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On Tuesday, CSPC Pharmaceutical (TADAWUL:2070) Group Ltd. (1093:HK) (OTC: CHJTF), a pharmaceutical company with nearly $4 billion in annual revenue and an impressive 70% gross margin, received an upgraded stock rating from CLSA, moving from Outperform (2) to High-Conviction Outperform (1), while maintaining a price target of HK$12.00. The upgrade follows the company’s fiscal year 2024 results, which were in line with previous profit warnings, showing a 7.8% decrease in revenue and a 26.3% drop in net profit.
CSPC Pharmaceutical’s financial performance reflected challenges, yet CLSA analyst Zhijie Zhao highlighted that revenue from two out-license projects completed in 2024 has not yet been recognized in the reported results. According to InvestingPro analysis, the company maintains a strong financial health score of "GOOD" and is currently trading below its Fair Value. Looking forward, the company has provided a positive growth outlook for its recurring business in 2025 and aims to secure three to four out-license projects annually.
Zhao noted the company’s research and development initiatives are starting to yield results. CLSA anticipates that CSPC Pharmaceutical’s R&D investments will lead to a significant contribution from overseas sales royalties, expected to commence in 2027.
The analyst’s commentary underscores the potential for CSPC Pharmaceutical’s strategic focus on out-licensing and R&D to improve its long-term financial outlook. The unchanged price target of HK$12.00 reflects CLSA’s confidence in the company’s ability to navigate current challenges and capitalize on future opportunities.
Investors in CSPC Pharmaceutical shares will likely monitor the company’s progress on securing new out-license projects and the resultant financial impacts, as these factors are central to CLSA’s upgraded rating and positive expectations for the company’s growth trajectory.
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