The 2023 results were dragged down by external disturbances, and the company is expected to return to a growth rate of more than 20% in 2024: the company issued a profit forecast. Revenue in 2023 increased 4-5% year-on-year to 65.78-6.38 billion yuan, and net profit to mother fell 20-26% to 685-745 million yuan, all lower than our previous expectations. We believe that the main reasons for the decline in growth are: 1) the price reduction of 32% after the renewal of Xianbixin Health Insurance, sales were still under pressure; 2) comprehensive industry regulation and DRG/DIP reforms continued to advance in the second half of the year, and the in-hospital sales volume of the company's core innovative drugs was affected to a certain extent; 3) Siludi Pharmaceutical shares held by the company experienced large share price fluctuations in 2023. It is estimated that net loss before tax was recorded during the year of about 742 million yuan (vs. net profit before tax of 394 million yuan for the same period in 2022).

Many new drugs will be submitted for NDAs in the next year, and the company expects to commercialize 11 innovative drugs by 2026. 1) Dalilaxen, an insomnia drug: Phase III enrollment is progressing smoothly, and it is expected that an NDA will be submitted in 2024. 2) Suvicita (VEGF inhibitor): Phase III SCORES study data showed that PFS was a statistically significant and clinically significant improvement compared to the control group. The OS data is not yet mature, but the Sovisita trial group showed a trend of benefits, and it is expected that the NDA will be submitted in 2024. 3) Xianoxin: The 2023 health insurance negotiations reduced the price by 27% and successfully renewed, and it is expected that full approval will be obtained in the near future. 4) Cosella: Real estate was approved at the end of December 2023, production technology has been transferred, and clinical research on combination chemotherapy or ADC drugs is currently being carried out. 5) The recently introduced cetuxime analogue CMAB009 and the influenza drug ADC189 are expected to be approved for marketing/NDA submission in 2024, respectively. The company expects peak sales in the mainland to reach 1.5 billion/ 1 billion yuan respectively; for IL-4R introduced from Conrad, the company will decide on further development and reporting plans after communicating with CDE.

Lower the target price and maintain the purchase. Based on the company's profit forecast and the latest sales of various innovative drugs, we lowered the company's 2023-25 revenue forecast to 6.62 billion/8.07 billion yuan/9.64 billion yuan, and lowered the net profit forecast to mother to 73 million/980 million/1.27 billion yuan, corresponding to 21%/32% CAGR. Based on the DCF model, we lowered our target price to HK$11.50 (previously HK$14.00), corresponding to 28.2x2024E PE and 0.9x 2024E PEG (based on 2023-25E EPS CAGR). Considering that the company's increasingly mature self-research capabilities and highly differentiated target layout provide more certainty in the medium to long term, we believe that the company's current valuation level is cost-effective and maintains the purchase rating.