UBS issued a research report adjusting its forecasts for SH PHARMA (02607). The bank raised its 2025 EPS estimate by 7% to reflect one-time gains from the SHPL merger but lowered 2026/27 EPS projections by 11% and 10%, respectively, citing slower commercial business growth, higher impairment losses, and increased minority interests. Rolling the valuation base forward by one year, UBS lifted the H-share target price from HK$14.5 to HK$15, retaining a "Buy" rating.

SH PHARMA reported revenue of RMB 215.1 billion in the first three quarters, up 2.6% year-on-year, with net profit attributable to shareholders rising 27% to RMB 5.15 billion. However, recurring net profit fell 26.8% to RMB 2.7 billion. Excluding one-off items, net profit declined 1.9% to RMB 3.98 billion. Third-quarter revenue grew 4.7%, but net profit and recurring net profit dropped 38.1% and 38.9%, respectively, missing market expectations. The weak performance was mainly due to higher asset/credit impairment losses (RMB 379 million and RMB 201 million in Q3 versus RMB 28 million and RMB 139 million a year earlier).

Management emphasized continued focus on transforming its industrial and commercial segments in 2025—prioritizing innovative drugs and traditional Chinese medicine (TCM) in the former and CSO and innovative drug services in the latter. UBS expects key TCM products and the SHPL merger to drive industrial revenue growth in 2025, with the commercial segment outpacing industry peers.