The trifecta of large infusion+innovative drug+API intermediates went hand in hand, covered for the first time, and gave a “buy” rating

Since its establishment in 1996, Colon Pharmaceutical has successfully transformed from the initial single large infusion faucet to a platform-based white horse driven by large infusion/API intermediates/innovative drugs/generic drugs. Considering the company's major infusion sector benefiting from product structure optimization+demand recovery, API business price stability+cost reduction and efficiency, the Collumbotai innovative platform spans the three major ADC/macromolecule/small molecule platforms. With excellent clinical data, it has attracted BD approvals such as MSD/Harbour BioMed, and actively participated in the collection of generic drug types. We expect the company to have EPS of 1.59/1.83/2.01 yuan (+40%/15%/10% yoy) in 2023-2025, and give the company 22 times PE (and A shares are comparable to the company Wind, which consistently predicts 22 times the same PE in '24), and the target price is 40.26 yuan. First coverage, giving a “buy” rating.

Large infusion sector: stable leading position for many years, parenteral nutrition/multi-chamber bag drive upgrade

Colon Pharmaceutical has the largest market share in China's large infusion industry. We are optimistic that the company may achieve a high-single-digit revenue CAGR in 2023-2025. Consider: 1) At the industry level, we believe that in 2023-2024, the large infusion industry will benefit from primary diagnosis and repair or usher in restorative growth. As a leading company, Colon is expected to continue to gain market share; 2) At the company level, Colon's infusion products have a comprehensive layout and significant scale effect (the highest gross margin in the industry). We are optimistic about its nutrition/therapeutic infusions with high added value (such as parenteral nutrition) and nutrition High-end packaging materials (such as powder and liquid double chambers The share of product revenue (bags, three-compartment bags, etc.) continues to increase.

Non-infusion drugs: Twining's full harvest period benefits the second synthetic biology curve, generic drug collection and release

Colon Pharmaceuticals' non-infusion segment is mainly composed of API intermediates and generic drug businesses: 1) API intermediates: We expect this sector to achieve 15% 2023-2025 revenue CAGR, considering stable prices in the stock business (such as sulphur red, 7-ACA, 6-APA), leading domestic production capacity and excellent pattern, while Twining implements a “two-wheel drive” strategy composed of improving quality and efficiency and synthetic biology. New products are expected to contribute incrementally (bisabolol, etc.). 2) Generic pharmaceuticals: We are optimistic that this business may achieve 7% 2023-2025 revenue CAGR. The company's stock varieties should be harvested in the first eight batches, and subsequent new products under development are expected to achieve “barefoot” release through collection (five varieties participate in the ninth batch of collection, and the risk of stock products is low).

Innovative drugs: leading domestic ADC platforms, MSD and other authorized cooperation to help large-scale overseas production

The company's innovative drug platform is rich in highlights: 1) The pipeline of self-developed ADC platforms is complete, and commercialization of two core products is imminent: Among them, the ADC section SKB264 (TROP2ADC initial indication 3L+TNBC) has the best potential in the same category, and is optimistic that the first domestically produced drug will be approved in 24 years; A166 (HER2 ADC, initial indication 3L+HER2+ breast cancer) is expected to be launched on the front line of domestic production in 24; 2) Other pipelines are improving and collaborating with each other, and are optimistic about tumor free layout (free tumor layout) CLDN18.2/PD-L1/RET/EGFR/JAK, etc.); 3) Endorsed by overseas giants and successfully opened up the possibility of going overseas (up to now, various post-clinical ADC licensing cooperation agreements have been reached with MSD, and MSD has taken stock).

4) Clinical/commercial milestones over the years of 4Q23-2025 are significant, innovative capabilities or further validation.

Risk warning: New drug development/BD related risks, innovative drug commercialization risks, industry policy risks, price fluctuation risks of APIs and intermediates.