Where did third-quarter results fall short?
- In the third quarter of 2026, Hualan Biological Engineering reported revenue of 1.016 billion yuan, down 36% year on year, and net profit of 47 million yuan, down 82% year on year. Both fell short of Goldman Sachs' previous forecasts of 1.344 billion yuan and 237 million yuan, respectively.
- The year-on-year decline in blood products revenue narrowed from 12.6% in the first half of 2026 to 9.1% in the third quarter. Vaccine revenue, however, fell 65.6% year on year in the third quarter, missing Goldman Sachs' expectations.
Why are vaccine revenue and profitability under pressure?
- The company stopped selling quadrivalent flu vaccines this year, and Goldman Sachs had already expected the average selling price of vaccines to decline. Management said the company's extensive participation in rural inclusive vaccination programs caused the average selling price to fall further than expected, weighing on revenue and profitability.
- Goldman Sachs expects this price trend to continue into the fourth quarter and for several years thereafter, and has therefore adjusted its earnings model.
How has Goldman Sachs adjusted its forecasts and valuation?
- Goldman Sachs cut its 2026 revenue forecast by 9.5%, from 3.878 billion yuan to 3.508 billion yuan, and its net profit forecast by 25.9%, from 819 million yuan to 607 million yuan. The cut to its profit forecast was substantially larger than the cut to its revenue forecast.
- The bank also cut its net profit forecasts for 2027 and 2028 by 22.4% and 22.3%, respectively, to 692 million yuan and 746 million yuan.
- Goldman Sachs rolled its valuation basis forward from its 2026 forecasts to its 2027 forecasts and lowered its 12-month target price from 13 yuan to 12 yuan, maintaining its neutral rating. The bank believes both of the company's core businesses face pressure and that its current valuation is broadly reasonable.