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On Thursday, HSBC analysts upgraded CSPC Pharmaceutical (TADAWUL:2070) Group Ltd. (1093:HK) (OTC:CHJTF) stock rating from Hold to Buy. The upgrade is accompanied by a new price target of HK$9.50, up from the previous HK$4.70. The analysts noted a recovery in the company’s performance, with product sales and profits showing quarter-on-quarter growth of 12% and 60%, respectively.
The upgrade follows CSPC’s recent announcement on May 30, detailing three potential licensing-out deals. These deals indicate stronger and faster business development progress than previously anticipated by HSBC. Additionally, a positive readout for CSPC’s innovative drug SYS6010 has contributed to the analysts’ increased optimism regarding the company’s future prospects.
The analysts have adjusted their net profit estimates for CSPC, expecting an increase of 7-19% for the years 2025-2026. They now project the company to achieve an 11% compound annual growth rate in net profit from 2025 to 2027, driven by higher business development income and improved operating cost controls.
Despite CSPC’s shares rallying approximately 65% year-to-date, outperforming the Hang Seng China Enterprises Index’s 37% rise, the stock is currently trading at a price-to-earnings ratio of 15.5 times its estimated 2025 earnings. This valuation is significantly lower than the domestic peers’ average of 25.6 times, making it an attractive option for investors.
HSBC’s analysts see further upside potential for CSPC shares, supported by expectations of new drug launches and an accelerated pace of business development with larger income scales. This has led to the decision to upgrade the stock to Buy from Hold.
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