Ping An's point of view:

The EU market space pattern is good, and the company's peak sales volume in the EU is expected to exceed 700 million yuan. According to the company's announcement, by the end of 2023, the 12 products introduced by the company had signed contracts with customers in more than 40 countries and submitted registration applications for the introduced products one after another. Among them, the large single product albumin paclitaxel is mainly exported to the European Union. It successfully passed the EU GMP on-site inspection in May 2024 and signed contracts with partners in 35 European and South American countries. It is expected to be commercialized in the EU by 2024H2, making it the second white purple generic drug company in the world to enter the EU market, and the quantity is very certain. The EU has a high level of medical expenditure, mainly public medical expenses, and has strong drug accessibility and pricing standards.

The five countries of Germany, France, Italy, Spain, and the United Kingdom account for more than 60% of the European pharmaceutical market, and will be the first tier of the company's Baizi generic drug promotion. As a high-end complex preparation, albumin paclitaxel is a core anti-tumor treatment. It is mainly used for first-line treatment of non-small cell lung cancer and pancreatic cancer, and second-line treatment for metastatic breast cancer. It has significant clinical advantages in terms of safety and patient compliance. There is plenty of room to replace white purple dosage forms in the EU. The penetration rate of white purple in the EU was only 15% in 2020, far lower than the white purple penetration rate level in China, the US, Japan, etc. In the future, with the participation of more generic drug companies, the penetration rate of white purple in the EU is expected to increase at an accelerated pace. We have made preliminary estimates of White Purple's market space. Under the neutral assumption of 50% penetration rate, the company's peak sales volume in the EU market is expected to exceed 700 million yuan.

Demand for drugs in emerging markets is growing rapidly, and there is plenty of room for imported drugs. The company successively completed on-site audits of various major biosimilar drugs, such as infliximab, bevacizumab, and adalimumab, in Egypt, Brazil, Indonesia, etc., and the pace of factory inspections was in line with expectations. According to the company's official website, infliximab already generated sales revenue in some emerging market countries in 2024Q1. The urgent demand for imported biopharmaceuticals from emerging markets is compounded by a good foundation for companies' overseas cooperation. It is expected that the market space for related products is broad, and the net interest rate will also be at a relatively high level.

Investment advice: Considering that the company has many subsequent overseas products, and white purple has broad scope and strong certainty, we forecast the 2024-2026 company's revenue of 1,568/20.71/2,692 billion yuan and net profit of 0.35/1.18/257 million yuan, which is in line with previous expectations. Considering that the company's various products under development and introduction will continue to promote clinical and overseas commercialization, the company's valuation is expected to further improve and maintain the “recommended” rating.

Risk warning: 1) Product development progress falls short of expected risk. The company has many research projects, and there is a risk that the R&D progress will fall short of expectations. 2) Overseas commercialization progress falls short of the expected risk. The company has introduced many varieties, and there is a risk that overseas listing progress will fall short of expectations. 3) Risk of changes in industry policies. The national health insurance catalogue will be adjusted from time to time, affecting the prices of the company's related products.