Guoyuan International: Giving Shenwei Pharmaceutical (02877) a target price of HK$10.04 as a “buy” rating

The Zhitong Finance App learned that Guoyuan International released a research report stating that it gave Shenwei Pharmaceutical (02877) a “buy” rating. The target price is HK$10.04, which corresponds to an 8-fold price-earnings ratio in 2026, an increase of 29.4% over the current price. The bank estimates that the company's revenue from 2026 to 2028 will be RMB 2.67 billion, RMB 2.83 billion and RMB 3.16 billion, respectively, and net profit of RMB 890 million, 960 million and RMB 1.09 billion, respectively. As new drugs continue to be marketed, the company's product structure will be optimized. The company's oral products account for 72.4%, and injections account for 27.6%. The product structure is reasonable and the resistance to risk is improved.

Guoyuan International's main views are as follows:

Innovative drug development progresses in an orderly manner

Phase III clinical trials of the two exclusive innovative drugs, Ciluotong capsules and JC capsules, have been completed, and production license applications have been accepted, and production licenses are expected to be obtained in mid-2027. Seluotong capsules are a component traditional Chinese medicine developed with modern innovative technology. It is an innovative traditional Chinese medicine for vascular dementia. According to the bank, vascular dementia is the second most common cause of dementia after Alzheimer's disease. The number of Alzheimer's patients in China exceeded 10 million in 2025, and there are currently no effective treatments. The bank believes that the market space is vast, and Seruotong capsules will be a major variety.

The number of ancient famous recipes approved by the company has reached 7, ranking first in the country. During the year, it was newly approved for Ling Gui Shugan Soup, Erdong Soup, and Peach Red Four Product Soup granules. Three new Class 3.1 drugs were also accepted: Pan-fried Liver Soup, and Angelica Liuhuang Soup. More than 100 classic famous recipes formed a medium- to long-term echelon.

Revenue declined, and the company strengthened fee control

The turnover for the first three quarters of 2026 was RMB 1,731 million, down 28.3% from the same period in 2025. All major product lines experienced significant declines: the turnover of injectable products decreased by 39.2% to 478 million yuan; the turnover of traditional Chinese medicine formula granular products decreased by 30.8% to 503 million yuan; the turnover of other dosage forms decreased by 36.9% to 110 million yuan; and softgels and granule products also decreased by 14.3% and 10.1%, respectively.

Against the backdrop of a 28.5% drop in revenue in the first half of 2026, net profit was 469 million yuan, a decrease of 23.7%. Sales and distribution costs were drastically reduced by 51.8% year-on-year, and administrative expenses were reduced by 15.5%. In 2025, the company achieved net profit of 949 million yuan with a 17% decline in revenue, an increase of 13.1% over the previous year. The bank believes that the company's ability to control expenses has been verified for two consecutive years. As of the end of June 2026, the company's bank balance and cash were RMB 7.538 billion, higher than the current total market value. The ratio of cash to market value was over 130%; the balance ratio was 21.5%.