UBS: China's pharmaceutical stocks had mixed results in the first half of the year, with SIMCERE PHARMA (02096) as the top pick.

UBS released a research report stating that the performance of Chinese pharmaceutical stocks in the first half of the year was mixed. Among the nine rated pharmaceutical companies, five outperformed market expectations, namely HANSOH PHARMA (03692), SIMCERE PHARMA (02096), SBP GROUP (01177), CSPC PHARMA (01093), and Sichuan Kelun Pharmaceutical (002422.SZ). UNITED LAB (03933) performed roughly in line with expectations, while 3SBIO (01530) and Huadong Medicine (000963.SZ) underperformed expectations, all of which were given "buy" ratings. During this period, the income from business development (BD) partnerships surprised, generally exceeding UBS's expectations. The median revenue and net profit growth for the industry in the first half were 4% and 3%, respectively, and UBS currently predicts that full-year growth can accelerate to 7% and 9%. UBS identified SIMCERE PHARMA as the top pick in the industry, pointing out that SIMCERE PHARMA is the only company to raise its guidance for 2026, adjusting its net profit growth target from 30% to 45% while maintaining a revenue growth target of 30%, and setting a target price of HK$16.6. Management indicated that Sanbexin, Quviviq, and the new cancer drug combination continue to drive product sales growth. A recent collaboration with Roche on preclinical TCE is expected to generate an additional US$75 million in upfront revenue. The bank noted that, based on better-than-expected gross margins in the first half, it raised the target price for HANSOH PHARMA from HK$48.8 to HK$50.8. The target prices for China National Pharmaceutical Group, Stone Pharmaceuticals, UNITED LAB, and 3SBIO are set at HK$7.7, HK$11.8, HK$12.8, and HK$26.4, respectively.