Core Viewpoint - The company is facing significant pressure from centralized procurement and medical insurance cost control in Q1 2025, but is expected to see gradual improvement starting from Q2 2025, with projections of achieving three major BD licensing deals exceeding $5 billion each in 2025 [1][2] Group 1: Q1 2025 Performance - In Q1 2025, the company's revenue decreased by 30% year-on-year, excluding BD income, with the prescription drug segment declining by 37% [1] - Key therapeutic areas experienced declines: CNS down 30% due to medical insurance cost control and a 13% price reduction from negotiations; oncology core products saw a 66% drop in sales due to centralized procurement and channel price adjustments [1] - The company recorded 720 million RMB in licensing fee income, primarily from collaborations with AstraZeneca and BeiGene [1] - Revenue from raw materials increased by 15% year-on-year, driven by demand in the VC market and rising product prices, while functional foods and other business revenues fell by 9% due to declining demand and prices for caffeine [1] - The net profit margin improved by 3.1 percentage points to 21.1% due to high-margin licensing income and cost control efforts [1] Group 2: Future Outlook and BD Transactions - The company anticipates gradual improvement in performance starting Q2 2025, driven by increased promotion of Enbip, stabilization from procurement and inventory adjustments, rapid market entry of new products, and additional BD income recognition [2] - Management expects to achieve three large overseas licensing deals in 2025, each exceeding $5 billion, including a comprehensive technology platform licensing deal [2] - The company is advancing a Phase III study for EGFR ADC in second-line EGFR+ NSCLC in China and has initiated studies for third-line EGFR classic mutation NSCLC overseas, with further discussions with the FDA planned for June [2] - Based on optimistic BD income and operating expense forecasts, the company has raised its revenue projections for 2025-2027 by 1.5-7.5% and net profit forecasts by 8-13% [2] - The DCF target price has been adjusted to 7.2 HKD, corresponding to a 14.7x P/E ratio and 1.1x PEG for 2025, indicating that the current stock price reflects the anticipated pressure on 2025 performance and future BD transactions, with limited upside potential [2]

Investment Rating - The report assigns a "Neutral" rating to the company with a target price of HKD 7.20, indicating a potential downside of 5.5% from the current closing price of HKD 7.62 [6][10]. Core Insights - The company's performance in Q1 2025 continues to be under pressure from centralized procurement and healthcare cost control, but is expected to improve gradually starting from Q2 2025. The management anticipates achieving three significant business development (BD) licensing deals, each exceeding USD 5 billion in 2025 [2][6]. - The report highlights that excluding BD revenue, the company's Q1 2025 revenue declined by 30% year-on-year, with the traditional medicine segment experiencing a 37% drop. Key therapeutic areas showed declines due to various factors, including price negotiations and centralized procurement impacts [6][11]. - The report projects revenue growth for the company, with estimates for 2025E at RMB 30,040 million, increasing to RMB 35,830 million by 2027E, reflecting a compound annual growth rate [5][11]. Financial Forecast Changes - Revenue estimates for 2025-2027 have been adjusted upwards by 1.5% to 7.5%, while net profit forecasts have been increased by 8% to 13% due to more optimistic expectations regarding BD revenue and operational cost rates [6][7]. - The report indicates a projected net profit of RMB 5,137 million for 2025, with a net profit margin of 17.1%, which is an improvement from previous estimates [5][11]. Market Performance - The company’s stock has shown a year-to-date increase of 59.41%, with a 52-week high of HKD 7.62 and a low of HKD 4.34, indicating significant volatility and potential for future growth [4][10]. - The report notes that the current stock price reflects the anticipated pressures on 2025 performance and future BD transactions, suggesting that the valuation multiples are reasonable with limited upside potential [6][10].