SINO BIOPHARM(01177)2024-08-15 05:38Investment 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 62.8% from the current closing price of HKD 2.95 [1][2]. Core Insights - The report highlights that the company's performance in the first half of 2024 met expectations, with revenue and adjusted net profit growing by 11% and 14% respectively. The growth is driven by rapid uptake of new products and biosimilars, alongside cost reduction efforts that are expected to enhance profit margins [1][2]. - The company is projected to return to double-digit revenue growth over the next three years, with innovative drugs expected to account for 50% of revenue by 2026 [1][3]. Summary by Sections Financial Performance - In 1H24, revenue and adjusted net profit increased by 11% and 14%, respectively, with highlights including a 15% rise in innovative drug revenue, which now constitutes 39% of total revenue. The generics segment also showed positive growth at 9% [1][3]. - Cost reduction measures have led to a 0.3 percentage point increase in gross margin, with sales and management expense ratios decreasing by 0.5 percentage points. The workforce was reduced by 5.3%, yet productivity improved by 17% [1][3]. Future Projections - The report projects revenue growth to rebound to double digits over the next three years, with innovative drugs expected to grow at a high double-digit rate and generics returning to positive growth [1][3]. - The company plans to launch at least six new products by 2025, which is anticipated to drive revenue growth [1][3]. Valuation - The report adjusts the profit forecasts for 2024-2026 down by 3-5% to RMB 30 billion, RMB 36 billion, and RMB 40 billion, respectively. The DCF valuation model's starting year has been rolled forward to 2025, maintaining the target price of HKD 4.80 [1][3].