Guoyi Securities released a research report projecting that Fosun Pharma (02196) will achieve net profits of RMB3.32 billion, RMB3.96 billion, and RMB4.77 billion in 2025-2027, representing year-on-year growth of 19.9%, 19.4%, and 20.4%, respectively. EPS is estimated at RMB1.2, RMB1.5, and RMB1.8, with corresponding H-share P/E ratios of 17X, 14X, and 12X. While short-term R&D expenses may impact net profit performance, the long-term outlook remains positive, driven by sustained growth in innovative drugs, BD transactions reshaping pipeline value, and equity incentive performance targets. The firm maintains a "Buy" rating for both A and H shares, with a target price of HK$26.5.

Key highlights from Guoyi Securities' analysis include:

**Company Performance**: For the first three quarters of 2025, Fosun Pharma reported revenue of RMB29.39 billion and net profit attributable to shareholders of RMB2.52 billion, up 25.5% YoY. Adjusted net profit stood at RMB1.57 billion. In Q3 alone, revenue reached RMB9.88 billion, with net profit attributable to shareholders at RMB820 million (+4.5% YoY) and adjusted net profit at RMB610 million (+5.2% YoY).

**Impact of Volume-Based Procurement and Growth in Innovative Products**: Revenue in the first three quarters and Q3 saw slight declines, primarily due to generic drugs being affected by volume-based procurement renewals and regional tenders. However, innovative drug revenue exceeded RMB6.7 billion in the first nine months, growing 18.1% YoY.

In Q3, Fosun Pharma continued advancing its innovative product pipeline. The small-molecule CDK4/6 inhibitor Futanib secured a new indication approval in China, while HLX14 (Denosumab Injection) gained approvals in the U.S. and EU. FKC889 (Bridging CAR-T Injection) also submitted an application for domestic market approval, which was accepted by China’s NMPA in September. The firm believes these new product launches will drive revenue recovery.

**Margin and R&D Expenses**: Q3 gross margin rose slightly to 48.4%, up 0.3 percentage points YoY, supported by higher-margin innovative products. The operating expense ratio increased to 44.1% (+1.4 percentage points YoY), with R&D expenses surging by RMB220 million YoY, reflecting investments in nuclear medicine, cell therapy platforms, and global multicenter trials for high-value pipelines like HLX22 and HLX43.

**Risk Factors**: Potential risks include slower-than-expected R&D progress or commercialization of new products, deeper-than-anticipated price cuts from volume-based procurement and national negotiations, and goodwill impairment.