Daiwa: Downgrade rating on Chinese Traditional Medicine (00570.HK) to "reduce" with a target price of 1.6 Hong Kong dollars.

According to the Wisdom Finance APP, Morgan Stanley released a research report stating that it is expected that the stock price of China Traditional Chinese Medicine (00570.HK) will decline in the next 30 days, as the company recently issued a profit warning. It is forecasted that the net profit for the first half of 2025 is expected to decrease by 165 to 175% year-on-year. The main reasons include the continued shrinkage of the traditional Chinese medicine formula granule business due to price reductions and increased competition from centralized procurement, as well as an increase in goodwill impairment provisions for related assets. Taking only the first factor into account, net profit has decreased by 50% to 60% year-on-year, far below market consensus. Considering that the centralized procurement process is only halfway completed, the bank believes that the related pressure will continue to exist, posing further downside risks to the 2026 earnings forecast; target price is 1.6 Hong Kong dollars, with a "reduce" rating.