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]
石药集团：集采影响大品种销售，短期业绩不确定性升高，下调评级至中性