Tonghua Dongbao’s 3Q24 revenue/attributable net profit (NP)/recurring NP were RMB710/160/150mn (-2.4/-40.4/-46.5% yoy). For 9M24, revenue/attributable NP were RMB+1.45bn/-70mn (-30.8/-108.7% yoy). After experiencing the one-off impact from the insulin VBP contract renewal in 2Q24, the company’s 3Q24 revenue has largely returned to normal. However, the 3Q24 profit declined more sharply than revenue on notably increased sales expense ratio during the period. Given the VBP impact waned in 2024, we expect the company to kick off a good start in 2025 and foster a second growth driver. Maintain BUY.
Domestic insulin: VBP contract renewed, insulin business stabilized
During the national insulin VBP contract renewal in April 2024, all of the company’s insulin products won A-class bids. We estimate 3Q24 sales volumes of second-generation insulin rose over 10% yoy, and that of third-generation insulin more than doubled, with aspart series sales volumes up c. 400% yoy. Given the latest VBP prices would remain unchanged until end-2027, we think the price cut risk brought about by VBP may have waned, and expect glargine/aspart sales volumes to rise by 20-30%/nearly 100% in 2025.
R&D pipelines thrived, Liraglutide approved, URAT1 data upcoming
1) GLP-1 series: the second domestic liraglutide was approved, and we expect it to contribute RMB100mn+ sales value in 2024. Semaglutide biosimilar has entered phase-III clinical trial; THDBH 120 (GLP-1/GIP) has entered phase-1b clinical trial for lowering glucose and reducing weight; and THDBH 110 (GLP-1 small molecule) has entered phase-I clinical trial for lowering glucose. 2) URAT1 series: THDBH 130 (URAT1) phase-2a clinical trial has reached the primary endpoint, and THDBH 151 (XO/URAT1) has entered phase-2a clinical trial. 3) Insulin series: Lispro insulin is about to apply for production approval, ultra-fast-acting lispro insulin has entered phase-III clinical trial.
Set to expand insulin business overseas with King-Friend
In September 2023, the company formed a partnership with King-Friend Biochemical Pharmaceutical (King-Friend) for the development and production of glargine, aspart, and lispro insulin injections in the US. We expect the company to submit production approval applications for these three products in the US by 2025, and to gain approval for marketing by 2026.
Earnings forecasts and valuation
We project its 2024/2025/2026 attributable NP at RMB104/947/1,130mn (-91.1/+808.1/+19.4% yoy), and value the stock at 24x 2025E PE (a premium over its peers’ average of 22x on Wind consensus to factor in its leading position). Our target market cap is RMB22.72bn and target price is RMB11.40.
Risks: product sales/R&D progress falling short of our expectations.

　　公司公布24年三季报：3Q24收入7.1亿元，-2.4%yoy；归母净利润1.6亿元，-40.4%yoy；扣非净利润1.5亿元，-46.5%yoy。1-3Q24公司实现收入14.5亿元，-30.8%yoy；归母净利润-0.7亿元，-108.7%yoy。在2Q24胰岛素集采续约的一次性冲击后，公司3Q24收入基本恢复正常，3Q24利润端下滑幅度大于收入端，主因3Q24销售费用率大幅提高。考虑到24年集采影响出清，25年将轻装上阵，开启第二成长曲线，维持“买入”评级。
　　国内胰岛素：集采续约落地，胰岛素业务企稳
　　24年4月国家胰岛素集采续约中，公司全部胰岛素产品以A类中标（其中甘精、门冬预混A1中标，额外获得二次分配量的30%以上），且降幅较小（其中二代胰岛素平均降价11%，甘精胰岛素降价19%，门冬速效和预混降幅~40%），我们估测3Q24二代胰岛素销量同比+10%以上，三代胰岛素销量翻倍增长，其中门冬系列销量+~400%yoy。考虑到此次集采价格将维持到27年底，我们认为公司集采降价风险已出清，预计25年甘精和门冬分别实现20%-30%和近100%销量增长。
　　研发管线多点开花，利拉鲁肽获批，URAT1数据即将披露
　　公司研发管线布局全面：1）GLP-1系列：利拉鲁肽已于23年12月获批降糖适应症，国产第二家，我们预计24年贡献1+亿元销售额；司美格鲁肽类似药（24年5月自质肽生物引进）降糖3期临床；THDBH120/121（GLP-1/GIP）降糖&减重1b期临床；THDBH110/111（GLP-1小分子）降糖1期临床；2）URAT1系列：THDBH130（URAT1）临床2a期达到主要终点，THDBH150/151（XO/URAT1）2a期临床；3）胰岛素系列：赖脯胰岛素（即将报产）、超速效赖辅胰岛素（3期临床）、德谷胰岛素利拉鲁肽（1期临床）。
　　联手健友，胰岛素出海可期
　　23年9月，公司与健友就甘精、门冬、赖脯三款胰岛素注射液在美国市场的开发和生产达成合作，我们预期三款产品有望于25年在美国陆续报产，26年陆续获批上市。考虑到美国胰岛素千亿市场空间（美国糖尿病年治疗费用近3800亿美金，其中胰岛素占比~30%，IDF2021，诺和诺德年报），我们认为在健友较强的海外注册和商业化能力的帮助下，胰岛素出海有望为公司带来更大市场机遇，并提振公司估值。
　　盈利预测与估值
　　我们预测公司24-26年归母净利润为1.04/9.47/11.30亿元，同比增速分别为-91.1/+808.1/+19.4%。给予25年24xPE（可比公司Wind一致预期22x，龙头给予溢价），给予公司估值227.2亿元，对应目标价为11.40元。
　　风险提示：产品销售不及预期，产品降价的风险，研发进度不达预期。

On 7 May, Tonghua Dongbao announced the acquisition of exclusive commercialization rights in Chinese mainland and the right to jointly develop overseas markets for the Phase III clinical product ZT001, a semaglutide analog for diabetes, from Beijing QL Biopharm. With this acquisition, the company has now established a comprehensive GLP-1 product mix, including a liraglutide analog, semaglutide analog, GLP-1/GIP, and GLP-1 small molecule. Considering the slight price reduction for the renewed insulin volume-based procurement (VBP), we estimate the company's 2024/2025/2026 attributable NP to be RMB1,167/1,380/1,643mn, and value the stock at 24x 2024E PE, a premium over its Wind consensus-based peers’ average of 23x given its leading position in the industry, for our target price of RMB14.08 (previous: RMB15.73).