Shanghai Pharmaceuticals Earnings: On Track to Meet Our 2024 Target; Shares Fairly Valued

Narrow-moat Shanghai Pharmaceutical Holdings' third-quarter results are on track to meet our 2024 revenue forecast of CNY 277.1 billion, with an expected annual growth rate of 6.5%. Despite mixed segment performances, SPH’s cumulative nine-month revenue accounts for 75.6% of our full-year forecast. Hence, with unchanged assumptions, we keep our fair value estimate unchanged at HKD 11.60 per share. To recap, we think SPH’s near-term medical distribution business’ slowdown is driven by sector regulations. Over the long run, we expect its manufacturing business to recover, as the innovative drug portfolio gradually expands. We view shares as fairly valued.