"Large Firms" China Merchants Securities initiates coverage on Kanion Pharmaceutical, expects the impact of centralized procurement to be digested

China Merchants Securities International published a report stating that Kanion Pharmaceutical (00867.HK) is digesting the impact of centralized procurement and is transitioning from the largest Contract Sales Organization (CSO) in China to a pharmaceutical company, moving towards full-chain development of innovative drug enterprises. It is expected that net profits from 2025 to 2027 will be RMB 1.65 billion, RMB 1.96 billion, and RMB 2.27 billion, respectively, with year-on-year growth of 1.5%, 18.9%, and 15.8%. The initial coverage gives a "strong buy" rating.

From the performance perspective, as the three core products are gradually included in centralized procurement in 2023, the company's short-term performance has experienced some fluctuations. However, starting in 2024, the commercialization of innovative products and the rapid growth of exclusive drugs will bring a turning point to the company's performance, with revenue and profit growth both turning positive in the first half of 2025.

From the product perspective, the company initially operated mainly as a CSO representing imported original research drugs. However, since the transformation began in 2018, it has rapidly enriched its product structure through overseas licensing, domestic cooperation, and independent research and development, while focusing on specialties and independently operating skin health, ophthalmology, and Southeast Asian businesses, becoming a full-chain development innovative drug enterprise