CICC: Maintaining SINOPHARM (01099) outperform industry rating with a target price of HK$24.7

CICC released a research report stating that it maintains its net profit forecast for SINOPHARM (01099) in 2025/2026 at 7.475 billion/7.926 billion RMB, with year-on-year growth of 6.0%/6.0% respectively. The current stock price corresponds to a 7.4 times and 6.9 times price-to-earnings ratio for 2025/2026. The firm maintains an outperform industry rating and a target price of HK$24.7, corresponding to a 9.4 times/8.8 times price-to-earnings ratio for 2025/2026, with an upside potential of 27.1%. Key points from CICC: Performance in the first three quarters of 2025 meets expectations The company announced its performance for the first three quarters of 2025: operating income of 431.5 billion RMB, down 2.5% year-on-year; net profit attributable to the parent company was 5.3 billion RMB, up 0.5% year-on-year, meeting the firm's expectations. Steady development in net profit for the third quarter of 2025 In the third quarter of 2025, the company's revenue was 145.4 billion RMB, down 1.5% year-on-year, up 0.7% quarter-on-quarter; net profit attributable to the parent company for the third quarter was 1.841 billion RMB, up 16.9% year-on-year, down 8.3% quarter-on-quarter. The firm believes that the company's operating situation is stable, and in the past two years, the company has further solidified the quality of its main business. Improvement in net profit for Guo Da Pharmacy Retail sector: In the first three quarters of 2025, subsidiary Guo Da Pharmacy's revenue was 15.226 billion RMB, down 7.14% year-on-year; net profit was 0.13 billion RMB, up 133.91% year-on-year, mainly due to the company optimizing its procurement system and improving store output. The firm expects the retail sector to further streamline internally this year, with profitability expected to continue improving. Equipment sector: Subsidiary China Medical Equipment's revenue in the first three quarters of 2025 was 54.693 billion RMB, down 2.41% year-on-year; operating profit was 0.962 billion RMB, down 10.34% year-on-year, mainly due to factors such as the impact of hospital prescription volume on the equipment business. Further optimization of the sales expense ratio In the first three quarters of 2025, the company's gross profit margin was 7.2%, down 0.2 percentage points year-on-year; sales expense ratio was 2.7%, down 0.1 percentage point year-on-year; management expense ratio was 1.1%, down 0.1 percentage point year-on-year, and financial expense ratio was 0.4%, roughly flat year-on-year. In the third quarter, the company's gross profit margin was 7.5%, remaining flat year-on-year. The firm expects the company to continue to maintain stable expenses this year. Risk warning: Pressure from centralized drug procurement, growth in retail and medical equipment businesses may not meet expectations.