Key takeaway

The company released its 2025 annual report and 1Q26 report. In 2025, insulin analogue product sales volume grew significantly, combined with product mix optimization and new product ramp? up, driving domestic sales revenue growth。 In 1Q26 the core business maintained steady growth, while earnings quality improved substantially. The company continued to advance overseas registrations, achieving notable results in 2025; multiple R&D pipelines made positive progress. In 2026 the company will accelerate the expansion of insulin analogue volumes and product mix upgrades, and promote the commercialization partnership for insulin degludec/aspart and insulin degludec. We expect steady growth in full? year performance. The company continues to advance registration filings for key products and strengthen international registration and overseas commercialization capabilities. Subsequent progress is worth expecting.

Event

The company released the 2025 annual report: Returning to profitability

On April 20, the company released its 2025 annual report, achieving: 1) operating revenue of RMB2.947bn, up 46.66% YoY; 2) net profit attributable to shareholders of the parent company of RMB1.219bn (2024: -RMB42mn, turning from loss to profit); 3) net profit attributable to shareholders of the parent company excluding non? recurring items of RMB375mn (2024: - RMB43mn, turning from loss to profit); 4) basic earnings per share of RMB0.62/share.

Profit distribution plan: A cash dividend of RMB3.00 (tax included) will be distributed for every 10 shares to all shareholders, totaling RMB587mn in cash dividends.

The company released the 1Q26 report

On April 29, the company released its 1Q26 report, achieving: 1) operating revenue of RMB748mn, up 14.76% YoY; 2) net profit attributable to shareholders of the parent company of RMB127mn, up 16.15% YoY; 3) net profit attributable to shareholders of the parent company excluding non? recurring items of RMB127mn, up 15.72% YoY; 4) basic earnings per share of RMB0.06/share.

Quick Take

Insulin analogue volume expansion drives performance growth, achieving a turnaround to profitability In 2025 the company’s revenue grew rapidly YoY, mainly due to: 1) significant growth in sales volume of insulin analogue products, driving domestic sales revenue growth; 2) before the implementation of the insulin centralized procurement renewal in the same period of 2024, commercial distributors controlled and adjusted inventory, reducing shipments and creating a low base. The profit side achieved a turnaround mainly due to revenue growth, investment income generated from the transfer of shares in AMOYTOP, and the relatively large loss recognized in the same period last year following the termination of certain R&D projects. In 1Q26, the company’s core business continued to maintain steady growth. Gross margin increased YoY, while both the selling expense ratio and administrative expense ratio declined YoY, leading to a substantial improvement in earnings quality.

Continuous progress in insulin market access and expansion: Product mix optimization and new product ramp-up support growth. In the insulin product market, the company seized the development opportunity from winning the Class A bid in the new round of centralized procurement. It rapidly promoted hospital access for its insulin product portfolio, while focusing on breakthroughs in retail terminals and previously untapped regional markets, and actively expanding incremental opportunities outside the centralized procurement scope. The company continues to optimize its product mix. In 2025, full-year sales volume of insulin analogs increased by more than 100% YoY, and revenue from insulin analog preparations surpassed that of human insulin. Other new products, such as liraglutide injection, empagliflozin tablets, and sitagliptin phosphate tablets, have also gradually ramped up in volume. Together with insulin products, they form a structured product portfolio that supports performance growth and empowers primary healthcare institutions. In 1Q26, revenue from the domestic market increased by nearly 20% YoY. Sales volume of insulin analogs maintained rapid growth, among which insulin aspart sales volume increased by more than 46% YoY. Revenue from insulin analog preparations accounted for more than 55% of total insulin preparation revenue. Sales volume of liraglutide injection increased by about 60% YoY in 1Q26.

Active advancement of internationalization strategy: Significant progress in overseas registrations. Under its internationalization strategy, the company accelerated overseas registration for multiple insulin products. In 2025, overseas revenue reached RMB203mn, up 97.16% YoY, maintaining a rapid growth trend. For insulin analogs, the company’s insulin aspart BLA in the United States has been accepted by the FDA, and its MAA in the European Union has been accepted by the EMA. The product has also been approved for launch in Indonesia and the Dominican Republic. Insulin glargine has been approved for launch in Myanmar. Human insulin products have been approved for launch in Uzbekistan and Nicaragua, and the company has obtained a GMP certificate in Malaysia. The human insulin API has received an approval letter from Pakistan’s DRAP. For GLP-1 products, liraglutide injection was approved for marketing in Peru, obtained GMP certificates in Colombia and Brazil, and has undergone an on-site GMP audit in Egypt.

Proactive expansion of innovative product pipeline, product portfolio continues to be enriched. The company is actively building innovative pipelines around the diabetes field. In 2025 and 1Q26, several core R&D pipelines, such as semaglutide (THDB0225 injection), insulin degludec/liraglutide injection, and GLP-1/GIP dualtarget receptor agonist (THDBH120 for injection), made important progress. In addition to diabetes, the company’s R&D pipeline has extended to the gout/hyperuricemia treatment field. Phase IIa clinical trial results of the XO/URAT1 dual-target inhibitor (THDBH151 tablets) met the primary endpoint, and the gout oral chemical drug etoricoxib tablets obtained marketing approval in Jan 2025. In Feb 2026, the company signed a Commercialization Cooperation Agreement with Huisheng Biotech, obtaining exclusive commercialization rights in mainland China for its insulin degludec/insulin aspart injection and insulin degludec injection. The two products form synergistic complementarity with the company's existing products, further enriching the product portfolio and are expected to cultivate new growth drivers for the company.

