Cinda Securities: Covering Sinopharm Holdings (01099) for the first time, the profit side of the “buy” rating has improved markedly

The Zhitong Finance App learned that Cinda Securities released a research report saying that Sinopharm Holdings (01099)'s inefficient business adjustments are coming to an end, and profits have improved in 2025Q3. Increased industry concentration and innovative business development drive growth. The company's dividend ratio is increasing year by year, and the current valuation is below the historical average. First coverage, giving the company a “buy” investment rating.

The main views of Cinda Securities are as follows:

The 2025Q3 inefficient business adjustments are nearing an end, and the profit side has improved markedly

1) The 2025Q3 sales expense ratio and management expense ratio declined, driving net interest rates to increase by 0.2 percentage points. Net profit growth rate in the 2025Q3 single quarter reached 17%. 2) 2025 is both the final year of the “14th Five-Year Plan” and the base year of the “15th Five-Year Plan”. In 2025, the company focuses on improving quality and efficiency and optimizing the business structure. The bank believes that in 2026, the company may be able to launch lightly, and the profit side may continue to exceed expectations. Furthermore, Sinopharm Group also focuses on promoting high-quality mergers and acquisitions. The “15th Five-Year Plan” may continue to focus on mergers, acquisitions and restructuring of assets to promote the formation of new quality productivity in the biomedical field. 3) The company's dividend ratio has been rising steadily in the past 4 years. The company's dividend ratio gradually increased from 28.1% in 2021 to 30.98% in 2024, with an average annual increase of 0.96 percentage points. Meanwhile, the average dividend rate for the past 5 years was 4.45%. Furthermore, the company's PB valuation is less than 1. Currently, the company's PB valuation is about 0.71 times (lower than the average PB valuation value of 0.81 times in the past 5 years).

Leaders benefit from increased industry concentration and expect the company's innovative business to contribute a second growth point

1) The concentration of the four leading companies in the distribution industry gradually increased from 38.38% in 2019 to 42.69% in 2023, with an average annual increase of 1.08 percentage points. Among them, Sinopharm Holdings's market share reached 20.36% in 2023. In terms of drug distribution, the company's pharmaceutical distribution revenue CAGR was about 7% in 2018-2024, and the drug distribution revenue in 2024 was about 424.6 billion yuan (accounting for 73%). The bank believes that the driving forces for the subsequent growth of pharmaceutical distribution include: 1. Increased concentration in the pharmaceutical distribution industry. 2. The variety structure is adjusted and optimized in the direction of high demand and high value. 3. Comprehensively promote the development of innovative services. In terms of device distribution, the compound growth rate of the company's pharmaceutical device distribution revenue from 2018 to 2024 was about 15.69%, and device distribution revenue in 2024 was about 117.5 billion yuan (accounting for about 20%). From a medium to long-term perspective, the growth drivers of the company's device distribution business include: 1. Increased concentration in the device distribution industry. 2. Growth in SPD business. 3. Growth in innovative businesses such as the equipment industry. 2) In the pharmaceutical retail sector, the company continues to promote the “batch and zero integration” strategy and continuously deepens the dual brand strategy of specialty pharmacies and National University Pharmacies. In 2018-2024, retail revenue CAGR was about 16%. The compound revenue growth rate of major pharmacies in China was 12.52%, while the compound revenue growth rate of specialized pharmacies was about 23.64%. The bank believes that in 2024, the company actively optimizes NU Pharmacies's less profitable stores, and may be expected to see improvements on the profit side of NUS Pharmacies in the future; while specialized pharmacies have been growing rapidly in recent years, and single-store output continues to rise, on the one hand, benefiting from the outflow of prescriptions, and on the other hand, they may have a synergy advantage with the company's distribution business, and the future growth rate is still worth looking forward to.

The “15th Five-Year Plan” is being prepared at the right time. The dividend ratio has increased year by year in the past 4 years, and the current company's PB is less than 1

1) In 2024, Sinopharm Group completed a change in governance. Mr. Bai Zhongquan, Chairman of Sinopharm Group, took office in June 2024, and Mr. Zhao Bingxiang, general manager, took office in April 2024. At the same time, Sinopharm Group's “14th Five-Year Plan” refers to the development strategic goal of the top 100 trillion dollars, and starting in 2025, Sinopharm Group will begin planning the “15th Five-Year Plan” from the top. The bank believes that after 2 years of business optimization and quality and efficiency improvement, Sinopharm Group and even Sinopharm Holdings are expected to advance lightly and move steadily forward during the “15th Five-Year Plan” period. 2) In recent years, the company's dividend ratio has shown a steady upward trend. The company's dividend ratio gradually increased from 28.1% in 2021 to 30.98% in 2024, with an average annual increase of 0.96 percentage points. The company's dividend ratio remained above 4.5% between 2021 and 2023. In 2024, due to declining profits, the 2024 dividend fell to 3.47%. Furthermore, the company's average PB (MRQ) value in the past 5 years was 0.81 times, while the company's PB valuation as of 2025/11/26 was about 0.71 times, which is lower than the average for the past 5 years.

Profit forecast: The bank expects the company's 2025-2027 revenue to be 577.187 billion yuan, 597.835 billion yuan, and 619.325 billion yuan respectively, with year-on-year growth rates of -1%, 4%, and realized net profit to mother of 8.077 billion yuan, 8.751 billion yuan, and 9.522 billion yuan, respectively, up 15%, 8%, and 9% year-on-year respectively, corresponding to the 2025/12/4 stock price PE, which is 7.27 times, 6.71 times, and 6.17 times, respectively.

Risk factors: Untimely collection of accounts receivable, rising financing interest rates, impairment factors exceeding expectations, intensifying market competition, price reduction in collection exceeding expectations, performance of joint ventures falling short of expectations, risk of selecting comparable companies across markets.