According to a research report from Everbright Securities Company Limited, CONSUN PHARMA (01681) is a leading traditional Chinese medicine company focused on nephrology, with steady growth and diversified business expansion, offering high dividend yield and low valuation attributes.

The broker maintains its net profit forecasts attributable to shareholders for 2026-2028 at RMB 1.25 billion, RMB 1.41 billion, and RMB 1.61 billion, representing year-on-year growth of 15.5%, 13.4%, and 13.8%, respectively. The current share price corresponds to PE ratios of 8.3x, 7.3x, and 6.5x. The "Buy" rating is maintained.

The key views from Everbright Securities Company Limited are as follows:

Event

The company released its 2026 interim report, with 26H1 revenue and net profit attributable to shareholders of RMB 1.785 billion and RMB 595 million, respectively, up 13.8% and 19.5% year-on-year. Operating net cash flow was RMB 781 million, up 58.6% year-on-year; basic EPS was RMB 0.71. The results were in line with market expectations. The company plans to declare an interim dividend of HK$0.38 per share, with a dividend payout ratio of 46.2%.

26H1 Revenue Grows Steadily, Profitability Strengthens

In 26H1, the company's profit growth outpaced revenue growth, mainly attributable to improved management efficiency and effective control of total operating costs. The gross margin rose 4.31 percentage points year-on-year to 81.36%, primarily driven by the company's improved supplier management system, enhanced production and operational efficiency, and lower costs of core raw materials. The net margin attributable to shareholders increased 1.59 percentage points year-on-year to 33.36%, further strengthening profitability.

The selling expense ratio declined 1.73 percentage points year-on-year to 31.14%, reflecting notable cost reduction and efficiency gains. The administrative expense ratio rose 2.18 percentage points year-on-year to 13.50%, mainly due to organizational restructuring, talent recruitment, and increased R&D investment. In addition, the income tax rate rose 8.30 percentage points year-on-year to 14.35%, primarily affected by the expiration of the income tax exemption policy for the Horgos plant at the end of 2025 and an increase in withholding tax.

Inventory and Receivables Turnover Stable, Payables Turnover Extended

In 26H1, the company's inventory turnover days were 136.9 days, essentially flat compared to 136.5 days in 2025. Accounts receivable turnover days were 30.2 days in 26H1, essentially flat compared to 32.3 days in 2025. Trade payables and notes payable turnover days were 70.6 days in 26H1, an increase of 20.5 days from 50.1 days in 2025, mainly due to the company's optimization of supplier settlement models and strengthened working capital management.

In 26H1, the company's net cash flow from operating activities was RMB 781 million, up 58.6% year-on-year, related to improved profitability, a higher proportion of customer cash payments, and extended supplier credit terms. The company's operational quality has been consolidated, and supply chain management capabilities have improved.

Renal Business Grows Strongly, Pipeline Projects Advance in an Orderly Manner

By product segment, in 26H1, renal drug revenue grew 18.1% year-on-year, maintaining its leading market position, with revenue growth related to channel expansion and increased market penetration. Women's and children's / hepatobiliary drug revenue grew 9.1% and 233.7% year-on-year, respectively, showing relatively strong performance.

The company continues to advance research and development. Among its pipeline, the Class 1.1 traditional Chinese medicine new drug "Qijian Granules" has been approved for IND. In terms of MRI contrast agents, Gadoteric acid meglumine injection was approved for marketing in August 2026, and Gadoxetic acid disodium injection has been submitted to the CDE for review. SK-08 has completed Phase I clinical trials in China, and SK-09 is undergoing Phase I clinical trials in Australia.

Risk Warnings

Policy risks in the pharmaceutical industry; OTC channel expansion falling short of expectations; intensifying competition risks; and risks of innovative drug R&D failure.