Sinopharm Group’s third-quarter revenue misses expectations, while lower expenses lift profit above forecasts

Where did third-quarter results differ from expectations?

Sinopharm Group’s revenue in the third quarter of 2026 was RMB 144.8 billion, down 0.4% year on year and below the Bloomberg consensus of RMB 152.5 billion. Nomura believes weakness in China’s pharmaceutical distribution business may still be weighing on revenue.
Profit attributable to shareholders for the same period was RMB 1.91 billion, up 3.7% year on year and above the Bloomberg consensus of RMB 1.78 billion, resulting in revenue below expectations and profit above expectations.
For the first three quarters, revenue fell 0.9% year on year to RMB 427.6 billion, while profit attributable to shareholders edged up 0.1% to approximately RMB 5.3 billion.

The third-quarter gross margin was 7.5%, unchanged from a year earlier and above the second quarter’s 6.8%; the operating margin rose 0.1 percentage points year on year to 3.9%.
Selling expenses fell 4.5% year on year to approximately RMB 3.8 billion, while net expenses from other income and expenditure and interest expenses fell 16.7% and 15.5%, respectively, jointly supporting profit growth.
However, gross profit for the first three quarters fell 4.4% year on year, and the gross margin declined from 7.2% a year earlier to 7.0%, indicating that the third-quarter margin improvement was not yet enough to offset the cumulative pressure during the year.

Subsidiary Guoda Pharmacy’s revenue for the first three quarters of 2026 was RMB 15.23 billion, broadly unchanged; medical device distribution revenue was RMB 55.3 billion, up 1.04% year on year. Growth in both businesses was modest.
Management said accounts receivable turnover days were 139 days for the first three quarters, unchanged from a year earlier and down from 145 days in the first half of 2026.
Nomura lists price cuts under centralized procurement of pharmaceuticals and medical devices, an increase in accounts receivable turnover days and a rising financial burden as downside risks to its target price.

Citing low valuation and a dividend yield of approximately 5%, Nomura maintains its Buy rating and HK$24.23 target price; the report lists a closing price of HK$15.34 on 23 October 2026.
Based on Nomura’s forecast fully diluted earnings per share of RMB 2.89 for fiscal 2026, the report lists a forward price-to-earnings ratio of 5.3 times. The target price uses a discounted cash flow model, with a weighted average cost of capital assumption of 10.1% and a perpetual growth rate of 2.0%.