"China CITIC Securities: The pharmacy industry is undergoing a transformation and reconstruction by diverting traffic. Optimistic about valuation repair brought by restructuring and mergers and acquisitions."

CITIC Securities released a research report stating that physical pharmacies will be under pressure in 2024 and 2025, but the sales scale will only decrease by 0.5% and 0.6%, indicating that this round of adjustments is more about redistributing traffic. 2026 will be a year of major transformation and adjustments for pharmacies: offline focusing on convenience, consumption, and professionalism, optimizing product structure, carrying out cross-industry operations, with significant effects evident in pilot programs; the online O2O warehouse store model will be implemented, competing with traditional pharmacies. Currently, the valuation of pharmacies is low, mainly due to market concerns about B2C competition, price comparison, medical insurance audits, etc. The bank believes that these factors have more impact on investment sentiment than actual business operations. At present, the dividend yield of many leading pharmacies exceeds 4%, and the long-term profit CAGR is expected to be maintained at over 10%, coupled with adjustments and acquisitions bringing about valuation repair.