Strong double-digit growth in 1Q24. CSPC reported 1Q24 revenue of RMB8.98bn (+11.5% YoY, +18.4% QoQ) and attributable net profit of RMB1.61bn (+12.9% YoY, +17.0% QoQ), regaining double-digit growth, and representing 26% and 20% of our previous full-year estimates, respectively. The GP margin in 1Q24 increased to 72.3% (vs 68.5% in 1Q23), mainly due to a higher proportion of revenue from finished drugs (84.2% in 1Q24 vs 79.7% in 1Q23). Selling expense ratio increased to 33.0% in 1Q24 (vs 30.9% in 1Q23), due to the higher proportion of revenue from finished drugs, in our view. Admin expenses ratio increased from 3.3% in 1Q23 to 3.7% in 1Q24. R&D expenses reached RMB3.68bn in 1Q24 (+16.0% YoY, +1.5% QoQ).
　　Accelerating growth in finished drug sales. Sales of finished drugs in 1Q24 increased 17.7% YoY to RMB7.56bn, driven by the strong sales growth of CNS products (+27.4% YoY), oncology products (+11.6% YoY), anti- infection drugs (+9.8% YoY) and cardiovascular drugs (+22.3% YoY). We think NBP performed well in Q1 driven by the strong growth from retail pharmacy channels. CSPC has established a dedicated sales force focusing on retail pharmacy channels to promote the sales of NBP and several generics.
　　New products to drive growth. We expect CSPC’s sales of new products to ramp up quickly, including Mingfule (rhTNK-tPA), Duoenyi (irinotecan liposome), Duoenda (mitoxantrone), Ouyuexin (desvenlafaxine), Yiluoda (nintedanib), Anfulike (amphotericin B), duvelisib (PI3K), and glumetinib (MET). Mingfule was approved for acute ischemic stroke in Feb 2024, bringing additional sales potential in acute ischemic stroke. We expect the NRDL to add this new indication during the negotiation at end-2024. CSPC has seven new NDAs under review, including PD-1, omalizumab, DDP4, liposomal amphotericin B, and two NDAs under US FDA review (Anfulike and Duoenyi), further expanding the Company’s commercial product portfolio. Management maintained the forecast of new products contributing RMB3.5- 3.6bn of reported revenue in 2024. Additionally, TG103 (GLP-1RA) completed enrolment for Ph3 obesity study in China in Jan 2024 and is enrolling for the Ph3 diabetes trial since Apr 2024. The semaglutide injection is currently enrolling for Ph3 diabetes in China as well since Feb 2024. The EGFR ADC and Nectin-4 ADC are going through Ph1 studies, with data readout expected in 2H24.
　　Maintain BUY. Based on the strong double-digit growth in 1Q24, we expect CSPC’s revenue and attributable net profit to grow 11.5%/ 11.1% and 13.1%/ 9.5% YoY in FY24E/ 25E, respectively. We revise up our DCF-based TP from HK$7.76 to HK$8.51 (WACC 11.78%, terminal growth 2.0%).
　　Risks: Sustainability of strong growth; Duomeisu’s potential national centralised procurement