Morgan Stanley lowers WEIGAO GROUP (01066) target price to 5.2 Hong Kong dollars and cuts profit forecasts.

Morgan Stanley released a research report stating that WEIGAO GROUP's revenue forecast for the years 2026 to 2028 has been adjusted upwards by 4% each to reflect annual growth of approximately 4% to 5%, which is at the lower end of management's latest guidance. However, the bank has lowered its gross margin assumptions for WEIGAO GROUP for the years 2026 to 2030 to reflect sustained pricing pressure and the impact of centralized procurement on general consumables, and has made minor adjustments to operating expense ratios in line with trends. The bank has factored in WEIGAO's full-year performance for 2025 and has reduced its earnings per share forecasts for 2026 to 2028 by 14.7%, 13.8%, and 14.2% respectively. Calculated using an updated RMB to HKD exchange rate of 1.14, the target price has been lowered from HK$6 to HK$5.2, with a "market perform" rating maintained. The bank believes that WEIGAO GROUP has a presence in multiple fields of medical technology in China, including general consumables, orthopedics, pharmaceutical packaging, interventional products, and blood management. It has one of the most efficient sales and distribution networks in the industry and serves as a strong platform for launching new products. However, recent growth has been affected by price reductions and industry sales below average, as well as headwinds from continued DRG and centralized procurement policies. The "market perform" rating reflects the bank's view that the valuation of WEIGAO GROUP is supported by stable growth and dividend yield.