CSPC Earnings: Lowering Our Growth Assumption; Fair Value Estimate Reduced Slightly

CSPC’s 2023 results were mixed. While the top and bottom lines were in line with our forecasts, we lower our 2024 revenue growth forecast to 5% from 8% as we see nervous system and oncology drugs setting the pace. While profit was below market consensus, we view CSPC’s performance largely favorably as the decline in net margin was driven by record-high research and development spending composed of CNY 4.8 billion on clinical trial adjustments, such as adding weight-loss drug pipelines or filling market approvals in North America. We don’t think it will instantly boost growth in 2024 and 2025, but we view it positively from a long-term perspective. Similar to its global big pharma peers, it is a necessary step to offset patent loss and remain competitive. We slightly lower our CSPC fair value estimate to HKD 7.8 per share from HKD 8.4 after fine-tuning 2024 and 2025 assumptions. The current share price is about a 15% discount to our fair value estimate.