The three major indications for Amelox are expected to be approved within one year: On November 27, 2024, the new indication SnDA of Amelox was accepted by the CDE. We expect this indication to be a targeted combination therapy for EGFR+ NSCLC (competitor Teresa has already been approved). In October 2024, the company announced that AENEAS2 (CTR20211135), a phase III trial of amelox combined with chemotherapy for EGFR+NSCLC, had reached the main end of PFS, reducing patients' risk of disease progression or death by more than 50% and was statistically significant. Additionally, there are two SNdAs under review with ametinib, namely: 1) adjuvant treatment for EGFR+ NSCLC after surgery (Teresa has been approved); and 2) maintenance treatment for unresectable locally advanced EGFR+ NSCLC. We expect that around the end of 2025, the above three SNdAs of Amelco are expected to be approved. The total number of approved indications will reach 5, covering the perioperative period, first-line, first-line maintenance and second-line treatment of EGFR+ NSCLC, driving the product's annual sales growth of more than 20% in 2024-25, and sales to reach the company's target of 6 billion yuan (RMB, same below) in 2026.

Amelok is expected to benefit from competitive compliance investigations: AstraZeneca recently underwent compliance investigations on Teresa's medical insurance payment reimbursement, which affected investment sentiment and stock price performance in Hanson to a certain extent. However, we believe that compliance with sales activities and medical insurance reimbursement will benefit the long-term healthy development of the innovative pharmaceutical industry, and benefit companies such as Hanson that focus on sales compliance. Amelot is expected to gain some of Teresa's market share in first-line and second-line treatments in the short term.

Pipeline research and development is progressing rapidly, and the wave of new products/new indications is coming: in addition to the three new indications of Amelol, the company is expected to launch innovative pharmaceutical products such as the oral antifungal drug HS-10366 and chitin in 2025-26. Among them, chitin sugar is expected to provide treatment options with fewer allergic side effects and lower dosage frequency for more than 100 million osteoarthritis patients in China, and the potential market space is huge. The company expects to launch more than ten new oncology products in 2025-30, including B7H3 and B7H4 ADCs from BD overseas. The company's cash account exceeds 21 billion yuan, and will continue to invest in BD (including mergers and acquisitions), R&D, and dividends in the future.

Upgrading the rating to buy: We think the company has reached an excellent time to invest after recent mood swings. We raised our 2025-26 revenue forecast by 0.5-1.5%, net profit forecast 0.3-1.4%, Amelot's peak sales forecast 3% to $8.2 billion, and raised the DCF target price to HK$24.0, corresponding to 32 times price-earnings ratio in 2025, 1.5 times PEG in 2025, and a 27% increase in potential stock price over the next 12 months, and raised the rating to buy.