Investment highlight

For the first time, Cody-B (02487) gives a rating to outperform industry, with a target price of HK $29.00.

The reasons are as follows:

There is a wide demand for pan-dermatosis treatment in China, but there is no new treatment plan yet. With the improvement of spending power, the new generation of domestic consumers pay more attention to skin management, and the demand for pan-dermatosis treatment is growing rapidly. According to Frost & Sullivan,2021, the domestic dermatology treatment / care market is 472 billion yuan in 2000 and will increase to 1.04 trillion yuan in 2030, with a CAGR of 9.2%. However, new treatment options in this field are still limited, which provides market opportunities for enterprises with strong R & D strength and market sense.

Cody is committed to creating a differentiated portfolio of pan-dermatology products. Based on a customer-centric philosophy and proprietary CATAME? Technology platform, the company has constructed a total of 11 product combinations covering four sub-areas: hair, dermatology, local fat management and epidermal anesthesia: 1) hair field: a multi-product layout, online and offline marketing strategy has been established. We expect the key product CU-40102 to become the first external finasteride product for androgenic alopecia in China. 2) Dermatology: developing topical drug combinations for acne, atopic dermatitis and psoriasis to reduce systemic exposure and adverse reactions; 3) Local fat accumulation management: we expect the core product CU-20401 recombinant mutant collagenase to become the first approved local fat accumulation management drug in China, achieving lower pain and good effect through a new mechanism; 4) topical anaesthesia:

It is expected to provide topical anaesthesia products with faster and longer-lasting effects than the approved products on the market.

The commercialization ability of preliminary verification, market-oriented team and flexible architecture escort. The company has initially set up a commercialization team to support the commercialization landing with multiple channels and flexible structure. CUP-MNDE and CUP-SFJH have been commercialized; in addition, we expect two key products, CU-40102 and CU-10201, to be officially launched at 4Q24. As a preliminary proof of the company's commercialization ability, the sales value of "Green Silk Geometry" exceeded 9.4 million yuan during the period of June 18, 2023, an increase of more than 4300% over the same period last year, ranking first in the cross-border Minodel SKU sales of Tmall and JD.com. The company expects 1H23 to achieve 34.3 million yuan in revenue, an increase of 4800% over the same period last year.

What is the biggest difference between us and the market? We believe that the domestic pan-skin demand is still underestimated and Cody is expected to play an important role in the development of the market. Potential catalysts: pipeline progress; commercialization progress.

Profit forecast and valuation

We expect the company's earnings per share in 2023 to 2024 to be-1.04 yuan and-1.06 yuan respectively, and we think the company is expected to break even before and after 2027. According to our DCF model, we give the company an outperform industry rating and a target price of HK $29 per share (corresponding to 37.8% upside space).

Risk

The commercialization of products is not as expected; clinical progress is not as expected; the risk of medical malpractice.