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]
石药集团：传统产品面临定价压力