CICC has issued a research report stating that due to pricing pressures on active pharmaceutical ingredients (APIs) and intermediates, it has lowered its net profit forecasts for UNITED LAB (03933) for 2026 and 2027 by 63.5% and 41.5% respectively, to 957 million yuan and 1.756 billion yuan. The current share price corresponds to a price-to-earnings (P/E) ratio of 18.0 times for 2026 and 9.7 times for 2027.
However, considering the potential of the company's innovative drug pipeline and the anticipated catalyst of potential overseas expansion, CICC maintains its Outperform industry rating and target price of HK$16.00. This target price implies P/E ratios of 29.4 times for 2026 and 15.8 times for 2027, suggesting a potential upside of 63.3% from the current share price. The main points from CICC's report are as follows.
The company's 2025 performance fell below CICC's expectations. UNITED LAB reported revenue of 13.21 billion yuan, a year-on-year decrease of 4.0%, and a net profit attributable to shareholders of 2.09 billion yuan, a year-on-year decrease of 21.6%. The decline in revenue and profit was primarily due to the impact of falling market prices and demand adjustments for intermediates and APIs.
The company's innovation transformation reached a milestone, with its GLP-1 portfolio showing leading potential. UBT251 (a GLP-1/GIP/GCG triple agonist) received an advance payment of 1.442 billion yuan from Novo Nordisk in 2025. The partner initiated an overseas Phase Ib/IIa clinical study for overweight/obesity in the first quarter of 2026, with data readout expected in 2027. Furthermore, preclinical data for UBT37034 showed significant weight reduction when combined with a GLP-1 agonist, and the first patient was dosed in its Chinese Phase I trial in March 2026. The company expects to submit clinical trial applications in China and the US for the oral small molecule drug UBT48128 in 2026.
Performance in intermediates and APIs faced short-term pressure, but production capacity maintained high utilization rates. Intermediate revenue for 2025 was 1.612 billion yuan (down 39.4% year-on-year), and API revenue was 4.90 billion yuan (down 23.1% year-on-year). CICC attributes the revenue decline mainly to fluctuations in the selling price and volume of core products affected by changes in market supply and demand. CICC anticipates that 6-APA prices may gradually recover in 2026. The designed capacity for the company's core intermediates (6-APA/Penicillin G Potassium Industrial Salt) reaches 20,500 tons, and the capacity utilization rate remains high at 100%, demonstrating strong production resilience and scale advantages.
The formulations business showed strong performance from the insulin series, with international expansion accelerating. In 2025, the insulin series generated revenue of 1.946 billion yuan, an increase of 57.4% year-on-year. The company's product portfolio continues to enrich, with liraglutide and insulin degludec approved for marketing, and semaglutide under review for production approval. Regarding internationalization, exports of human-use formulations reached 554 million yuan in revenue. In its first year of large-scale overseas expansion, the company's insulin products won a tender from the Brazilian Ministry of Health, setting a record for export volume among similar Chinese products. Additionally, the company has established cooperation with several countries involved in the Belt and Road Initiative.
Risks highlighted include new drug R&D risks, exchange rate fluctuations, intensifying competition, and risks associated with new business expansion.
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