FIRST SHANGHAI: Maintains "buy" rating on CONSUN PHARMA (01681) with a target price of 25.2 Hong Kong dollars.

FIRST SHANGHAI released a research report stating that it maintains a "buy" rating for CONSUN PHARMA (01681), adjusts the profit forecasts for 2025-2027, calculates a target price of HK$25.20 with a 10% discount rate and 0% perpetual growth rate, corresponding to a 19 times price-to-earnings ratio in 2025, representing a 59.50% increase from the current price. Taking into account the continuous optimization of the company's operating structure, the leading position of its kidney disease products in the market, steady performance growth, and high dividends and repurchases collectively demonstrate the value and confidence of the company. The main points of FIRST SHANGHAI are as follows: Impressive overall performance, continuous optimization of the operating structure CONSUN PHARMA showed impressive performance and steady growth trend in the first half of 2025, actively optimizing the operating structure and deepening strategic layout. In the first half of 2025, the group's revenue reached RMB 1.569 billion, a year-on-year increase of 23.7%. Gross profit increased by approximately 27.6% to RMB 1.209 billion. The gross profit margin further increased to 77.1%, up 2.4 percentage points from the same period in 2024, mainly due to the decrease in the purchase price of Chinese medicinal materials. The company's attributable net profit was approximately RMB 498 million, a year-on-year increase of 24.6%. The company continued its high dividend policy, with the board of directors proposing a mid-year dividend of HK$0.33 per share, exceeding 51% of the dividend payout ratio. Core products driving growth, synergistic development of various business segments At CONSUN PHARMA, sales revenue of nephrology drugs was approximately RMB 1.131 billion, an increase of around 28.0% from the same period in 2024. Its core product, Uremic Cleansing Granule, continues to drive growth, maintaining a leading position in the modern traditional Chinese medicine category for kidney disease. Sales revenue of pediatric drugs was approximately RMB 172 million, an increase of about 17.5% from the same period in 2024. Source Likang Oral Liquid is the only orally administered iron supplement that has entered the national essential medicine and medical insurance directory, focusing on children, pregnant women, and the prevention and treatment of IDA. In 2024, the National Medical Insurance Administration removed its reimbursement indication restrictions, significantly improving clinical accessibility in adult departments and steadily increasing market share. Sales revenue of medical imaging contrast agents was approximately RMB 95 million, an increase of about 22.0% from the same period in 2024. In 2024, the company's Gadobenic acid meglumine injection in multiple specifications passed consistency evaluation, and two new CT contrast agents, Kangbixian (Iohexol) and Kangyouxian (Iopromide), were launched. In addition, multiple research and development products, such as octafluoropropane liposomal microsphere injections, have been reported for production or completed validation awaiting application, enriching the product pipeline. In the Yulin Pharmaceutical segment, sales of skin, liver and gallbladder, and orthopedic drugs have all increased by approximately 19.7%, 4.6%, and 2.1% from the same period last year, respectively. Prominent kidney disease products, leading position in the industry Uremic Cleansing Granules are the flagship product of the CONSUN PHARMA Group, maintaining a leading position in the traditional Chinese medicine market for kidney disease. As an exclusive variety, it has unique market competitiveness. Uremic Cleansing Granules are mainly used for chronic kidney disease (CKD), effectively lowering serum creatinine levels, delaying eGFR decline and CKD progression, and having high safety. Data shows that the adult CKD prevalence in China is as high as 8.2%, with an estimated number of patients exceeding 120 million, indicating a huge target market size. Uremic Cleansing Granules is the first traditional Chinese medicine for kidney disease that has completed evidence-based medical research, completed systematic biology research, has definite clinical efficacy, and has received "strong recommendations" from multiple clinical guidelines and expert consensus. Since there is currently no cure for chronic kidney disease and there is a lack of significantly effective competitive products in existing treatments, Uremic Cleansing Granules, as a traditional Chinese medicine, have a certain regulatory role in delaying disease progression by excreting toxins through the intestinal tract with high safety and ease of administration. Additionally, with its outstanding sales and public relations team, wide range of indications (covering the vast majority of patients with impaired kidney function), extensive recognition among doctors and patients, and inclusion in the medical insurance catalog at an affordable price, the clinical application frequency of this product is high. At the background of centralized procurement, the company has adopted a "quantity for price" strategy, achieving both consolidation of the existing customer base and expansion of new customers. Overall, it is expected that the future sales volume of Uremic Cleansing Granules will maintain steady growth. Although the patent protection of Uremic Cleansing Granules expired in 2024, due to its complex compound composition, difficulty in imitation, and the strict and lengthy process of new drug evaluation and approval, it is expected that this variety will maintain a high market barrier for a long period of time, and the competitive landscape is expected to remain relatively concentrated, maintaining its leading position in the market.