CICC: Maintaining UNITED LAB (03933) outperform rating, target price of HKD 16.00

CICC released a research report stating that due to pressure on the prices of raw materials and intermediates, the net profit for UNITED LAB (03933) in 2026/2027 has been lowered by 63.5%/41.5% to 0.957 billion yuan/1.756 billion yuan. The current stock price corresponds to a P/E ratio of 18.0 times for 2026 and 9.7 times for 2027. However, considering the potential of the company's innovative drug pipeline and potential catalysts for overseas expansion, the rating is maintained as outperform the industry with a target price of HK$16.00, corresponding to P/E ratios of 29.4 times for 2026 and 15.8 times for 2027, representing an upside potential of 63.3% from the current stock price. Key Points from CICC: Performance in 2025 is lower than expected by the bank The company announced its 2025 performance: revenue of 13.21 billion yuan, a decrease of 4.0% year-on-year, and net profit attributable to the parent of 2.09 billion yuan, a decrease of 21.6% year-on-year. The performance is lower than expected by the bank, and the decline in revenue and profit is mainly due to the impact of market price declines and demand adjustments in intermediates and raw materials. Transformation milestone for innovation, GLP-1 matrix has leading potential UBT251 (GLP-1/GIP/GCG triple target) received a prepayment of 1.442 billion yuan from Novo Nordisk in 2025, and the partner launched overseas Phase Ib/IIa clinical trials in 2026Q1, with data expected in 2027. In addition, preclinical data for UBT37034 showed that in combination with GLP-1, significant weight loss can be achieved, and the first subject for Phase I in China was enrolled in March 2026; UBT48128, an oral small molecule, is expected to submit clinical applications in China and the US in 2026. Intermediates and raw materials: short-term pressure on performance, high capacity utilization maintained In 2025, revenue from intermediates was 1.612 billion yuan (down 39.4% year-on-year), and revenue from raw materials was 4.90 billion yuan (down 23.1% year-on-year). The bank judged that the decline in revenue was mainly due to changes in market supply and demand for core products, fluctuations in sales prices, and sales volumes. The bank expects the price of 6-APA to gradually recover in 2026. The company's core intermediates (6-APA/Potassium Penicillin) have a designed capacity of 20,500 tons, with capacity utilization remaining at a high level of 100%, demonstrating strong production resilience and scale advantages. Formulations: Insulin series performance outstanding, international layout accelerating In 2025, the revenue from the insulin series was 1.946 billion yuan, an increase of 57.4% year-on-year. The company's product portfolio continues to grow, with approvals for Liraglutide and Degludec Insulin on the market, and Semaglutide insulin in application for production. In terms of internationalization, the company achieved export revenue of 554 million yuan for human formulations, with the insulin products securing contracts with the Brazilian Ministry of Health in the first year of large-scale overseas expansion, setting a record for exports of similar products from China. In addition, the company has reached cooperation agreements with several countries along the Belt and Road. Risk factors: risks in new drug research and development, exchange rate fluctuations, worsening competitive landscape, risks in new business expansion.