Including US$312mn upfront and milestone payments from Takeda, HCM's consolidated revenues from oncology/immunology reached US$529mn in FY23 (vs US$164mn in FY22), close to the upper limit of its US$450-550mn guidance. The in-market product sales increased 28% YoY (35% at CER) to US$214mn in FY23, among which sales of fruquintinib in China increased 15% YoY (22% at CER) to US$108mn, maintaining leadership in patient share (47%) in 3L CRC. Fruquintinib recorded US$15mn in sales in the overseas market in 2023 since the launch in Nov. Surufatinib's in-market sales in FY23 increased 36% YoY (43% at CER) to US$44mn, and ranked 2nd in the NET market with 21% share in 4Q23. Savolitinib's in-market sales in FY23 increased 12% YoY (19% at CER) to US$46mn, even with a 38% price cut for NRDL inclusion since Mar 2023. Mgmt guides the FY24E consolidated revenue from oncology/immunology to reach US$300-400mn, driven by 30% to 50% growth in oncology marketed product revenue. In FY23, HCM spent US$302mn on R&D, down 22% YoY, due to the completion of several large registration-enabling trials, the focus on ex-China development through partnerships and the strategic prioritization of pipeline. HCM recorded a net income of US$101mn in FY23. As of end-2023, HCM had a strong cash position of US$886mn. Management is confident to turn profitable in FY25E.

Fruquintinib shows potential for expanded indications in China and aims for wider international approvals. The NDAs of fruquintinib for CRC are under review in the EU and Japan (NDAs submitted in Jun and Sep 2023, respectively). In China, fruquintinib may receive approval for 2L GC in 2H24E (sNDA in Apr 2023). Cross- trial comparison shows fruquitinib's superior efficacy than ramucirumab in 2L GC patients. Additionally, fruquintinib + sintilimab received BTD for endometrial cancer (pMMR type) in China, and the potential Ph2 registration trial in China completed patient enrolment in Jul 2023, with the sNDA filing expected in early 2024E. The Ph2/3 trial of fruquintinib + sintilimab for 2L RCC completed enrolment in Dec 2023, with the top line results expected by end-2024E.

Savolitinib to become the company's second product to achieve global commercialization. The global Ph2 SAVANNAH trial of savolitinib in 2/3L osimertinib-refractory MET+ NSCLC finished enrolment in Feb 2024. We anticipate the US NDA submission for accelerated approval by the end of 2024, and savolitinib potentially to be positioned as HCM's second product to reach the global market. Compared with other competing therapies, savolitinib + osimertinib offers potentially better efficacy for specific MET+ patients, and its oral administration route is more convenient over other competing therapies. In China, savolitinib has the potential to expand its label into 1L MET Exon 14 NSCLC with the filing expected in 1Q24E based on positive results from confirmatory Ph3b study.

Sovleplenib, a promising best-in-class Syk inhibitor, holds strong potential for overseas licensing. The China Ph3 ESLIM-01 trial of sovleplenib for ITP met its endpoints, leading to the acceptance of the NDA by the NMPA in Jan 2024, with the status of priority review. Concurrently, HCM is initiating a Ph1b/II trial in the US for ITP. Moreover, HCM is on track to unveil detailed Ph3 ITP results by mid-2024 and Ph2 wAIHA data as well. The anticipated data release is expected to act as a significant catalyst for potential international out-licensing agreements.

Maintain BUY. Considering the company's guidance, we revise our TP from HK$36.67 to HK$34.31 based on DCF valuation (WACC: 10.25 %, terminal growth rate: 3.0%).