Our target price of HK$114 is based on a discounted cash flow (DCF) approach. We consider DCF as an appropriate method for an R&D-driven company currently without profit. Our DCF analysis factors in our revenue and earnings forecasts out to 2036E; we assume a terminal growth rate of 2% and a WACC of 9.0%, with a beta of 1.1.

We rate Ascentage Pharma shares as High Risk given the stock’s short trading history and the following risk factors. Key downside risks to our target price include: 1) lack of profitability historically and in immediate forecast periods; 2) limited operating history and challenges in moving to revenue generation; 3) risk of R&D failure; 4) challenges in patient enrollment; and 5) regulatory risks.