How did third-quarter results compare with expectations?

  • Lao Bai Xing reported third-quarter 2026 revenue of 5.653 billion yuan, up 7% year on year, and net profit of 171 million yuan, up 31% year on year. Both results were broadly in line with Goldman Sachs’ expectations.
  • Revenue was below Goldman Sachs’ earlier forecast of 5.977 billion yuan, while net profit was close to its forecast of 174 million yuan.

Which earnings forecasts did Goldman Sachs adjust?

  • Following the third-quarter results, Goldman Sachs fine-tuned its model, lowering its 2026 revenue forecast from 23.906 billion yuan to 23.678 billion yuan and its net profit forecast from 657 million yuan to 650 million yuan, reductions of 1.0% and 1.1%, respectively.
  • The bank also lowered its net profit forecasts for 2027 and 2028 by approximately 1% each, to 684 million yuan and 709 million yuan, respectively. Goldman Sachs considers these adjustments immaterial, and its investment thesis, rating and price target remain unchanged.

Why has industry consolidation not changed the Neutral assessment?

  • Goldman Sachs expects the pharmaceutical and healthcare products market to grow steadily and industry leaders to outperform through expansion by mergers and acquisitions and growth in sales of innovative drugs and non-drug products. As policy encourages acquisitions and industry consolidation accelerates, companies with stronger balance sheets and integration capabilities are better positioned to gain share.
  • Compared with its major peers, Lao Bai Xing faces tighter funding conditions and has historically relied more on franchising than mergers and acquisitions for store growth. Goldman Sachs therefore considers its expansion capacity and financial flexibility relatively weak, with limited upside to the current share price.
  • Goldman Sachs forecasts a compound annual growth rate of approximately 15% in the company’s earnings from 2023 to 2028 and maintains its Neutral rating and 12-month price target of 17 yuan. Improvements in financial conditions, execution of mergers and acquisitions, and policy updates on non-drug sales are catalysts the bank is watching for 2026.