratio of 1.4 times for 2024-2026 [2].