Core Viewpoint - Huahai Pharmaceutical (600521.SH) expects a significant decline in net profit for the fiscal year 2025, projecting a range of 224 million to 335 million yuan, representing a year-on-year decrease of approximately 70% to 80% [1]. Financial Performance - The company's net profit attributable to shareholders is expected to drop sharply, with a forecasted range of 113 million to 226 million yuan for net profit excluding non-recurring gains and losses, indicating a year-on-year decline of about 80% to 90% [1]. - The report highlights a substantial decrease in both net profit and net profit excluding non-recurring gains and losses compared to the same period last year [1]. Business Challenges - Domestic formulation business is facing pressure due to the expansion and deepening of domestic centralized procurement policies, leading to continuous price pressure and intensified competition. Additionally, the sales revenue from existing products is declining, while new products are taking time to ramp up, negatively impacting profits [1]. - The raw material pharmaceutical industry is experiencing fierce competition characterized by overcapacity and price pressure. New product development is hindered by long development cycles and significant impacts from changing internal and external business environments, resulting in decreased sales revenue and profits [1]. - The company is accelerating the progress of its biopharmaceutical innovation projects, leading to a substantial year-on-year increase in R&D expenditures [1]. Non-Operating Gains - Non-operating gains have increased by approximately 100 million to 130 million yuan year-on-year, primarily due to increased fair value changes of financial assets measured at fair value and gains from the sale of certain equity interests [1].

Investment Rating - The report maintains a "Strong Buy" rating for Huahai Pharmaceutical with a target price of 24.6 CNY [2][9]. Core Insights - The company's main business is under pressure, but significant progress has been made in innovative drug research and development [2][9]. - For the first three quarters of 2025, the company reported revenue of 6.409 billion CNY, a year-on-year decrease of 11.57%, and a net profit attributable to shareholders of 380 million CNY, down 63.12% year-on-year [2][9]. - The third quarter alone saw revenue of 1.893 billion CNY, a decline of 10.70% year-on-year, with a net loss of 29 million CNY, marking a year-on-year decline of 110.30% [2][9]. Financial Performance Summary - Revenue projections for 2024A, 2025E, 2026E, and 2027E are 9.547 billion CNY, 8.367 billion CNY, 9.101 billion CNY, and 10.100 billion CNY respectively, with a year-on-year growth rate of 14.9%, -12.4%, 8.8%, and 11.0% [4]. - Net profit attributable to shareholders is forecasted to be 1.119 billion CNY in 2024A, 375 million CNY in 2025E, 668 million CNY in 2026E, and 810 million CNY in 2027E, reflecting growth rates of 34.7%, -66.5%, 78.1%, and 21.1% respectively [4]. - The company’s gross margin for the first three quarters of 2025 was 61.71%, a decrease of 0.95 percentage points year-on-year [9]. Business Development and Innovation - The company is accelerating its transformation and upgrading efforts, with a focus on innovative drug pipelines entering a harvest period [9]. - In the first three quarters of 2025, the company registered 16 new domestic formulation products, received 3 ANDA approvals in the U.S., and obtained 4 clinical trial approvals for biological drugs [9]. - Key innovative drugs are progressing through critical stages, including the domestic first self-developed IL-36R monoclonal antibody HB0034, which is expected to be approved in the second quarter of next year [9].