CSPC PHARMA-石药集团：Accelerating growth in finished drug sales

Investment Rating - Maintain BUY rating for CSPC Pharmaceutical with a revised target price of HK $8.51, up from HK$ 7.76, indicating a potential upside of 21.0% from the current price of HK $7.03 [2][4]. Core Insights - CSPC reported strong double-digit growth in 1Q24, with revenue of RMB8.98 billion, representing an 11.5% year-over-year increase and an 18.4% quarter-over-quarter increase. The attributable net profit was RMB1.61 billion, up 12.9% YoY and 17.0% QoQ [2]. - The gross profit margin in 1Q24 increased to 72.3%, up from 68.5% in 1Q23, primarily due to a higher proportion of revenue from finished drugs [2]. - Sales of finished drugs grew 17.7% YoY to RMB7.56 billion, driven by strong performance in CNS products (+27.4% YoY), oncology products (+11.6% YoY), anti-infection drugs (+9.8% YoY), and cardiovascular drugs (+22.3% YoY) [2]. - CSPC expects new products to significantly contribute to revenue, with management forecasting RMB3.5-3.6 billion from new products in 2024 [2]. Financial Summary - For FY24E, CSPC's revenue is projected to reach RMB35.065 billion, reflecting an 11.5% YoY growth, while attributable net profit is expected to be RMB6.867 billion, a 13.1% increase YoY [3][8]. - The earnings summary indicates a consistent growth trajectory, with revenue and net profit forecasts for FY25E at RMB38.970 billion and RMB7.516 billion, respectively [3][8]. - The company maintains a strong financial position with a net gearing ratio projected to improve from (37.3%) in FY23A to (51.2%) in FY26E [3]. Product Development and Pipeline - CSPC has seven new NDAs under review, including significant products like PD-1 and omalizumab, which are expected to enhance the company's product portfolio [2]. - The company is actively pursuing new indications and has completed enrollment for Phase 3 studies for several products, including TG103 for obesity and semaglutide for diabetes [2]. Market Performance - CSPC's market capitalization stands at HK$ 83.78 billion, with an average turnover of HK$273.1 million over the past three months [3]. - The stock has shown a 1-month performance of +6.5% and a 3-month performance of +15.2% [3].