Maintain the "buy" and lower the target price to HK $2.70. The EPS forecast for 2022-2024 is lowered to 0.021 yuan / 0.022 yuan / 0.050 yuan respectively, which mainly reflects the lower-than-expected sales of medical and beauty products and generics, as well as the potential sale of some generics business.
The performance in the first half of 2022 was lower than expected due to the repeated COVID-19 epidemic, which led to lower-than-expected sales of medical and beauty products, and lower-than-expected sales of generic drugs due to health care reform policies. The income / shareholder profit in the first half of 2022 was 1464 million yuan / 40 million yuan, down 23.2% from the same period last year.
There is uncertainty in the short term, but is bullish on long-term growth potential. Expected sales of some generics businesses with declining profitability and policy impact over the next 12-24 months may lead to earnings uncertainty. However, we believe that the company will be able to devote more resources to the medical and pharmaceutical sectors with high value growth and profitability, thereby improving the company's medium-and long-term financial performance. Taking into account the comprehensive pipeline layout, strong marketing capabilities and good compliance, we expect the medical and beauty business to achieve a rebound in growth from the second half of 2022 and is optimistic about its long-term growth potential. The research and development of the biomedical sector is basically progressing smoothly and is expected to generate revenue soon. We expect that anatrazole (PPI), asparagus insulin injection, asparagus insulin 30 injection and asparagus insulin 50 injection will be approved in 2022-2023, and pirosini (CDK4/6i), sglt-2i and Degu insulin injection will be approved in 2023-2024.
Catalysts: recovery in sales of medical and beauty products; promotion of innovative pipelines; and progress in the listing or private financing of biotechnology subsidiaries.
Risks: weak economic conditions; recurrent COVID-19 epidemic; policy risks; and company pipeline delays.