CITIC Securities: Mainland pharmaceutical industry has not turned the corner but is optimistic, SINOPHARM (01099) is the top choice.

Citi Research released a research report stating that although the leading pharmaceutical distributors in China have not yet seen a turnaround in their mid-term performance in the first half of 2025, the structural optimism for this industry is mainly due to several factors, including: 1) the possibility of loosening mainland medical insurance spending; 2) optimization of volume-based procurement, mainly due to potential measures to prevent the internal competition in the medical industry; 3) strengthening of the cash direct payment capability of medical insurance funds; 4) the domestic interest rate reduction cycle will assist distributors in improving their financial leverage. Citi Research raised the target price of SINOPHARM (01099) by 22.5%, from HK$20 to HK$24.5. The target price of H shares of Shanghai Pharmaceuticals Holding (02607) was raised by 15.4%, from HK$12.3 to HK$14.2. However, the target price of CHINARES PHARMA (03320) was lowered by 5.1%, from HK$5.9 to HK$5.6. The "outperform" rating is maintained for the above-mentioned companies. SINOPHARM is the top pick.