20260821-招银国际-石药集团-01093.HK-Domestic_sales_stabilizing_as_BD_engine_scales_up_5页_1mb

CSPC Pharmaceutical (1093 HK) Summary

Core Content

CSPC Pharmaceutical Group (1093 HK) is a leading Chinese pharmaceutical company that has demonstrated significant growth in its domestic sales and has successfully transitioned into a global innovator. The company is expected to benefit from a growing business development (BD) income stream, driven by its highly differentiated, late-stage pipeline and a series of out-licensing deals.

Main Points

• Domestic Sales Stabilizing and Margin Expansion:

  • In 1H26, total revenue reached RMB18.6bn (+40.1% YoY), with RMB5.9bn of license fee income.
  • Ex-BD finished drug sales showed a fourth consecutive quarter of recovery, reaching RMB5.09bn in 2Q26 (flattish QoQ), indicating that domestic headwinds are bottoming out.
  • Sales were primarily driven by the CNS portfolio, especially NBP and Mingfule.
  • NBP was recently included in the 2026 National Essential Medicines List, which is expected to aid in primary-care penetration.
  • The company's product gross margin improved sequentially to 64.9% in 2Q26, and the selling expense ratio decreased to 25.6%.
  • R&D expenses increased by 18% YoY to RMB1.6bn, highlighting a sustained commitment to innovation.
  • Net profit in 2Q26 was RMB5.2bn, up from RMB860mn in 1Q26, driven by the AZ upfront payment.

• Out-Licensing Deals:

  • CSPC has secured seven out-licensing agreements since late 2024, with total upfront and milestone payments exceeding US$1.7bn and US$33bn, respectively.
  • The AZ partnership has deepened with the establishment of a 51/49 biologics manufacturing joint venture in Shijiazhuang.
  • CSPC retains a strong pipeline of highly differentiated assets with potential for further BD income.

• Pipeline Catalysts:

  • SYS6010 (EGFR ADC): Initiated seven Phase 3 trials in China for various indications, including EGFRm NSCLC, EGFRwt NSCLC, 2L ESCC, and HER2-/EGFR+ BC.
    • Combined with a PD-1 mAb, it delivered a 52.4% uORR (n=42), with updated data expected at WCLC 2026.
  • SYS6043 (B7-H3 ADC): Entered Phase 3 trials in ovarian cancer, with oral data updates expected at ESMO 2026.
  • PD-1/IL-15 bsAb, EGFR ADC, B7-H3 ADC, and multiple siRNA and CAR-T candidates are in development.
  • The HPV vaccine SYS6026 has entered Phase 2, while the COVID mRNA vaccine SYS6006 is in Phase 1/2 trials in combination with a PD-1 mAb for solid tumors.

• Financial Performance:

  • Revenue for FY26E is expected at RMB32.15bn, with a YoY growth of 23.6%.
  • Net profit is forecasted at RMB9.098bn, a significant YoY increase of 134.7%.
  • EPS is projected to be RMB0.76 for FY26E, up from RMB0.34 in FY24A.
  • P/E is at 10.7x for FY26E, significantly lower than prior years.
  • DCF-based target price has been revised up from HK$13.05 to HK$13.44, with a 41.2% upside from the current price of HK$9.52.

• Valuation and Sensitivity Analysis:

  • The DCF valuation for FY26E is RMB119,096mn, with a terminal value of RMB185,555mn.
  • The terminal growth rate is 3.0%, and the WACC is 9.34%.
  • Sensitivity analysis shows the target price is sensitive to changes in WACC and terminal growth rate.

• Market Position and Analyst Ratings:

  • CMBIGM maintains a BUY rating for CSPC, with a target price of HK$13.44.
  • The stock is expected to deliver a potential return of over 15% over the next 12 months.
  • The company's market cap is HK$113,451.8mn, with a 3-month total return of HK$827.0mn.

Key Information

• Shareholding Structure:

  • Massive Giant Group Ltd: 10.6%
  • Cai Dongchen: 12.4%

• Share Performance:

  • 1-month: 12.0%
  • 3-month: 28.8%
  • 6-month: -9.5%

• Risk Factors:

  • Further price cuts of NBP in the NRDL renewal by end-2026.
  • Continuous strict drug promotion restrictions in the healthcare sector in China.

• Key Financial Ratios:

  • Gross margin: 73.22% in FY26E.
  • Operating margin: 33.13% in FY26E.
  • Net margin: 27.16% in FY26E.
  • ROE: 25.6% in FY26E.
  • Current ratio: 2.7x.
  • Net debt to equity: 0.4x.
  • P/B: 2.3x.
  • P/CFPS: 11.8x.

• Dividend Yield:

  • FY26E: 4.2%
  • FY27E: 3.4%
  • FY28E: 3.7%

• Capital Expenditure:

  • Consistent at RMB2,000mn across the forecast periods.

• Cash Flow:

  • Operating cash flow is expected to be RMB7,879mn in FY26E.
  • Net cash from operations has shown a positive trend, with an increase in FY26E.

• Valuation Metrics:

  • P/E (x): 10.7x for FY26E.
  • P/E (diluted): 10.7x for FY26E.
  • P/B: 2.3x for FY26E.
  • P/CFPS: 11.8x for FY26E.

Analyst Certification

• The research analyst certifies that the views expressed in the report reflect their personal views.
• No part of their compensation is directly or indirectly related to the specific views in the report.
• The analyst confirms no trading or dealings in the stock covered in the report within 30 days prior to the report's issue.
• They will not trade in the stock for 3 business days after the report's issue.
• The analyst does not serve as an officer of any Hong Kong listed companies covered in the report.
• They have no financial interests in the companies covered in the report.

CMBIGM Ratings

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

Disclosures

• This report is not tailored to individual investors and is for informational purposes only.
• CMBIGM is not a registered broker-dealer in the United States and is not subject to U.S. rules on research report preparation and analyst independence.
• The report is prepared solely for the use of intended recipients and may not be reproduced, reprinted, sold, redistributed, or published without prior written consent.
• The information is based on publicly available and reliable data, but accuracy, completeness, timeliness, or correctness is not guaranteed.
• CMBIGM may issue other publications with different information or conclusions.