Where did third-quarter results beat Goldman Sachs' expectations?

  • Zhifei Biological's third-quarter 2026 revenue was 2.515 billion yuan, down 7% year on year but above Goldman Sachs' previous forecast of 2.05 billion yuan.
  • Net profit for the quarter was 125 million yuan, compared with a loss of 743 million yuan in the same period a year earlier; Goldman Sachs had previously forecast a quarterly loss of 230 million yuan.

How does the end of destocking improve profit and cash flow?

  • Goldman Sachs believes the company's destocking phase is largely over. With the clearance of near-expiry vaccines sold on behalf of other manufacturers complete, the company no longer needs to rely primarily on steep price cuts to clear inventory, and its average selling price and gross margin have recovered accordingly.
  • The third-quarter operating margin recovered to 2.9%. Since the fourth quarter of 2024, the first quarter of 2026 had previously been the only positive quarter, at 0.8%.
  • Reversals of some previously recognized impairment charges on receivables and inventory also boosted reported profit; operating cash flow rose 31% year on year. Goldman Sachs believes the worst period of excessive inventory and cash constraints has passed.

How has Goldman Sachs adjusted its full-year forecasts and target price?

  • Goldman Sachs raised its 2026 revenue forecast from 7.891 billion yuan to 8.13 billion yuan and narrowed its net loss forecast from 1.151 billion yuan to 1.023 billion yuan. Despite the improvement in third-quarter profitability, the bank still expects a full-year loss.
  • Goldman Sachs raised its 2027 net profit forecast from 296 million yuan to 324 million yuan and expects net profit of 429 million yuan in 2028. It raised its 12-month target price from 18 yuan to 19 yuan and maintained its buy rating; the valuation uses a 10-year discounted cash flow model.

Which products will drive future growth?

  • Goldman Sachs sees sales potential in vaccines for people over 50 and believes shingles and respiratory syncytial virus (RSV) vaccines will be important drivers of the company's revenue.
  • The bank is watching the launches of the RSV vaccine and the 15-valent pneumococcal conjugate vaccine, as well as progress in introducing new products from multinational pharmaceutical companies. It lists termination of contracts with Merck or GSK, weaker-than-expected performance of key new products, and cash flow problems as the main risks.