Core Viewpoint - The company has shown strong financial performance in the first half of 2025, with significant revenue growth driven by licensing income, and is well-positioned for future growth with a robust pipeline of drug candidates [1][2]. Financial Performance - The company reported a revenue of 612 million RMB in H1 2025, representing a 23% increase, primarily from Merck licensing income [1] - Gross profit for the same period was 610 million RMB, also up by 23% [1] - R&D expenses amounted to 230 million RMB, reflecting a 6% increase, while net profit surged by 59% to 330 million RMB [1] - As of June 30, 2025, the company had cash and bank balances of 2.33 billion RMB, an increase of 370 million RMB, mainly due to licensing income [1] Shareholder Returns - The management has prioritized shareholder returns, with a total buyback amount of approximately 150 million HKD over the past two years [2] Pipeline Development - The company has one molecule in NDA stage and another in critical clinical stage, with 6-7 molecules in early clinical phases, indicating a clear and structured pipeline [1] - ABSK021 (CSF-1R) has shown promising clinical results, with a 54% overall response rate (ORR) in a Phase III study, and is expected to contribute to revenue starting in 2026 [2] - ABSK011 (FGFR4) targets a significant unmet need in liver cancer treatment, with ongoing studies showing favorable outcomes [3][4] Clinical Trials and Research - The company has initiated a registration clinical study for ABSK011 in advanced or unresectable HCC patients, which is the only registered clinical trial in China targeting patients after ICI treatment [4] - The company is also advancing other molecules such as ABSK141 (KRAS G12D) and ABSK211 (Pan-KRAS), with IND submissions expected in 2025 and 2026 respectively [5][6] Revenue Projections - Revenue forecasts for FY25-27 are estimated at 610 million, 630 million, and 630 million RMB respectively, with net profits projected at 30 million, 130 million, and 350 million RMB [6]

Investment Rating - The report maintains an "OUTPERFORM" rating for the company with a target price of HKD 17.90, up from a previous target of HKD 13.40 [2][14][32]. Core Insights - The company reported a revenue of RMB 612 million for H1 2025, a 23% year-on-year increase, primarily driven by an upfront payment from Merck of USD 85 million [20][21]. - The gross profit for the same period was RMB 610 million, with net profit reaching RMB 330 million, reflecting a 59% increase year-on-year [20][21]. - The company has a robust cash position of approximately RMB 2.3 billion, which supports its operations and planned R&D investments for the next 2-3 years without the need for external financing [22][23]. Financial Performance - Revenue projections for FY25-27 are revised to RMB 610 million, RMB 630 million, and RMB 630 million respectively, with corresponding net profit estimates of RMB 30 million, RMB 130 million, and RMB 350 million [14][32]. - The company’s revenue growth is projected at 2544% for FY25, followed by 21% for FY26, and 3% for FY27 [17]. Pipeline and Product Development - The company has a well-structured pipeline, including one asset at the NDA stage and several others in various clinical phases, indicating a clear strategy for market expansion [22][24]. - Lead assets ABSK021 and ABSK011 are expected to contribute significantly to revenue within the next 2-3 years, with ABSK021 showing a 54% overall response rate in a Phase III study [24][28]. - ABSK011 has demonstrated promising results in treating liver cancer, with an overall response rate of 44.8% in second-line patients [28][29]. Strategic Direction - The management aims to expand from early-stage small molecules into bispecific antibodies, antibody-drug conjugates (ADCs), and autoimmune diseases, targeting broader market opportunities [22][23]. - The company has repurchased approximately HKD 150 million worth of shares over the past two years, reflecting a commitment to shareholder returns [23]. Valuation - The valuation is based on a risk-adjusted discounted cash flow (DCF) model, with a WACC of 10.0% and a terminal growth rate of 3.5%, leading to a target price of HKD 17.90 per share [14][32].