Date of Report
25 October 2024
Broker Name
UOB Kay Hian
Company Overview
CSPC Innovation Pharmaceutical Co is a producer of functional raw materials and health food that is transforming itself into a leading drug innovator in China.
Stock Data
- Share Price: Rmb31.13
- Target Price: Rmb37.00
- Upside: +18.9%
- Bloomberg Ticker: 300765 CH
- Shares Issued: 1,404.6 million
- Market Cap: Rmb43,725.0 million (US$6,141.6 million)
- 3-Month Average Daily Turnover: US$38.3 million
- 52-Week High/Low: Rmb40.62/Rmb18.82
Financial Performance
9M24 Results
- Revenue: Rmb1,479 million (down 23.7% YoY)
- Adjusted Net Earnings: Rmb137 million (down 76.3% YoY)
- Net Profit: Rmb139 million (down 63.5% YoY)
Key Financials
| Year |
Net Turnover (Rmbm) |
EBITDA (Rmbm) |
Net Profit (rep.) (Rmbm) |
Net Profit (adj.) (Rmbm) |
| 2022 |
2,626 |
1,155 |
726 |
658 |
| 2023 |
2,502 |
869 |
756 |
744 |
| 2024F |
1,988 |
53 |
146 |
146 |
| 2025F |
3,176 |
537 |
508 |
508 |
| 2026F |
3,990 |
993 |
902 |
902 |
Key Financial Metrics
- FY24 NAV/Share: Rmb2.50
- FY24 Net Cash/Share: Rmb1.00
- PE Ratio (2024F): 369.6x
- Dividend Yield: 0.0%
Stock Impact
- Revenue Decline: 3Q24 revenue declined 14.5% YoY, largely due to a significant decrease in the average selling price (ASP) of caffeine raw materials, impacting revenue from the health food segment due to weak market demand.
- R&D Investment: R&D expenses increased by 49.9% YoY to Rmb205 million in 3Q24, raising the R&D expense/revenue ratio from 22.5% in 9M23 to 30.9% in 9M24.
Product Launches and Innovations
- New Biopharmaceutical Products: CSPC Innovation launched the Enlonstobart injection (PD-1 mAb) in June 2024 and received market approval for its Omalizumab biosimilar in October 2024. The company aims to generate substantial revenue from these products.
Acquisition of CSPC Baike
- Acquisition Details: CSPC Innovation is on track to acquire a 100% stake in CSPC Baike for Rmb7.6 billion, which includes both share and cash consideration.
- Expected Profit Contribution: CSPC Baike has guaranteed a minimum net profit of Rmb435 million for 2024.
Risks and Earnings Revision
- Earnings Forecast: The 2024 revenue and adjusted net earnings growth estimates have been revised to -20.5% and -80.4% YoY, respectively.
- Key Risks: Include policy risks, intensifying competition, R&D risks, and potential failures in M&A activities.
Valuation and Recommendation
- Recommendation: Maintain BUY with a target price of Rmb37.00, based on a DCF model assuming a WACC of 10.2% and terminal growth rate of 3%.
Stock Price Catalysts
- Successful acquisition of CSPC Baike and continued efforts in R&D and innovative drug launches are seen as key catalysts for growth.
