Main business revenue for the first half of 2024 slightly exceeded expectations

The company's revenue in the first half of the year increased by 46.3% year on year to 3.95 billion yuan (RMB, same below). Among them, revenue from the main business pharmaceutical sales business increased 55.1% year on year to 3.81 billion yuan and slightly exceeded expectations. The company's net shareholders' net loss increased by 182.1% year on year to 0.39 billion yuan in the first half of the year, but the increase in losses was mainly due to the lack of one-time tax rebate revenue of 0.136 billion yuan received in the same period last year and the R&D expenses ratio increased 1.3 percentage points year on year. The company is currently rapidly expanding its product pipeline, and increasing investment in R&D is a normal phenomenon.

Existing products go hand in hand with new products, and 2024-26E revenue will grow rapidly. Based on the situation in the first half of 2024, we raised 2024E revenue and shareholder net loss forecasts by 0.04% and 17.7%, respectively. In addition, we raised 25-26E revenue by 4.4% and 5.9%, respectively, and our shareholders' net profit forecasts by 0.8% and 8.8%, respectively. Based on the adjusted forecast, we expect the 2023-26E revenue CAGR to reach 26.4%, based on:

1) The core product in the field of oncology is still increasing, and there is room for revenue growth: Dabershu's revenue has grown rapidly since it was approved for launch at the end of 2018, and revenue for the first half of 2024 increased by 45.6% year-on-year to 0.239 billion US dollars (about 1.68 billion yuan). The marketing application for this product for a new indication for second-line endometrial cancer was accepted in the first half of the year and is expected to be approved in 2025. We expect Daboshu's 2023-26E revenue CAGR of 13.2%. 2) Revenue from newly launched products will continue to grow in recent years: the revenue of products other than Dabershu has increased rapidly in recent years, accounting for 58.8% of the company's revenue from 26.6% in 2021 to 58.8% in the first half of '24. All of these products were launched after 2020 and are in the early stages. Launched in August of this year, Dabert is the first KRAS G12C mutant non-small cell lung cancer drug in China, and will contribute revenue from the second half of the year. According to data from the National Center for Disease Control and Prevention, the proportion of KRAS G12C mutations in non-small cell lung cancer patients reached 12%-15%, and there is a broad demand for this drug. 3) Maxidu Peptide will become a major product in the cardiovascular field: the marketing application for weight loss and diabetes has been accepted by the State Drug Administration. Although the product is not on the market, it has excellent clinical data. It has recently been listed as a recommended drug for weight loss by the Endocrine Society of the Chinese Medical Association (CSE). We raised our 2025-26E revenue forecast for this product to 0.6 billion yuan and 1.5 billion yuan, respectively.

The “Buy” rating was reconfirmed, and the target price was raised to HK$55.40

According to the adjusted DCF model, the target price was raised from HK$51.05 to HK$55.40, reflecting an increase in 2025-26E shareholders' net profit and reaffirming the “buy” rating.

Risk warning: (1) The price reduction of the drug may exceed expectations; (2) the progress of clinical trials and approval of new drugs may be slower than expected; (3) the promotion effect of the new drug may be worse than expected after marketing