CICC has reiterated its 2025/2026 net profit forecasts for SINOPHARM (01099) at RMB 7.475 billion and RMB 7.926 billion, representing year-on-year growth of 6.0% each. The current share price implies 2025/2026 P/E multiples of 7.4x and 6.9x, respectively. The firm maintains an Outperform rating and target price of HK$24.7, corresponding to 2025/2026 P/E ratios of 9.4x and 8.8x, with an upside potential of 27.1%.

Key takeaways from CICC's analysis: 1. **Q1-Q3 2025 Performance In Line with Expectations** SINOPHARM reported Q1-Q3 2025 revenue of RMB 431.5 billion (-2.5% YoY) and net profit attributable to shareholders of RMB 5.3 billion (+0.5% YoY), meeting CICC's projections.

2. **Strong Q3 2025 Earnings Momentum** In Q3 alone, revenue stood at RMB 145.4 billion (-1.5% YoY, +0.7% QoQ), while net profit reached RMB 1.841 billion (+16.9% YoY, -8.3% QoQ). The firm noted stable operations and enhanced core business quality over the past two years.

3. **Retail Segment: Guoda Pharmacy Profit Recovery** Subsidiary Guoda Pharmacy posted Q1-Q3 revenue of RMB 15.226 billion (-7.14% YoY) but saw net profit surge 133.91% YoY to RMB 13 million, driven by procurement optimization and higher per-store productivity. CICC expects further operational streamlining and profit improvement in this segment.

4. **Medical Equipment Segment: Challenges Persist** Subsidiary China Medical Devices recorded Q1-Q3 revenue of RMB 54.693 billion (-2.41% YoY) and operating profit of RMB 962 million (-10.34% YoY), impacted by hospital prescription volumes.

5. **Cost Efficiency Improvements** Q1-Q3 gross margin dipped slightly to 7.2% (-0.2pp YoY), while sales/management expense ratios improved to 2.7% (-0.1pp) and 1.1% (-0.1pp), respectively. Q3 gross margin held steady at 7.5% YoY. CICC anticipates sustained cost control ahead.

**Risks**: Pressure from centralized drug procurement; slower-than-expected growth in retail and medical equipment businesses.