CICC: Maintains Outperform rating on GENSCRIPT BIO (01548), lowers target price to HK$17.90.

CICC released a research report stating that it maintains its profit forecast for GenScript Bio (01548) for the year 2026, while introducing a net profit forecast of $71.64 million for 2027. The rating of outperforming the industry is maintained, but due to recent systematic adjustments in the Hong Kong stock pharmaceutical industry, the target price has been lowered by 16.7% to HK$17.90 (based on the DCF valuation method), with an upside potential of 53.6% from the current stock price. CICC's main points are as follows: Revenue and adjusted profits meet the expectations of the bank The company reported its performance for the year 2025: revenue of $960 million, a year-on-year increase of 61.4%; adjusted net profit (excluding losses, impairment, and stock incentives from Legend Bio) reached $230 million, a year-on-year increase of 285.0%. The strong growth was mainly due to the significant licensing revenue recognized by Pioneer Bio, with a net loss attributable to equity holders of $533 million, mainly due to: 1) a non-cash impairment provision of $398 million due to the decline in the share price of the company's associated company, Legend Bio; 2) equity method losses of $320 million from Legend Bio. Benefitting from licensing revenue, the CDMO business (Pioneer Bio) is growing rapidly In 2025, the CDMO sector's revenue grew by 309.1% to $389 million, and the adjusted operating profit turned from a loss to $194 million. The growth was mainly driven by the substantial licensing revenue generated from the anti-PD-1 single-domain antibody licensed to Livzan Medicine. The bank believes that this transaction validates the research and commercialization value of Pioneer Bio's NME (New Molecular Entity) platform and expects the company to continue to license assets such as CD3 VHH externally in the future. Meanwhile, conventional CDMO revenue benefits from industry recovery, achieving double-digit growth. Steady growth in the life science business As the company's core business, the life science sector achieved revenue of $522 million in 2025, a year-on-year increase of 14.8%; adjusted operating profit was $95.37 million, a year-on-year increase of 5.5%, benefiting from the continuous penetration of the company's "gene-to-protein" one-stop platform and the demand growth brought by industry trends such as AI-driven drug development. Protein-related businesses have become the second growth curve of the sector, accounting for close to 30% of revenue, and maintaining high-speed growth. Steady progress in industrial synthetic biology (BioVinc) Revenue in 2025 grew by 7.9% to $58 million, with an adjusted operating loss of $3.18 million. The company strategically increased its investment in research and development of AI-driven innovation and new products, leading to short-term operational losses. The company's natural sweet protein Mellia has obtained FDA GRAS certification in the United States and has submitted regulatory application materials to the Chinese National Health Commission, with the bank expecting it to become a future growth point. Risk warning: research and development risks, lower-than-expected capacity utilization, policy fluctuations, geopolitical risks.