CMB International: Yao Ming Kangde (02359) removed from the 1260H list to reduce geopolitical risks

The Zhitong Finance App learned that CMB International released a research report stating that it will maintain the “buy” rating of Yao Ming Kangde (603259.SH) A shares and a target price of 190 yuan. Yao Ming Kangde (02359) was removed by the US Department of Defense from the “Chinese military enterprises” list under 1260H. The bank believes that it is completely reasonable to remove it from the 1260H list based on the business attributes of Pharmaceutical and Kangde, which is expected to further reduce the interference of geopolitical risks with the company's operations. However, the US Department of Defense also stated that it does not rule out the possibility of re-listing the company in the future based on other new or additional reasons.

CMB International pointed out that the 1260H list is a list of Chinese companies routinely updated by the US Department of Defense. The companies included will not be able to sign, renew, or extend procurement contracts with the US Department of Defense, and upstream and downstream partners or financial investors in the supply chain may also reduce or interrupt cooperation. However, businesses can seek removal through administrative or legal action. The bank believes that Yao Ming Kangde's removal this time is another case of a Chinese company defending its legitimate interests through legal channels.

The bank said that Sino-US pharmaceutical business cooperation still faces potential policy disruptions, including the BINSA draft, which is currently in the US Congress legislative process, and the US Treasury's request for comments to include biotechnology in the scope of the COINS Act supervision.

CMB International predicts that after the US Democratic Party regains control of the Senate and House of Representatives, it is likely that it will not relax its control over sensitive technology over China, but the relevant policy measures may place more emphasis on clear rules and proper procedures, so normal pharmaceutical commercial cooperation is expected to gain more rational policy space.