UBS Downgrades CSPC Pharmaceutical and Kelun Pharmaceutical to 'Neutral', Names Hansoh Pharma as Top Pick

Intelligent Finance APP learned that UBS issued a research report stating that it remains optimistic about the long-term potential of China's medical market. However, the Chinese pharmaceuticals industry has surged 64% year-to-date driven by optimism over licensing deals, coupled with increasing risks from potential U.S. executive orders and high valuations. The bank expects market focus to shift back to organic revenue/profit growth. Due to weak fundamentals, UBS downgraded CSPC (01093) and Kelun (002422.SZ) to "Neutral" and replaced its industry top pick from 3SBIOINC (01530) to Hansoh Pharma (03692) due to its stable traditional business and innovative pipeline reserves. In terms of long-term pipeline potential, the bank believes Hengrui Medicine (01276) and Hansoh Pharma are the best performers.

The report indicates that the forward P/E ratio of Chinese pharmaceutical stocks is higher than the five-year average. However, the rising risk from U.S. executive orders is shifting market focus back to organic growth. CSPC and Kelun are expected to have the lowest compound annual growth rate (CAGR) in revenue between 2024-2034, at only half of the 13% average level of 3SBIOINC, Hansoh Pharma, and Innovent Biologics.

The report pointed out that CSPC's core traditional product NBP (accounting for 32% of finished drug revenue in 2024) continues to lose market share, while its high reliance on unconfirmed business development (BD) income increases uncertainty. Kelun faces weak demand and fierce competition, which may lead to the lowest revenue growth among peers in 2025.