In January 2022, we published our previous in-depth research report on Kain Technology. Over the past 2 years, the company has continued to be deeply involved in the field of hepatitis C and hepatitis B virus treatment. At the present time, whether the scope of reimbursement for the hepatitis C drug Kailliwei Medical Insurance is expanding or the data is about to be read out by probiotics for the treatment of hepatitis B, it is expected to inject strong impetus into the company's rapid development. In this report, we have thoroughly sorted out and analyzed the company's main varieties and R&D pipelines to provide investors with investment references.
Kailiwei covers the main genotypes of HCV in China and ushered in a rapid release period. Kailiwei successfully renewed the contract in '22, and included hepatitis C type 1b in the scope of medical insurance, achieving full coverage of major domestic HCV genotypes. The results of the national negotiations began to be implemented in March '23. Kailliwei quickly scaled up, and H1 sales revenue in '23 increased more than 2 times over the same period last year. Kailiwei's products are effective, and the company focuses on the grassroots market. Under a differentiated competitive strategy, Kailiwei is expected to achieve revenue of 4.3/7.4/1.05 billion yuan in 2023-2025.
The competitive pattern for functional hepatitis B cure is good, and the company has entered the clinical data readout stage. In '23, H1, the company developed a phase III clinical trial of interferon alpha-2 injections (probiotics) to treat chronic HBV infections in the low replication phase and completed enrollment of all subjects and 48 weeks of medication, and entered the 24-week follow-up phase. At the end of December '23, the follow-up was completed as planned, and the data readout phase was entered. Currently, only the long-term interferon for hepatitis B indications in China is Tebao Biopegbin. Pai Probiotic is expected to become the second domestic long-term interferon for hepatitis B indications to be marketed in the second half of '25, sharing the blue ocean market for slow B functional cure.
The product echelon is reasonable and has both certainty and growth. The company's mature products, such as Jin Shuxi and Kain Yisheng, lead the market share in their respective segments. Among them, Jin Shuxi has collected and landed, and the decline is moderate. It is expected to maintain its current leading market share and continue to contribute cash flow to the company. In addition, the new product Anbosi is in the rapid release stage, and the company's overall product echelon construction is reasonable.
It is proposed to raise capital for the company's antibody production base construction project and supplement working capital.
The company will issue no more than RMB 300 million of common shares to no more than 35 (including 35) specific targets, of which 270 million yuan will be used for antibody production base construction projects and 0.3 billion yuan will be used to supplement working capital.
Profit forecasts, valuations, and ratings
We forecast that in 2023/2024/2025, the company will achieve operating income of 1,420 million/1,846 billion/ 2,332 billion yuan, a year-on-year increase of 22%/30%/26%, net profit to mother of 122 million/200 million/243 million/243 million yuan, an increase of 46%/63%/22% year-on-year, corresponding EPS of 0.71/1.17/1.42 yuan. We used the PE valuation method to value the company, giving the company 27 times PE in 2024, with a target price of 31.51 yuan, maintaining a “buy” rating.
Risk warning
Product development falls short of expectations; market competition intensifies; product release falls short of expectations; restrictions on shares are lifted; EPS is diluted after additional issuance; assumptions and estimates are subjective