Investment Rating - The report maintains a "Neutral" rating for the company with a target price adjusted to HKD 5.06 [3][5][16]. Core Views - The company is expected to face continued pressure on its performance in the short term, primarily due to a decline in the revenue of its pharmaceutical segment, which has resulted in a year-on-year revenue drop of 4.9% to RMB 22.686 billion for the first three quarters [1][2]. - The decline in revenue is attributed to several factors, including a 14.5% quarter-on-quarter decrease in the pharmaceutical segment's revenue, impacted by price controls and increased competition [1][2]. - The company has increased its R&D spending, leading to a rise in the R&D expense ratio by 2.1 percentage points [1]. Summary by Sections Financial Performance - For the first three quarters, the company's revenue decreased by 4.9% to RMB 22.686 billion, and net profit attributable to shareholders fell by 15.9% to RMB 3.78 billion [1]. - The third quarter saw a significant decline in revenue and net profit, with year-on-year drops of 17.8% and 51.5%, respectively [1]. - The pharmaceutical segment, which has the highest gross margin, experienced a revenue decline, leading to a 3.1 percentage point drop in gross margin for the third quarter [1]. Revenue Forecast - The revenue forecast for the pharmaceutical business remains unchanged, with an expected year-on-year decline of 7.0% in 2024, followed by a gradual recovery in 2025-2026 [2]. - New drug approvals are anticipated to partially offset the impact of price reductions, but significant revenue recovery is not expected in the short term due to market competition and price controls [2]. Adjustments to Projections - Revenue projections for raw materials and functional foods have been slightly lowered, with 2024-2026 revenue estimates adjusted down by 1.0%, 1.6%, and 1.6%, respectively [3]. - R&D expense forecasts for 2024-2026 have been increased by 7.8% to 11.5%, while net profit estimates for the same period have been reduced by 3.7%, 4.8%, and 2.2% [3].
石药集团：预计短期内业绩仍将承压