Zheshang Securities: 2026H1 API Industry Continues to Divide to Eliminate Production Capacity, Structural Adjustment, and Optimization and Upgrade

The Zhitong Finance App learned that Zhishang Securities released a research report saying that the 2026H1 API industry continues to differentiate: traditional commodities are facing clear production capacity and pressure on profits, and specialty APIs are booming and resilient on the high-end complex molecular circuit. In the specialty APIs sector, the bank suggests selecting targets with high flexibility and strong growth attributes from multiple dimensions such as industrial upgrading, capacity release & new product layout; in the bulk APIs sector, focus on production capacity clearance progress and price inflection points, and lay out leading companies with leading cost curves and steady cash flow on the left.

The main views of Zheshang Securities are as follows:

Growth capacity: quarterly fluctuations, revenue recovery

The overall growth rate of the main API companies in 2026H1 was corrected. The revenue growth rate reached 3.8% year on year (-8.2% in 2025H1), and revenue recovered. Net profit to mother fell 10.7% year on year (-17.6% in 2025H1), and the decline narrowed, thanks to the recovery in downstream demand for some products, stabilized prices, and the second growth curve.

Profitability: Overall pressure, internal segmentation

The gross margin and net margin of major API companies declined by 1.9 pct and 1.6 pct, respectively, in 2026h1 (excluding extreme values for sample companies). The average gross margin and net margin for a single quarter in 26q2 fell 3.3 pct and 2.6 pct, respectively. The decline in gross margin was mainly affected by rising costs of upstream chemical raw materials, low prices of some APIs, and exchange rates; the decline in net interest rates was further dragged down by exchange losses.

Quality of operations: Cash flow improved, fixed asset turnover continued to decline

The 2026H1 API sector's operating cash flow has improved dramatically. The net operating cash flow is significantly higher than the net profit to mother, and most companies have achieved positive cash flow; the fixed asset turnover ratio of the sector continues to decline, mainly due to the introduction of new production capacity in the early stages, and production capacity is still climbing. Looking ahead, fixed asset turnover is expected to improve as downstream demand recovers, order delivery, and capacity utilization rises.

Capital expenditure: reducing intensity and then verifying production capacity

The total absolute value of capital expenditure of major API companies in 2026H1 was 2.76 billion yuan (YOY -25%). The 2026H1 Shenwan API sector's capital expense/depreciation amortization fell from 1.06 in 2025H1 to 0.89. This also shows that the industry is undergoing a process of capacity removal, structural adjustment, and optimization and upgrading. The new investment is concentrated in the direction of high barriers such as CDMO/peptides.

Risk warning: Risk of product volume and price recovery falling short of expectations due to increased competition; production safety accidents and quality risks; risk of exchange rate fluctuations, etc.