Yamato: The mid-term adjusted net profit of China Biopharmaceutical (01177) far exceeded the expected target price and rose to HK$7.2

The Zhitong Finance App learned that Daiwa released a research report saying that China Biopharmaceutical (01177)'s adjusted net profit for the first half of the year (excluding dividend income) far exceeded expectations, mainly driven by significant savings in sales expenses. The bank reconfirmed the “buy” rating, and the target price was raised from HK$7 to HK$7.2. Yamato raised its earnings forecast per share by 30% to 31% from 2026 to 2028, reflecting cost savings and increased gross margin, but remained largely unchanged in the long-term forecast.

Yamato pointed out that the total revenue of Chinese biopharmaceuticals in the first half of the year increased 10.6% year on year to 19.44 billion yuan, which is roughly in line with the forecast and 4% higher than the market consensus. Product revenue increased 5.6% year over year to RMB 18.22 billion. Among them, sales of innovative drugs were strong, reaching 7.81 billion yuan, up 29.2% year over year, which was better than the forecast. Adjusted net profit (excluding dividend revenue) increased 92.3% year over year to RMB 3.34 billion, far exceeding the bank's and market expectations. It was mainly due to the increase in gross margin of product sales to 88.6% from 84% in the same period last year, and sales cost savings of nearly RMB 1.2 billion, which was beyond expectations.

The bank also pointed out that Zhongsheng Pharmaceutical is the earliest pioneer in adopting and promoting artificial intelligence applications in the pharmaceutical industry. After several years of investment, AI has significantly reduced costs and improved efficiency, including greatly improving the efficiency of early drug discovery, shortening the PCC (preclinical candidate compound) development cycle of the OAPD platform from 24 months to at least 8 months, PCC compounds can be effectively screened and eliminated by more than 70%, and the phase III clinical trial time of TQC3721 has been reduced by about 15%. PD-L1 antibody production increased by 20% while reducing production costs by 20%. On the marketing side, AI increases commercial team promotion efficiency by 30%. The comprehensive benefits of AI applied by various departments reduced the sales and administrative expenses ratio from 41.3% in 2025 to 32% in the first half of this year. Management expects the long-term target of this ratio to be 30%.