Jefferies Lifts CSPC Target to HKD7.2, Keeps 'Underperform' on VBP Risk

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·Mar 26 2026, 07:50

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Key Takeaways

Jefferies reiterated its bearish stance on CSPC Pharmaceutical Group, highlighting significant operational headwinds despite a minor adjustment to its price forecast. The firm's analysis points to systemic risks that overshadow management's optimistic growth projections for the upcoming year.

'Underperform' Rating Maintained: Jefferies kept its negative rating on CSPC, signaling continued concerns about the company's performance after a 10% annual revenue decline.
Price Target Raised to HKD7.2: The target price was increased from a previous HKD5.9, though this was not enough to shift the overall negative outlook.
VBP Risks Persist: The primary concern is the ongoing threat from Volume-Based Procurement (VBP), which Jefferies expects to continue pressuring CSPC's earnings throughout the year.

Jefferies Lifts Target to HKD7.2 But Sees Persistent Weakness

Jefferies raised its price target for CSPC Pharmaceutical Group (01093.HK) to HKD7.2 from HKD5.9 but maintained its 'Underperform' rating on the stock. The decision follows a challenging year for the drugmaker, which saw its annual revenue fall 10% year-over-year, missing expectations. While CSPC's management guided for a return to positive growth in its finished drug business this year, Jefferies' analysis suggests that significant hurdles remain.

Volume-Based Procurement Threatens Future Earnings

The core of Jefferies' bearish thesis is the persistent risk from China's Volume-Based Procurement (VBP) program, which aggressively lowers drug prices. The investment bank stated that these adverse factors are expected to continue throughout the current year. Specific market concerns center on the potential inclusion of key products, like Irinotecan Hydrochloride Liposome Injection, into the national VBP list, which would directly compress the company's profit margins and revenue streams.

Market Bets on Prepayments Increase Disappointment Risk

Looking ahead, Jefferies noted that while Business Development (BD) initiatives are crucial for long-term growth, the market's current focus presents a different kind of risk. Investors are increasingly betting on stock price appreciation driven by expectations of upfront payments from BD deals. As these expectations become more elevated, Jefferies warns that the "risk of disappointment is increasing," creating a fragile setup for the stock price if future deals do not materialize as hoped.