Hansoh Pharmaceutical Group is a leading innovation-driven pharmaceutical enterprise in China, subordinate to Hausen Pharmaceutical, Changzhou Hengbang Pharmaceutical, Hansen Biopharmaceutical, etc., ranking among the top 100 pharmaceutical enterprises in the world and the top three industrial enterprises in China's pharmaceutical R & D product line for many years in a row. it is a national key high-tech enterprise and a national technological innovation demonstration enterprise. In June 2019, Hansoh Pharmaceutical Group was listed on the Hong Kong Stock Exchange (03692.HK). The company's revenue increased from 7.722 billion yuan in 2018 to 9.382 billion yuan in 2022, while net profit remained relatively stable, mainly due to the continued increase in investment in innovative drug research and development.

With the adjustment of product structure, the inflection point of the company's profit is expected to come. Once olanzapine, pemetrexed disodium, gemcitabine, imatinib, dexitabine, tegacycline, repaglinide, rabeprazole and other top 8 imitation pharmaceuticals accounted for more than 80% of the company's revenue. The proportion continued to decline after collection. At the same time, since 2019, the proportion of sales of seven innovative drugs successively approved by the company, such as ametinib, flumatinib, losenapeptide, pemosapeptide, inailizumab, morpholine nirazole and amitenofovir, has increased to 61.8% in the first half of 2023.

The R & D pipeline is greatly undervalued and ranks first in many areas in China. HS-20094 is the first domestic progress of GLP-1R/GIPR double agonist, is expected to share the major market for reducing blood sugar. HS-10374 is the first echelon TYK2 inhibitor made in China, and there is plenty of room for autoimmune indications such as psoriasis and SLE. HS-10390 is the first domestic progress of ETA/AT1 double receptor antagonist, IGA nephropathy oral varieties. HS-20093 is the most advanced B7H3 ADC in China, and the data of small cell lung cancer is excellent. HS-20089 is the first B7H4ADC in domestic progress, and there is a huge space for the internationalization of authorized GSK. HS-10382 is the first allosteric BCR-ABL inhibitor in China, combined with flumatinib to ensure the leading position of CML. HS-20117 is the leading anti-EGFR/c-MET antibody in China, and there is a huge space for lung cancer.

Investment advice: with the rise of China's innovative pharmaceutical industry, the emerging head biotech company is growing rapidly, and its market capitalization has surpassed that of a number of established traditional pharmaceutical companies. However, we believe that Hansoh Pharmaceutical Group is one of the established domestic enterprises that have successfully changed from generics to innovation. The performance growth slowed down in 2021 and 2022 due to the impact of generic drug collection and health insurance negotiations, but as the proportion of innovative drug sales continued to increase, the profit inflection point is expected to appear. While Hansen has a number of leading domestic varieties, and has achieved overseas authorization in the field of ADC, international potential is emerging, valuation flexibility. We expect the company's operating income from 2023 to 2025 to be 95.28 yuan, 105.23 yuan and 11.438 billion yuan respectively, an increase of 1.5%, 10.4% and 8.7% over the same period last year, and the net profit of returning home is 27.80,30.37 and 3.288 billion yuan, up 7.6%, 9.2% and 8.3% respectively. According to the valuation method of innovative drug pipeline (discounted cash flow method based on risk adjustment), the overall valuation of the company is HK $85.046 billion, corresponding to the target price of HK $14.33. Cover for the first time and give a "recommended" rating.

Risk tips: clinical progress is not up to expectations, competition pattern changes, foreign cooperation is not up to expectations.