KYNB

We rate FIBROGEN INC (KYNB) as a Reduce with a composite score of 41.0/100 at a current price of $7.21. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in momentum (64th percentile) and stability (38th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (15th percentile) and quality (25th percentile) tempers our overall conviction. We assign a No Moat rating (26/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: quarterly earnings execution and sector-level competitive dynamics. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is narrowing, which raises the risk of a future downgrade if the trend persists.

FIBROGEN INC holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 41.0/100 places it at rank #3419 in our full 7,333-stock universe. At $50M in market capitalization, FIBROGEN INC is a small-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.

The outlook is moderately positive, with revenue expanding at 8% and favorable momentum (64th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 113% (+70.2pp vs sector) narrow to operating margins of -10179% (-10180.2pp vs sector) and net margins of 1090.6%, yielding a gross-to-net conversion rate of 968%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $7.21, FIBROGEN INC is trading at a premium to fundamental value. Our value factor score of 36/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 0.2x (a 99% discount to the sector median of 22.3x), P/S of 6.4x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Medium uncertainty rating to FIBROGEN INC. The stock presents a balanced risk profile: below-average price stability (38th percentile) and weak quality scores (25th percentile). While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: below-average price stability (38th percentile); weak quality scores (25th percentile); low beta of -3.93 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 38th percentile and quality factor at the 25th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 113% provide a buffer against cost pressures. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate FIBROGEN INC's capital allocation as Poor. Key concerns include low returns on equity (-234.1%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — FIBROGEN INC significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, FIBROGEN INC receives a Reduce rating with a composite score of 41.0/100 (rank #3419 of 7,333). Our quantitative framework assigns a No Moat (26/100, trend: narrowing), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 36/100.

Our analysis does not support a constructive view on FIBROGEN INC at this time. The combination of limited competitive advantages, medium uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.