Our target price of HK$185 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 2035E; we assume a terminal growth rate of 4.0%, a WACC of 9.6%, with  a beta of 1.2.

Although our quant model rates Akeso High Risk, we do not apply a High Risk rating as the company has achieved significant revenue (Rmb2.1bn in 2024) and has established a robust pipeline.

Key risk factors include: 1) lack of profitability historically and in forecast periods; 2) cadonilimab sales worse than expectation; 3) clinical failure of ivonescimab in 1L NSCLC; 4) regulatory risks; and 5) fiercer-than-expected competition. These risks could prevent the stock from reaching our TP.