Group 1 - The long-term potential of China's healthcare market remains optimistic, but the pharmaceutical sector has surged 64% this year due to licensing optimism, leading to a shift in market focus towards organic revenue/profit growth due to rising risks from potential U.S. executive orders and high valuations [1][2] - UBS downgraded the ratings of CSPC Pharmaceutical Group (01093) and Kelun Pharmaceutical (002422.SZ) to "Neutral" based on weak fundamentals, while changing its industry preference from 3SBio (01530) to Hansoh Pharmaceutical (03692) due to its stable traditional business and innovative pipeline [1] - The report indicates that the forward P/E ratio of Chinese pharmaceutical stocks is above the five-year average, with increasing risks from U.S. executive orders shifting market focus back to organic growth [1] Group 2 - CSPC's core traditional product NBP, which accounts for 32% of its 2024 finished drug revenue, continues to lose market share, and its high dependence on unconfirmed business development revenue increases uncertainty [2] - Kelun Pharmaceutical faces weak demand and intense competition, which may result in the lowest revenue growth among peers by 2025 [2] - The expected compound annual growth rate (CAGR) for CSPC and Kelun from 2024 to 2034 is only half of the average 13% CAGR of 3SBio, Hansoh, and Innovent Biologics [1]

Group 1 - UBS maintains a positive outlook on the long-term potential of China's healthcare market, but notes a 64% increase in the pharmaceutical sector this year due to optimistic sentiment from licensing agreements, alongside rising risks from potential U.S. executive orders and high valuations [1] - The focus is expected to shift back to organic revenue/profit growth due to weak fundamentals, leading to downgrades for CSPC Pharmaceutical Group and Kelun Pharmaceutical to "Neutral" [1] - UBS has changed its preferred stock in the industry from 3SBio to Hansoh Pharmaceutical, citing Hansoh's stable traditional business and innovative pipeline reserves [1] Group 2 - The report indicates that the forward P/E ratio of Chinese pharmaceutical stocks is above the five-year average, with rising risks from U.S. executive orders shifting market focus back to organic growth [1] - CSPC and Kelun are projected to have the lowest compound annual growth rate (CAGR) for revenue from 2024 to 2034, at half the average of 13% for peers like 3SBio, Hansoh, and Innovent Biologics [1] - CSPC's core traditional product NBP, which accounts for 32% of its 2024 finished drug revenue, continues to lose market share, increasing uncertainty due to high reliance on unconfirmed business development revenue [1] - Kelun faces weak demand and intense competition, which may result in the lowest revenue growth among peers by 2025 [1]