Key Takeaways:
Citi Research cut its price target for Luye Pharma (02186.HK) by 14% to $4.3 from $5, citing a more severe than expected impact from price cuts on the company's mature products.
"The impact of price cuts on mature products of Luye Pharma was more severe than expected," Citi Research said in a note. The bank reiterated its "Buy" rating on the stock.
The research house lowered its revenue and net profit forecasts for the 2026-2027 period. The following table summarizes the change in Citi's price target.
Despite the lowered short-term forecasts, Citi pointed to a significant long-term earnings improvement. Luye's management guided for a net profit compound annual growth rate (CAGR) of over 25% from 2026 to 2030, driven by growth from new products in China and accelerated sales of its drug Erozfi in the US.
Luye's management expects sales of Erozfi in the United States to double to $40 million in 2026, reaching a break-even point for the drug. This, combined with continued growth from new products launched in China, underpins the company's optimistic long-term profit guidance.
The target price reduction from a major institution like Citi could put negative pressure on Luye Pharma's stock in the near term as investors adjust to the reduced growth expectations for its legacy products. However, the reiterated "Buy" rating suggests Citi sees significant long-term value, which may temper any potential sell-off.
This article is for informational purposes only and does not constitute investment advice.
