Goldman Sachs: Lowering the target price of Sinopharm Holdings (01099) to HK$18.46. Second quarter results are in line with expectations

The Zhitong Finance App learned that Goldman Sachs released a research report stating that it lowered the target price of Sinopharm Holdings (01099) from HK$19.07 to HK$18.46, maintaining a “neutral” rating. Based on performance, Sinopharm Holdings' profit forecast for 2026 to 2028 was lowered by 3.2%, 3.2% and 2.8% to reflect slightly greater pressure on gross margin than expected.

According to Goldman Sachs, Sinopharm Holdings' second-quarter sales fell 1.6% year-on-year to 142.4 billion yuan, which is generally in line with expectations. Gross margin during the period was pressured to 7.05%, down from 7.46% in the same period last year, mainly due to the continued promotion of centralized procurement (VBP) of pharmaceuticals and medical devices, medical insurance fee control, and structural price headwinds. However, strict cost control effectively relieved profit pressure. Sales and administrative expenses were reduced by 6% year on year, and financing costs were reduced to 0.44% of sales, driving profit down only 1% year over year to 2 billion yuan, which is in line with Goldman Sachs expectations. Management said that the revenue decline gradually narrowed in May and continued to improve in June and July.

According to the report, Sinopharm Holdings' retail business became an important growth engine. Revenue in the first half of the year increased 8.6% year-on-year, which is significantly superior to the traditional distribution business. Management believes that DTP (Direct to Patient) pharmacies are directly benefiting from two major long-term trends: the outflow of prescriptions and the demand for commercialization of innovative drugs out of hospital in the early stages. Combining upstream distribution capabilities, a national specialty pharmacy network and patient service infrastructure, the company is expected to gain a larger share in the innovative drug value chain, and plans to transform retail pharmacies into comprehensive medical service hubs for chronic disease management, patient follow-up, and digital patient management platforms.

Management said that the company is actively transforming from a traditional distributor to a comprehensive medical service platform to expand high-value-added businesses such as hospital supply chain services (SPD), centralized distribution, third-party logistics, innovative drug commercialization support, and community medical services. Related service revenue recorded double-digit growth in the first half of the year, adding 35 SPD projects and 28 centralized hospital distribution projects during the period.