Yunnan Baiyao Group Co.,Ltd

Follow-up report based on an on-site management visit argues that solid fundamentals and a high dividend yield make Yunnan Baiyao increasingly attractive, with EPS forecasts of RMB 3.12, 3.37, and 3.61 for 2026–2028 and a target price of RMB 68.64 based on a 22x 2026 PE multiple. It highlights expansion in health products and pharmaceuticals plus an innovation and M&A pipeline, while flagging intensifying out-of-hospital TCM competition and potentially slower-than-expected consumption recovery as key risks.

This note reviews expected 2025 results (RMB 41.19 billion in revenue with RMB 5.15 billion net profit) and forecasts Q1 2026 revenue of RMB 11.60 billion, emphasizing improving gross and net margins, strong operating cash flow, and generous cash dividends totaling RMB 4.64 billion for 2025. It maintains a “Buy” rating with a RMB 62.4 target price based on a 20x 2026 PE and warns that weaker sales of core products, slower new-product development, and cost fluctuations are key downside risks.

The report highlights that first-three-quarters 2025 revenue reached RMB 30.654 billion with net income of RMB 4.777 billion, underpinned by 8.48% year-on-year growth in industrial revenue and robust sales of core pharmaceutical products and health-care items. It discusses the acquisition of Juyaotang to complement the TCM pipeline, ongoing nuclear-medicine and innovative-drug R&D, a RMB 1.82 billion special dividend, and provides net income forecasts of RMB 5.198/5.665/6.185 billion for 2025–2027 with a “buy” rating, while citing fair-value changes, new-product promotion risk, and raw-material price increases as key concerns.

This Chinese-language Q3 2025 review notes that year-to-date revenue rose 2.47% with 10.41% growth in net profit, driven by 8.48% industrial revenue growth and strong performance from core Yunnan Baiyao TCM products and other branded medicines, improving overall gross margin. It details secondary innovation across 16 major TCM varieties, multiple innovative and nuclear-medicine projects (INR101 and INR102), maintains a “recommend” rating with forecasts for rising revenue and net profit through 2027, and outlines risks including weaker downstream demand, underperforming sales, slower R&D and production progress, rising raw-material costs, and aggressive centralized-procurement price cuts.

This quarterly review highlights that 2025 year-to-date revenue and net profit grew roughly 2% and 10% respectively, with industrial revenue of RMB 11.582 billion up 8% year-on-year and strong growth from the Baiyao pharmaceutical series, health products (particularly toothpaste), and stable TCM resources income. It underscores healthy operating indicators, ongoing short-, medium-, and long-term R&D across core products and nuclear-medicine projects, maintains an “Overweight”/“gain” rating with a RMB 71.85 target price at 22x 2026 PE, and flags weaker consumption and a tougher pharmaceutical operating environment as key risks.

The semi-annual review describes how H1 2025 revenue of RMB 21.257 billion and net income of RMB 3.633 billion (up 3.92% and 13.93% year-on-year) demonstrate resilient growth and reinforce the brand value of Yunnan Baiyao as a leading TCM player, with industrial revenue share rising and gross margin expanding. It highlights strong growth in the pharmaceutical and health-products business groups, solid performance in TCM resources and provincial pharma operations, high dividend payout (special dividend equal to about 50% of H1 net income), maintains an “Overweight” rating with a RMB 67.85 target price at 23x 2025 PE, and warns that intensified industry competition and weaker-than-expected product sales are the main risks.