LZYY(SH:603368) China Post Securities·2025-09-30 09:31Investment Rating - The report gives a "Buy" rating for the company, indicating an expected relative increase in stock price of over 20% compared to the benchmark index within the next six months [8][12]. Core Insights - The company is experiencing a phase of performance pressure, with a reported revenue of 10.301 billion yuan for H1 2025, down 3.21% year-on-year, and a net profit of 429 million yuan, down 7.52% [3][4]. - The decline in revenue is attributed to stricter control of drug expenditure in medical institutions and the impact of expanded centralized procurement, leading to reduced sales and profit margins in the wholesale business [3][4]. - The company is implementing employee incentive plans to enhance talent retention and core competitiveness, while also investing in overseas innovative drug companies to diversify its product line [5][7]. Financial Performance - For H1 2025, the gross margin was 11.07%, a decrease of 0.74 percentage points, and the net profit margin was 4.17%, down 0.19 percentage points [4]. - The wholesale segment generated revenue of 805 million yuan, down 4.7%, while the retail segment saw a revenue increase of 3.62% to 1.643 billion yuan [4]. - The company forecasts revenues of 21.133 billion yuan, 22.221 billion yuan, and 23.383 billion yuan for 2025, 2026, and 2027 respectively, with net profits projected at 828 million yuan, 873 million yuan, and 922 million yuan [8][10]. Strategic Initiatives - The establishment of a wholly-owned subsidiary to invest in Suninflam Ltd. aims to enhance the company's capabilities in high-tech innovative drugs and biopharmaceuticals [5][7]. - The company is focusing on optimizing its product structure and improving cost efficiency to mitigate the impact of industry policies and achieve stable growth [4][5].