The results of the 2024 national health insurance catalogue were announced. Terbiao successfully renewed the contract and added ITP indications for children, and enital (HER2 monoclonal antibody), and nafurafine hydrochloride oral tablets were newly added to the medical insurance catalogue. As health insurance funds continue to support innovative drugs, we expect the prices of the company's renewal varieties to be stable, providing support for the company's steady growth. Furthermore, the company is progressing smoothly in the research pipeline. A number of innovative varieties have already entered NDA or clinical phase III, and are expected to be approved one after another in 2025E-27E, providing new impetus for the company's growth. We expect the company's 2024E and 2025E revenue to increase by 12.8% and 12.2%, respectively. The current market value corresponds to 6.6 times 2025E PE, and the valuation is extremely attractive. We expect the company to maintain a 30% dividend ratio. The current stock price corresponds to the 2025E dividend rate of 4.5%.

The 2024 health insurance catalogue was updated, and many products were successfully renewed/included in health insurance. Terbiao and initumab (HER2) were successfully renewed, and Terbiao added ITP (primary immune thrombocytopenia) indications for children. As health insurance funds continue to support innovative drugs, we expect the prices of the company's renewal varieties to be relatively stable. We believe that, benefiting from the expansion of indications and the increase in penetration rate, Terbi Australia is expected to continue to grow rapidly in 2025E. In addition, the company's new drug, nafurafine hydrochloride tablets (Limerick), which was approved for marketing in 2023, was successfully entered into medical insurance through negotiations to improve pruritus in hemodialysis patients.

Innovative R&D and cooperation are being introduced in parallel, and the pipeline continues to be enriched in the later stages. Sansheng Pharmaceutical has built perfect sales capabilities in various channels such as hematology, oncology, nephrology, rheumatology, OTC, and e-commerce. Based on this, the company continues to enrich its innovation pipeline. In 2024, the company's long-term EPO (SSS06) and 608 (IL-17A) both completed listing applications and are expected to be approved for listing in 2025E. 611 (IL-4R), 613 (IL-1beta), and (IL-5) have all entered phase III clinical phase and are expected to be approved successively in 2026E-27E. 707 (PD-1/VEGF) is undergoing phase II clinical trials for three indications. In addition, the company introduced a variety of post-clinical products, which have a strong synergy effect with existing pipelines. In the field of skin and hair, the company introduced topical acne drugs Winlevi and simeglutide (weight loss indications), both of which are currently in phase III clinical phase. In the hematology/oncology sector, the company introduced clifutinib benzenesulfonate and paclitaxel oral solutions in 2024. Paclitaxel oral solution was approved for the treatment of advanced gastric cancer in September '24, and phase III clinical trials for HER2-negative breast cancer are ongoing. Clifotinib benzenesulfonate is in clinical phase III and is used to treat relapsed/refractory AML. We expect the new product to gradually become an important growth engine for the company starting in 2026.

The buy rating is maintained, and the target price is HK$9.81. We expect the company's revenue and net profit to mother to increase by 12.2% and 13.6%, respectively, in 2025E. Based on the 9-year DCF model, the target price was HK$9.81 (WACC: 11.83%, sustainable growth rate: 2.0%), corresponding to 9.8 times the 25-year price-earnings ratio.