Yuanta Securities: Maintains a "buy" rating on Shanghai Fosun Pharmaceutical (02196), with a target price of HKD 26.5.

Yuanta Securities released a research report stating that Shanghai Fosun Pharmaceutical (02196) is expected to achieve a net profit of 3.32 billion yuan, 3.96 billion yuan, and 4.77 billion yuan in 2025-2027, with year-on-year growth rates of +19.9%, +19.4%, and +20.4%, respectively. The corresponding EPS are 1.2 yuan, 1.5 yuan, and 1.8 yuan, with H-share PE ratios of 17X/14X/12X. Although the increase in short-term research and development expenses affects net profit performance, in the long term, the continuous drive of innovative drugs will boost performance growth, BD transactions will reshape pipeline value, and equity incentive performance appraisal will guarantee performance growth rate. The company maintains a "buy" investment rating for A/H shares with a target price of 26.5 Hong Kong dollars. Key points of Yuanta Securities include: Company Performance: The company achieved revenue of 29.39 billion yuan in the first three quarters of 2025, with a net profit attributable to the parent company of 2.52 billion yuan, up 25.5% year-on-year, and a non-GAAP net profit attributable to the parent company of 1.57 billion yuan. In Q3, the company achieved revenue of 9.88 billion yuan, with a net profit attributable to the parent company of 820 million yuan, up 4.5% year-on-year, and a non-GAAP net profit attributable to the parent company of 610 million yuan, up 5.2% year-on-year. Overall revenue affected by centralized procurement, while innovative products continue to grow rapidly: The company had a slight negative growth in revenue in the first three quarters of 2025 and in Q3, mainly due to the impact of centralized procurement of generic drugs and some local centralized procurement, but revenue from innovative drugs maintained rapid growth, exceeding 6.7 billion yuan in the first three quarters, an increase of 18.1% year-on-year. In Q3, the company continued to launch innovative products, with the innovative small molecule CDK4/6 inhibitor Pilnuo gaining approval for a new indication in China, HLX14 Daratumumab Injection being successively approved for listing in the United States and the European Union in September, and FKC889 Brigit press injection has also been filed for listing in China, receiving acceptance from the National Medical Products Administration in September. The company believes that with the continuous launch of its innovative drug products, revenue growth will be driven. Q3 gross margin slightly increased, with a significant increase in research and development expenses year-on-year: The comprehensive gross margin for Q3 was 48.4%, up 0.3 percentage points year-on-year, mainly driven by the increased proportion of high-margin innovative drug products. The expense ratio for Q3 was 44.1%, up 1.4 percentage points year-on-year, with the sales expense ratio down 1.4 percentage points, the management expense ratio up 0.2 percentage points, the financial expense ratio down 0.8 percentage points year-on-year, and the research and development expense ratio significantly increased by 2.7 percentage points, with an increase of 220 million yuan year-on-year. This was mainly due to the company's increased investment in innovative platforms, including nuclear medicine and cell therapy, as well as the global multicenter clinical trials of high-value pipelines such as HLX22 and HLX43. Risk factors: The progress and sales of new product research and development may not meet expectations, drug centralized procurement and national price negotiation may exceed expectations, and there is a risk of impairment of goodwill.