Kanion Pharmaceutical(SH:600557) HTSC·2025-08-29 11:01Investment Rating - The report maintains a "Buy" rating for the company [6][8]. Core Views - The company experienced significant revenue and profit pressure in the first half of 2025, with revenue, net profit attributable to shareholders, and net profit excluding non-recurring items declining by 27%, 40%, and 46% year-on-year, respectively [1][2]. - Despite the current challenges, the company is expected to gradually narrow the revenue decline, with potential growth from its traditional Chinese medicine, biopharmaceuticals, and chemical drugs pipelines [1][2]. - The collaboration with Dong'e Ejiao to promote Huangqi Essence is anticipated to unlock market potential, leveraging Dong'e Ejiao's strong marketing and distribution capabilities [4]. Summary by Sections Financial Performance - In 1H25, the company's revenue was 1.64 billion RMB, with a net profit of 140 million RMB and a net profit excluding non-recurring items of 120 million RMB, reflecting a year-on-year decline of 27%, 40%, and 46%, respectively [1]. - In 2Q25, revenue was 764 million RMB, with a net profit of 59 million RMB and a net profit excluding non-recurring items of 38 million RMB, showing declines of 15%, 42%, and 53% year-on-year [1]. Product Performance - Core products faced sales pressure, with injection revenue down 40% to 510 million RMB and oral liquid revenue down 49% to 280 million RMB in 1H25 [2]. - Other dosage forms showed mixed performance, with capsules and granules experiencing declines of approximately 5% and 18%, while tablets, patches, and gels saw growth of 5% to 12% [2]. Research and Development - The company has a robust R&D pipeline, with two approved traditional Chinese medicines and several in various clinical trial phases [5]. - The acquisition of Zhongxin Pharmaceutical is expected to enhance the company's product offerings, particularly in diabetes treatment with unique dual-target and triple-target products [3]. Valuation and Forecast - The revenue forecast for 2025-2027 has been adjusted downwards by 8%, 11%, and 13%, respectively, with expected net profits of 400 million RMB, 460 million RMB, and 530 million RMB, reflecting year-on-year growth of 2%, 15%, and 15% [6]. - The target price is set at 21.26 RMB, based on a 30x PE for 2025, indicating a premium over the average PE of comparable companies [6].