In the third quarter of 2026, Sinopharm Group’s revenue fell 0.4% year on year, though the decline narrowed from the second quarter; profit rose 3.7% year on year. Goldman Sachs raised its earnings forecasts while maintaining a Neutral rating.
Original source：Goldman SachsFirst published on Unhidea：Original source date：
Key takeaway
Despite policy pressure on pharmaceutical and medical device distribution, Sinopharm Group achieved profit growth through a relatively stable gross margin and cost controls, but cash flow management and long-term growth continue to constrain Goldman Sachs’s rating assessment.
Where did third-quarter operations improve?
Sinopharm Group’s third-quarter 2026 revenue was RMB 143.8 billion, down 0.4% year on year, though the decline narrowed from the second quarter. It also exceeded Goldman Sachs’s previous forecast of RMB 141.6 billion. On that basis, Goldman Sachs believes the quarter’s operating trends stabilized.
Policy continued to pressure pharmaceutical and medical device distribution, and revenue had yet to return to year-on-year growth. However, the third-quarter gross margin was 6.8%, broadly in line with 6.9% a year earlier.
Why did profit grow despite a slight decline in revenue?
Third-quarter profit was RMB 1.9 billion, up 3.7% year on year, with the growth rate exceeding Goldman Sachs’s previous forecast of 0.6%.
Cost control was the main support: selling, general and administrative expenses fell 3.1% year on year, while finance costs as a share of revenue declined from 0.22% a year earlier to 0.15%.
Accounts receivable turnover days shortened year on year and were broadly in line with the second quarter. However, Goldman Sachs believes distributors have weaker bargaining power than pharmaceutical companies and hospitals, and the company continues to face pressure in managing cash flow and optimizing its debt levels.
Why did Goldman Sachs raise its forecasts while maintaining a Neutral rating?
After incorporating the third-quarter results, Goldman Sachs raised its net profit forecasts for 2026, 2027 and 2028 by 1.8%, 1.6% and 1.3%, respectively, and slightly raised its 12-month price target from HK$18.46 to HK$18.79.
Goldman Sachs considers the adjustments modest and maintained its Neutral rating: the company’s share price is at the lower end of its five-year average valuation range, and the bank believes this valuation already fairly fully reflects its growth prospects.
The medical device distribution network could become a driver of long-term growth, but Goldman Sachs expects it may take several years for the business to develop into a core source of earnings. An expansion of volume-based procurement could pressure margins; deterioration in working capital turnover or tighter financing conditions would also add pressure.
