Wanlian Securities: Offline pharmacies "clearance integration + refined transformation", profit repair is obvious.

Wanlian Securities released a research report stating that from 2025 to the first quarter of 2026, the revenue and profits of offline pharmacy sector have achieved positive growth. The majority of top offline pharmacy companies have shown a common feature of profit growth rate significantly higher than revenue growth rate. The industry is currently undergoing a deep transformation from "land grabbing" to "refined operation". The overall industry structure presents a "strong-getting-stronger" Matthew effect, where enterprises with refined operation capabilities and fast digital transformation will occupy an advantageous position in future competition. Key points from Wanlian Securities: Market Review In the first four months of 2026, the biopharmaceutical sector saw a 0.12% increase, underperforming the Shanghai and Shenzhen 300 Index by 3.71 percentage points. The offline pharmacy sector rose by 3.81%, outperforming the pharmaceutical industry by 3.69 percentage points. As of April 30, 2026, the PE (TTM) ratio of the offline pharmacy sector was 19.81, with a percentile rank of 16.93% since 2021. Performance Review Overall, from 2025 to the first quarter of 2026, sectors with positive growth in both revenue and profits include other biologics, medical research outsourcing, chemical formulations, other medical services, and hospitals. The year-on-year growth rate of total operating income for the offline pharmacy sector in 2025 and 2026 Q1 was 4.19% and -0.13% respectively, while the year-on-year growth rate of net profit attributable to shareholders was 25.52% and 10.65% respectively. Investment Recommendations On the revenue side, offline pharmacies are increasing revenue through expanding franchise stores and sinking channels to enhance scale effects. On the profit side, they are achieving cost reduction and optimization to improve efficiency and precision in operation. The industry is currently in a phase of accelerating clearance and focusing on developing high-output stores. Benefiting from this, the net profit of the offline pharmacy sector turned from negative to positive in 2025 and 2026 Q1. Currently, the offline pharmacy industry is transitioning from single drug sales in stores to diversification of services, such as adding consumer diagnostic and management services, gradually transforming into a "health full-cycle service station". Risk factors: The risk of unexpected pressure from group procurement and price governance, the risk of online pharmacy disruption, and the risk of merger and integration effects not meeting expectations.