Tasly Pharmaceutical （600535） Mutual Empowerment of Tasly & CR Sanjiu， Eyeing Innovation

Investment Rating - The investment rating for Tasly Pharmaceutical is maintained at OVERWEIGHT, with a target price of RMB17.30, indicating a potential upside of 25% from the closing price of RMB13.85 as of August 9, 2024 [3][10][30]. Core Insights - The controlling shareholder of Tasly, Tasly Group, plans to transfer 28% of its share capital (approximately 418 million shares) to CR Sanjiu for a total consideration of around RMB6,212 million. This acquisition is expected to enhance CR Sanjiu's industrial chain and leverage Tasly's expertise in traditional Chinese medicine and innovative pharmaceuticals [3][4]. - Tasly is projected to achieve attributable net profits of RMB1.18 billion, RMB1.31 billion, and RMB1.46 billion for the years 2024, 2025, and 2026, respectively, reflecting year-on-year growth rates of 10%, 11%, and 11% [3][4]. - The report anticipates stable business fundamentals for Tasly in 2024, with steady growth in its traditional Chinese medicine segment and a rally in sales volume for chemical drugs driven by the VBP program [5][6]. Summary by Sections Business Overview - Tasly is recognized as a leader in traditional Chinese medicine prescription drugs and has a strong R&D pipeline with 98 products in development. The company has developed blockbuster products such as Danshen and Yangxue Qingnao [4][5]. Financial Projections - Revenue is expected to grow from RMB8,593 million in 2022 to RMB10,506 million by 2026, with net profit projected to increase from a loss of RMB256.51 million in 2022 to RMB1,460 million in 2026 [8][15]. - The earnings per share (EPS) is forecasted to rise from a loss of RMB0.17 in 2022 to RMB0.98 in 2026 [8][15]. R&D and Innovation - Tasly has consistently invested in R&D, with annual expenses ranging from RMB600 million to RMB900 million since 2018, representing an R&D expense ratio of 5-10%. The company has independently developed over 20 novel TCM products, with several projects expected to submit NDAs starting in 2024-2025 [6][4]. Market Position - The acquisition by CR Sanjiu is expected to reshape Tasly's competitive landscape, integrating management systems and potentially adjusting business practices from 2025 onwards [4][5].