CICC has released a research report noting that, considering internal business pressures, it has cut its 2026/2027 net profit forecasts for 3SBIO by 6% and 12% to RMB 2.842 billion and RMB 3.051 billion, respectively. The current share price corresponds to 13.7 times and 12.4 times price-to-earnings ratios for 2026/2027. Maintaining an Outperform rating, and reflecting a slight downward shift in the sector's valuation center, the broker has lowered its target price by 18% to HK$30.00, which implies 23.1 times and 20.9 times 2026/2027 P/E ratios and an implied 68% upside.

Key Views from CICC:

The 1H26 results were in line with market expectations. The company reported 1H26 revenue of RMB 4.526 billion, up 3.9% year-over-year; net profit attributable to shareholders of RMB 1.147 billion, down 15.6% year-over-year; and adjusted net profit attributable to shareholders of RMB 1.436 billion, up 26.5% year-over-year. The 1H26 results met market forecasts.

Internal revenue faces pressure, but an acceleration is expected in the second half. In 1H26, the company's out-licensing revenue was RMB 852 million, primarily from the SSGJ-707 milestone payment. Excluding out-licensing revenue, the company's revenue was RMB 3.674 billion (down 15.6% YoY), mainly impacted by medical insurance cost controls and VAT adjustments. According to announcements, the long-acting erythropoietin (Xinbi'ao) and the IL-17 monoclonal antibody (Yisai Tuo) have entered the preliminary form review list for the 2026 National Medical Insurance Catalog adjustment. The partnered product, oral paclitaxel, has been included in the medical insurance catalog. CICC expects internal revenue to accelerate in the second half of the year. In 1H26, the company achieved CDMO revenue of RMB 231 million (up 160.9% YoY), which the broker estimates was primarily driven by the supply of SSGJ-707 drug substance to Pfizer.

SSGJ-707 is progressing smoothly, and the early-stage research pipeline is well-positioned. According to company announcements, Pfizer has initiated nine global multi-center clinical trials, including two Phase III studies for 1L NSCLC and 1L CRC. It also plans to launch a Phase II clinical trial for early-stage NSCLC within the year, as well as Phase III trials combining PADCEV for first-line endometrial cancer and first-line metastatic urothelial carcinoma. The company currently has five products under NDA review, including its self-developed IL-4Rα monoclonal antibody 611 and ophthalmology VEGF monoclonal antibody 601A, as well as partnered products such as oral paclitaxel (Bairuisu), HER2 ADC (DB-1303), and semaglutide injection WS2403.

Expense ratios are well controlled, and adjusted profit achieved growth. In 1H26, the company's selling expense ratio was 26.7% (down 10.4 percentage points YoY), administrative expense ratio was 5.9% (down 0.6 percentage points YoY), and R&D expense ratio was 15.1% (up 2.5 percentage points YoY). Under the backdrop of medical insurance cost controls, resources and expenses have been further tilted toward the R&D end. In terms of profit, the company achieved adjusted net profit attributable to shareholders of RMB 1.436 billion in 1H26, corresponding to an adjusted net margin of 31.7%, up 5.7 percentage points YoY.