CICC has issued a research report stating that SINOPHARM (SEHK: 01099) recorded revenue of RMB 427.613 billion for the first three quarters of 2026, down 0.90% year-on-year, with net profit attributable to shareholders of RMB 5.314 billion, up 0.13% year-on-year, in line with the firm's expectations.
The firm maintains its net profit forecasts for 2026 and 2027 at RMB 7.527 billion and RMB 7.918 billion respectively, and retains its "Outperform" rating and HK$21.25 target price. This target price corresponds to forecast price-to-earnings ratios of 7.6 times for 2026 and 7.0 times for 2027, implying approximately 33.40% upside from the current share price.
Key observations from CICC are as follows:
Net profit increased year-on-year in the third quarter. In the third quarter of 2026, the company achieved revenue of RMB 144.814 billion, down 0.43% year-on-year and up 1.96% quarter-on-quarter. Net profit attributable to shareholders was RMB 1.910 billion, up 3.74% year-on-year and down 4.02% quarter-on-quarter. The firm believes that the company is poised to solidify its leading industry position by advancing a differentiated, region-specific business development strategy and accelerating the optimization and adjustment of its business structure.
Guoda Drugstore's net profit saw significant year-on-year growth in the first three quarters. In the retail segment, subsidiary Guoda Drugstore reported revenue of RMB 15.234 billion for the first three quarters of 2026, up 0.05% year-on-year, and net profit of RMB 27 million, up 105.08% year-on-year. In the medical devices segment, subsidiary China National Medical Devices achieved revenue of RMB 55.262 billion for the first three quarters of 2026, up 1.04% year-on-year, while operating profit was RMB 856 million, down 11.07% year-on-year. The firm believes that Guoda Drugstore's sales revenue is gradually stabilizing, and that the company is expected to enhance its operational quality through continuous product mix optimization, strategic adjustments to store layouts, and further strengthening of expense controls.
Both gross margin and expense ratios declined year-on-year. In the first three quarters of 2026, the company's gross margin was 7.0%, down 0.3 percentage points year-on-year; the selling expense ratio was 2.6%, down 0.1 percentage points year-on-year; the administrative expense ratio was 1.1%, down 0.03 percentage points year-on-year; and the financial expense ratio was 0.3%, down 0.1 percentage points year-on-year. In the third quarter of 2026, the company's gross margin was 7.5%, flat year-on-year. The firm believes that the company is expected to achieve cost control and efficiency improvements in the future through refined management and digital empowerment.
Risk factors include pressure from centralized drug procurement and lower-than-expected growth in the retail and medical device distribution businesses.
Comments