Guosen Securities has released a research report revising down its profit forecasts for WEIGAO GROUP (01066) for 2026 and 2027, while introducing a new forecast for 2028. The firm now anticipates revenues of 14.092 billion yuan, 15.005 billion yuan, and 15.963 billion yuan for 2026-2028, respectively, representing year-on-year growth rates of 5.3%, 6.5%, and 6.4%. Net profit attributable to shareholders is projected to be 1.676 billion yuan, 1.804 billion yuan, and 1.953 billion yuan for the same period, with growth rates of 4.0%, 7.6%, and 8.3%. The current stock price implies forward price-to-earnings ratios of 10x, 9x, and 8x for 2026, 2027, and 2028. Guosen Securities affirmed that Weigao has established multi-dimensional competitive barriers, including brand image, quality control, economies of scale, and cost advantages, and thus maintains an "Outperform" rating on the stock. The key points from the report are as follows.

In 2025, the company achieved revenue of 13.389 billion yuan, a year-on-year increase of 2.3%. Net profit attributable to shareholders was 1.612 billion yuan, a decrease of 22.0% year-on-year. After excluding the impact of special items and exchange gains/losses, the adjusted net profit declined by 19.9% year-on-year. The profit contraction was primarily attributed to price reductions for products in the generic medical device segment and increased investment in building out the sales system. The total dividend payout for 2025 was approximately 714 million yuan, representing a payout ratio of 50% of the operational net profit.

Profitability was pressured in the generic consumables segment due to the impact of volume-based procurement initiatives. The company is actively cultivating new growth drivers. Revenue from the medical device business reached approximately 6.365 billion yuan in 2025, a slight increase of 1.1%. Key products, such as high-end infusion sets and indwelling needles, experienced significant price declines following the implementation of volume-based procurement in several provinces and cities. Furthermore, sales expenses increased due to efforts to establish an overseas sales network and deepen the domestic distribution network. Revenue from the pharmaceutical packaging business was about 2.288 billion yuan, up 0.4% year-on-year. Domestic selling prices for pre-filled syringes remained stable, with volume growth in the single digits. Sales and profits in this segment were negatively impacted by substantial price reductions for pre-filled flushing syringes due to procurement policies. The orthopedics business generated revenue of 1.523 billion yuan, an increase of 5.8%. While the shift to a distributor model for traditional consumables affected reported revenue growth, profitability in this segment showed a significant recovery. The interventional business reported revenue of 2.218 billion yuan, up 1.0% year-on-year, with single-digit growth in Asia, Europe, the Middle East, and Africa. The company is promoting an asset swap involving Weigao Pulead and Weigao Blood Purification, which is expected to add new business segments such as blood purification and upstream biopharmaceuticals. Weigao is aligning with industry trends toward specialized, active, and intelligent consumables, aiming to build comprehensive medical device solutions. It is also establishing deep partnerships with local overseas enterprises to quickly develop a replicable international expansion model.

Both gross and net profit margins declined in 2025. The gross profit margin was 47.6%, down 2.7 percentage points year-on-year, mainly due to price pressures from procurement policies affecting generic consumables and pharmaceutical packaging. The sales expense ratio was 18.1%, up 0.2 percentage points, while the administrative expense ratio was 10.3%, an increase of 0.4 percentage points. R&D expenditure reached 647 million yuan, maintaining a ratio of 4.8% of revenue. The financial expense ratio was 1.9%, unchanged from the previous year. The net profit margin decreased to 12.8%, down 3.7 percentage points year-on-year. Net cash flow from operating activities was 2.551 billion yuan, with the cash content of net profit attributable to shareholders exceeding 150%, indicating a continuation of healthy cash flow levels.

The report highlights several risk factors, including potential further price reductions from volume-based procurement, underperformance in pharmaceutical packaging orders, and slower-than-expected expansion of new business ventures.