20210827-招银国际-石药集团-01093.HK-1H21_results_beat__accelerating_BD_pace_4页_749kb

CSPC Pharmaceutical (1093 HK) Company Update Summary

Core Content Overview

CSPC Pharmaceutical Group (1093 HK) reported strong first-half of 2021 (1H21) results, with sales and net profit rising by 9.8% and 32.3% year-over-year (YoY), respectively. These figures accounted for 52% and 58% of the full-year estimates, indicating robust performance. The company's gross profit margin (GPM) improved by 1.1 percentage points to 76.1%, operating profit margin (OPM) increased by 5.6 percentage points to 26.4%, and net profit margin (NPM) rose by 3.8 percentage points to 22.5%. These improvements were attributed to effective cost control, particularly in administrative expenses, which decreased by 0.86 percentage points, and stable selling and R&D expenses ratios.

Key Financial Highlights

• 1H21 Sales: RMB13.8bn (+9.8% YoY)
• 1H21 Net Profit: RMB3.1bn (+32.3% YoY)
• GPM: 76.1% (+1.1ppts)
• OPM: 26.4% (+5.6ppts)
• NPM: 22.5% (+3.8ppts)
• NBP Sales: RMB3.1bn (-8.3% YoY), but expected to recover with price-cut impact mitigated

Strategic Collaborations and BD Progress

CSPC achieved several key business development (BD) milestones in 1H21:

1. BPI-7711 (3rd-gen EGFR-TKI) – Acquired from Beta Pharma in March 2021.
2. CM310 (anti-IL4Rα mAb) – Acquired from Keymed in March 2021.
3. KN026 (HER2-targeted BsAb) – Acquired development and commercialization rights from Alphamab in August 2021 for breast and gastric cancer.
4. NBL-015 (anti-Claudin18.2 mAb) – Out-licensed to Flame Biosciences, and two bispecific molecules to be developed on the NovaTE platform.

The company expects to secure more in-licensing deals in H221 and 2022, focusing on CNS, autoimmune diseases, ophthalmology, and oncology. With RMB11bn in net cash, CSPC is well-positioned to execute these deals.

R&D and Innovation

CSPC is accelerating its R&D efforts, particularly in building its own mRNA platform for antiviral and cancer vaccines. The company is leveraging core delivery technologies such as nanoliposome, LNP, and albumin nano-formulation. It is also committed to developing other innovative platforms for siRNA, ADC, PROTAC, and cell therapy, expanding its capabilities across various therapeutic areas.

Investment Recommendation

• Rating: BUY
• Target Price (TP): HK$15.20 (up from HK$14.79)
• Current Price: HK$10.04
• TP Upside: +51.35%

The revised 2021E and 2022E revenue forecasts were increased by 5% and 6%, respectively, and net profit forecasts were raised by 15% and 8%. The DCF-based target price reflects a 25x FY21E P/E and 23x FY22E P/E, assuming a WACC of 10.9% and terminal growth of 3.0%.

Key Catalysts

1. Better-than-expected in-licensing deals
2. Stronger-than-expected product sales

Financial Performance Summary (YE 31 Dec)

Key Ratios

Stock Performance

• Market Cap (HK$ mn): 120,217
• Avg 3 mths t/o (HK$ mn): 526.81
• 52w High/Low (HK$): 11.68 / 7.08
• Total Issued Shares (mn): 11,974

Shareholding Structure

Peer Valuation Comparison

Analyst Certification

The analyst certifies that the views expressed reflect personal opinions and that no compensation is tied to the report's content. The analyst also confirms no trading or affiliations with the companies covered in the 30 days prior to the report's release and no conflicts of interest affecting the report's objectivity.

CMBIS Ratings

• BUY: Stock with potential return of over 15% over next 12 months
• HOLD: Stock with potential return of +15% to -10% over next 12 months
• SELL: Stock with potential loss of over 10% over next 12 months
• NOT RATED: Stock not rated by CMBIS
• OUTPERFORM: Industry expected to outperform the relevant market benchmark
• MARKET-PERFORM: Industry expected to perform in-line with the market
• UNDERPERFORM: Industry expected to underperform the market

Important Disclosures

• The report is for informational purposes only and not tailored to individual investors.
• CMBIS is not liable for any losses arising from reliance on the report.
• The report may be subject to change without notice.
• CMBIS may have conflicts of interest due to its business relationships with the companies mentioned.

Legal & Distribution Notes

• The report is intended for distribution to major US institutional investors only.
• In the UK, it is provided only to persons within the Financial Promotion Order.
• In Singapore, it is distributed by CMBI (Singapore) Pte. Ltd. to Accredited Investors, Expert Investors, or Institutional Investors only.

Conclusion

CSPC Pharmaceutical Group is demonstrating strong financial performance and strategic progress through a series of BD deals and R&D initiatives. The company's focus on building an in-house mRNA platform and expanding into new therapeutic areas positions it for future growth. With a BUY rating and a target price of HK$15.20, the company is seen as a promising investment opportunity.