CHINARES PHARMA(03320.HK)：CHINA’S LARGEST OTC DRUG PRODUCER WITH BRANDS TRACTION

Core Insights - China Resources Pharmaceutical Group (CR Pharmaceutical) is a leading integrated pharmaceutical company in China, ranking among the top three in overall revenue, with a CAGR of 7.5% from 2019 to 2024 [1] Group 1: Business Overview - The company specializes in pharmaceutical manufacturing and commercial distribution of medicines, nutraceutical products, and medical instruments [1] - In 1H25, revenue from TCM and healthcare products accounted for nearly 60% of drug manufacturing revenue, with notable brands like 999 and Dong-E-E-Jiao [1] - The manufacturing business achieved a CAGR of 10.4% from 2022 to 2024, driven by organic growth and M&As [1] Group 2: Mergers and Acquisitions - The company completed the acquisition of CR Jiangzhong in February 2019, holding 43% equity in Jiangzhong Pharmaceutical, enhancing its position in the TCM industry [2] - CR Sanjiu acquired 28% equity in KPC and Tasly in December 2022 and March 2025, respectively, further consolidating its market position [2] - The company entered the blood products sector by acquiring a 29% stake in Boya Bio-Pharmaceutical in November 2021 and completed the acquisition of Nigale Technology in February 2025 [2] Group 3: Distribution Business - In 1H25, the company's distribution revenue reached Rmb110bn, ranking third in the industry [3] - The drug distribution business revenue was Rmb108.3bn, with medical device distribution revenue at Rmb18.0bn, reflecting an 8% YoY increase [3] - Retail business revenue reached Rmb5.5bn in 1H25, showing an 11% YoY growth [3] Group 4: Financial Forecast - The company is forecasted to achieve a net profit of Rmb3.49bn (+4.0% YoY) in 25E, Rmb3.76bn (+7.9% YoY) in 26E, and Rmb4.05bn (+7.7% YoY) in 27E [4] - An 8.7x 26E PE is assigned, implying a market cap of HK$35.3bn, with a 24% upside from the current market cap of HK$28.5bn [4]