Key points of investment:

The R&D engine is strong, and commercialization capabilities continue to be realized. The company's 2027 revenue target is 20 billion yuan. Currently, 11 products have been approved for listing. The 2024H1 product revenue has reached 3.8 billion, an increase of 55% over the previous year. The company has a mature commercialization team of about 3,000 people, and its commercialization capabilities have been initially verified. The company has sustainable and diversified long-term growth space in the four key diseases of oncology, cardiovascular and metabolism, autoimmunity, and ophthalmology. It has a product development team with more than 1,500 employees. Among them, more than 300 employees of Cinda National Qingyuan are dedicated to discovering the world's first of its kind (FIC) and best-in-class (BIC) innovative drugs, which is the company's powerful R&D engine. The company expects to achieve sales of nearly 20 approved products in 2027, and proposes a development target for 2027: domestic revenue of 20 billion yuan.

Cindilizumab continues to grow rapidly. Self-developed IO+ADC will open a second growth curve. The company has already approved 9 oncology products, 1 submitted for NDA, 2 are in the critical clinical stage, and more than 10 are in clinical development. The company's sales of Cindilizumab in 2023 were about 2.75 billion yuan, an increase of 34% over the previous year. In 2023, EGFR-TKI was added to the medical insurance catalogue to treat EGFR mutation-positive non-squamous non-small cell lung cancer. Currently, PD-1 monoclonal antibody is the only one included in the medical insurance list for this indication. It is expected that cindilimab will continue to grow. The potential for next-generation IO therapy independently developed by the company is beginning to emerge. The world's first PD-1/IL-2 molecule has shown encouraging effects on immunotherapy and cross-tumor treatment of cold tumors, which is expected to help the company internationalize. In clinical phase I in more than 300 subjects, IBI363 has seen excellent efficacy in all representative tumor types. In the future, the company is expected to focus on exploiting the dual advantages of “IO+ADC” in the field of oncology, first using the drug design and mechanism understanding of antibodies to develop monoclonal, dual, and multi-antibody products with global innovation. At the same time, an ADC differentiated technology platform was laid out to overcome frontline treatment with immunological combination therapy.

Mars peptides have a first-mover advantage. Next-generation chronic disease products are expected to establish long-term brand barriers in the comprehensive product pipeline. The company has commercialized 2 products, 2 have submitted NDAs, 2 are in critical clinical stages, and nearly 10 are in the clinical development stage, covering chronic diseases such as immunity, metabolism, and ophthalmology. Marsitol is the fastest progressing dual-target GLP-1R inhibitor in China. It is the world's first GLP-1R/GCGR dual-target agonist to enter clinical phase III. The NDA for long-term weight management for obese or overweight patients was accepted in February 2024, and the NDA for type 2 diabetes was accepted in August, and commercialization is expected to begin in 2025. The PASI90 in the 16-week phase 3 clinical study for psoriasis surpassed 80% of the 16-week PASI90, and was administered once every 12 weeks, showing the best potential in its class for strong curative efficacy. The IGF-1R antibody tetuumab is expected to become the first innovative drug in the field of thyroid eye disease in China.

Profit forecasting and investment advice

We expect the company's revenue for 2024-2026 to be 8, 11, and 14.7 billion yuan, respectively, with revenue growth rates of 29%, 37%, and 34% respectively. The estimated net profit for 2024-2026 is -0.3, 0.1, and 1.3 billion yuan, respectively, and EPS is -0.20 yuan, 0.07 yuan, and 0.82 yuan, respectively. According to DCF's valuation, based on WACC of 9.16% and a sustainable growth rate of 3%, the company's reasonable stock price is estimated to be HK$58.05, and the current reasonable market value is HK$94.7 billion. First coverage, giving a “buy” rating.

Risk warning

Risk of product sales falling short of expectations, risk of clinical trial failure.