Operating net cash flow maintained growth in 2025 and 1Q26, results of expense control continued to be released

In 2025, the company’s overall gross margin was 70.33%, down 3.57pcts YoY; among which biological products (APIs and finished formulations) recorded a gross margin of 72.84%, down 4.26pcts YoY, mainly due to lower average selling prices after the centralized procurement of human insulin injections and insulin analogs. In 2025, the company’s selling expense was RMB1.108bn (+3.74% YoY), with a selling expense ratio of 37.60% ( - 15.55pcts); R&D expense was RMB167mn (+68.29% YoY), with an R&D expense ratio of 5.67% (+0.73pct); administrative expense was RMB181mn (-0.95% YoY), with an administrative expense ratio of 6.14% (-2.95pcts); financial expense was RMB19mn (+200.39% YoY), with a financial expense ratio of 0.64% (+0.33pct). The decline in the selling expense ratio was mainly due to relatively small YoY changes in expenses while revenue grew rapidly; the decline in the administrative expense ratio was mainly due to a YoY decrease in depreciation and maintenance expenses. In 2025, the company’s net operating cash flow reached RMB689mn, up 49.08% YoY, mainly due to increased cash received from the sale of goods and the provision of services.

In 1Q26, the company’s overall gross margin was 71.62%, up 2.30pcts YoY, mainly driven by product mix optimization. In 1Q26, the company’s selling expense was RMB273mn (+8.63% YoY), with a selling expense ratio of 36.56% (-2.06pcts); R&D expense was RMB36mn (-4.83% YoY), with an R&D expense ratio of 4.79% (-0.99pct); administrative expense was RMB64mn (-5.39% YoY), with an administrative expense ratio of 8.56% (-1.82pcts); financial expense was RMB3mn (-33.90% YoY), with a financial expense ratio of 0.38% (-0.28pct). All expense ratios declined, and the results of expense control continued to materialize. In 1Q26, the company’s net operating cash flow was RMB263mn, up 165.54% YoY, and operating quality continued to improve.

2026 outlook: Favor steady earnings growth of the leading insulin company and expect new progress in innovative R&D and internationalization

As a domestic leader in second? generation and third? generation insulin, the company has consolidated its fundamentals after winning the Class A bid in the renewal of centralized procurement, with considerable incremental potential in retail terminals and untapped markets, while product mix optimization and the rampup of new products are expected to drive continued growth in the domestic business. Overseas registrations are progressing steadily and are expected to open up a second growth curve. Innovative R&D continues to advance, providing ample momentum for the company’s medium? to long? term growth. Looking ahead to 2026, as the renewed centralized procurement agreement volumes are steadily executed, the company will accelerate volume expansion of insulin analogs and product mix upgrades, while advancing the commercia lization cooperation of insulin degludec/insulin aspart and insulin degludec, and we expect steady earnings growth throughout the year. The company will continue to advance the registration filings of key products such as semaglutide and ultra? rapid? acting insulin, while further strengthening international registration and overseas commercialization capabilities. Subsequent progress is worth anticipating.

Earnings forecast and investment rating

We expect the company’s operating revenue to reach RMB3.308bn, RMB3.650bn, and RMB3.963bn in 2026– 2028, representing YoY growth of 12.3%, 10.3%, and 8.6%, respectively. Net profit attributable to shareholders of the parent company is projected to be RMB567mn, RMB656mn, and RMB746mn, respectively. Net profit in 2026 is expected to decline 53.5% YoY, mainly because the transfer of equity in AMOYTOP generated investment income of RMB1.099bn in 2025, resulting in a high base for net profit; excluding this impact, operating performance is expected to maintain a growth trend. Net profit attributable to shareholders of the parent company is expected to grow 15.8% and 13.6% YoY in 2027–2028. EPS is projected to be RMB0.29/share, RMB0.34/share, and RMB0.38/share, corresponding to PE of 31.2X, 27.0X, and 23.8X, respectively. We initiate coverage with a “Buy” rating.

Risks

1. Risk of price cuts from centralized procurement: The execution period of the renewed insulin centralized procurement bidding extends to the end of 2027. If a new round of centralized procurement is launched or renewal terms change, product prices may face further downward pressure.

2. Risk of R&D progress falling short of expectations: Innovative drug development has long cycles and high investment. Clinical failure or slower-than-expected progress may occur, affecting the medium- to long-term value of the pipeline.

3. Risk of intensified market competition: New hypoglycemic drugs such as GLP-1 may compete with and substitute for insulin in the market, potentially affecting the company’s product market share.

4. Risk of overseas expansion falling short of expectations: The progress of overseas registration approvals is affected by regulatory policies in different countries and involves uncertainties. If approval, launch, or commercialization progress falls short of expectations, subsequent performance may be affected.

5. Risk of performance falling short of expectations: If product sales fall short of expectations or prices decline, net profit attributable to shareholders of the parent company for 2026–2028 may decrease from the current forecasts of RMB567mn, RMB656mn, and RMB746mn to RMB471mn, RMB552mn, and RMB638mn.