BOC International: Maintain Rongchang Biotech's (09995) “Buy” rating and adjust the target price to HK$128

The Zhitong Finance App learned that BOC International released a research report stating that maintaining the “buy” rating of Rongchang Biotech (09995), drastically raising the 2026 foreign license revenue forecast, raising the 2026 revenue forecast, and lowering the 2027-28 revenue forecast mainly reflects the latest pace of confirmation of revenue from external licensing transactions, as well as adjustments to product sales forecasts based on 1-3Q results. Since the profit margin of the foreign licensing business was significantly higher than product sales, the increase in revenue forecasts in this sector directly led to a significant improvement in overall profit expectations. The target price was adjusted to HK$128 based on the DCF model, implying a potential increase of 97%. A rich catalyst is expected to drive valuation restoration in the short term.

The main views of BOC International are as follows:

3Q26 product sales accelerated, and profits continued in a single quarter

3Q26 achieved revenue of 910 million yuan (RMB, same below), +46% year over year, and its commercial sales revenue in mainland China was 810 million yuan, +33% year over year. By product: 1) Taitaxip 3Q26's sales revenue was 550 million yuan, +45% year over year, mainly due to the continued stabilization of SLE's competitive advantage, and the rapid expansion of new patients and sales scale after approval in the Shenfu/GmG field. The future growth momentum comes from: a) The new indications for IgA nephropathy and Sjörg syndrome were approved in June, opening up new growth space, and GMG indications continued to penetrate the target market; b) The product was included in the new version of the basic drug catalogue, which is expected to further expand the coverage of primary hospitals in the future. 2) Verdicitol 3Q26's sales revenue was 270 million yuan, +13% year over year; its first-line urothelial cancer indications in combination with treprilizumab were approved in April, and the results and dosage progress of subsequent health insurance negotiations are worth paying attention to. By the end of 3Q26, the commercial team size of tetracip and verdicitol was about 900/500 people respectively. From the end of the year to the beginning of next year, the team allocation in the nephrology field of taitacip will be increased. In the first three quarters, the gross margin of commercial sales in mainland China was 83.6%, which was basically the same; benefiting from the scale effect brought about by product volume, the commercial sales cost rate in mainland China was -7.7 ppts to 40.5% year over year; R&D expenses were -22% year over year, mainly due to a decrease in clinical expenses related to the product after overseas licensing. The 3Q26 company withheld net profit of 74 million yuan, and the basic business continued to achieve profit in a single quarter after 2Q. The management anticipates that the overall operation of 4Q26 will continue to be good, and is confident of achieving the goal of a break-even base business throughout the year.

Global development of core pipelines enters the harvest period in 2027

1H27 is expected to usher in three major readings: titacipr GMG global phase III data (led by partner Vor Bio, plans to submit BLA in 4Q27), titacipril OMG mainland China phase III data, and verdicitol combined with K drug 1LUC global phase III data (led by partner Pfizer, then declared for BLA). The first case of RC1481LNSCLC is about to be enrolled in Phase III of the Global Phase III. In 2027, it is expected that phase II data reading and phase II research in combination with AbbVie ADC will be realized. The company also plans to promote the application of a variety of dual-antibody ADCs, triple-antibody ADCs, dual-load ADCs, and new TCE molecules into clinical practice in 2027.