CICC maintains its outperform rating on CSPC PHARMA (01093), with a target price of HK$12.

CICC releases research report stating that considering the changes in the pace of recognizing external authorization income, CSPC PHARMA (01093) has lowered its net profit for 2026 by 17.6% to 7.503 billion yuan, and increased its net profit for 2027 by 72.2% to 7.856 billion yuan. The current stock price corresponds to a 2026/2027 P/E ratio of 9.3 times/8.7 times. It maintains an outperform industry rating, considering that this profit forecast adjustment is only due to changes in the pace of income and profit recognition. The bank is optimistic about the company's performance recovery and growth and the continuous realization of external authorizations in the next three quarters. It maintains a target price of HK$12.00, corresponding to 15.9 times the 2026 P/E ratio and 14.9 times the 2027 P/E ratio, with a 70.5% upside potential compared to the current stock price. Key points from CICC: 1Q26 performance in line with market expectations The company announced its 1Q26 performance: revenue of 6.465 billion yuan, a year-on-year decrease of 7.8%; net profit attributable to the parent company of 0.86 billion yuan, a year-on-year decrease of 41.8%, and an adjusted net profit of 0.842 billion yuan, a year-on-year decrease of 40.3%, in line with market expectations. The apparent decline in revenue and profits is mainly due to the year-on-year decline in external authorization income due to changes in the pace of revenue recognition. The bank predicts that authorization income recognition will continue to maintain a relatively high level in the following quarters. Internal pharmaceutical business achieves recovery growth In 1Q26, the company's proprietary drug revenue was 5.224 billion yuan, of which the nervous system accounted for 2.331 billion yuan (YoY + 22%/QoQ + 9%), anti-tumor drugs accounted for 0.565 billion yuan (YoY + 2%/QoQ + 2%), anti-infective drugs accounted for 0.838 billion yuan (YoY -9%/QoQ unchanged), cardiovascular drugs accounted for 0.538 billion yuan (YoY + 31%/QoQ + 9%), respiratory system drugs accounted for 0.271 billion yuan (YoY -17%/QoQ -17%), digestive metabolism drugs accounted for 0.248 billion yuan (YoY-17%/QoQ +49%), other proprietary drugs accounted for 0.287 billion yuan (YoY -21%), and authorization fee income accounted for 0.146 billion yuan (YoY -80%/QoQ -19%). The bank calculated that excluding authorization fee income, the year-on-year recovery growth of internal pharmaceutical revenue reached 6.2%, and profitability also strengthened. The bank expects the company's internal business to maintain a recovery growth trend throughout the year. Smooth progress in R&D, continuous authorization worth looking forward to In January 2026, the company authorized its sustained-release drug technology platform and peptide drug AI discovery platform, including SYH2082 (long-acting GLP1R/GIPR agonist/ progressing to phase I clinical trials), 3 preclinical programs, and 4 new projects to AstraZeneca. Everything is progressing smoothly. At the same time, the company's KN026 (HER2 bispecific antibody), SYS6010 (EGFR ADC), SYS6043 (B7-H3 ADC), SYS6002 (Nectin-4 ADC), and other innovative molecules will soon read out data at the 2026 ASCO conference. The bank expects continued external authorizations and milestone income recognition in the future. Risk warning: R&D output lower than expected, centralized procurement price reductions exceed expectations, external authorization lower than expected.