Key takeaway

The company released its 1H26 report. In 1H26, intensified competition in the blood products industry, product price adjustments, and an adjustment to the value-added tax rate for biological products led to YoY declines in both revenue and profit, while gross margin came under YoY pressure. The company continued to lead the domestic market in both the number of plasma collection stations and plasma collection volume. Plasma collection reached 1,453 tonnes in 1H26, up 6.8% YoY. In terms of capacity, the Yunnan and Lanzhou projects have passed completion acceptance, and going forward, new capacity is expected to come online gradually. In R&D, subcutaneous human immunoglobulin was approved for marketing, making it the first domestically developed product of its kind. Recombinant factor VIII gained approval for an additional pediatric indication and two new specifications, while the pipeline under development continued to expand. As product prices stabilize, plasma collection station efficiency improves, and new products ramp up, the company is expected to maintain steady operations.

Event

The company released its 1H26 report, with earnings under short-term pressure

On August 29, the company released its 2026 interim report, reporting for 1H26: 1) operating revenue of RMB2.595bn, down 16.56% YoY; 2) net profit attributable to shareholders of the parent company of RMB299mn, down 52.75% YoY; 3) net profit attributable to shareholders of the parent company after excluding non-recurring items of RMB285mn, down 53.91% YoY; 4) basic EPS of RMB0.15.

The company’s profit distribution plan for 1H26 is to distribute a cash dividend of RMB1 per 10 shares to all shareholders, based on total share capital of 1.977bn shares, for a total dividend of RMB198mn, inclusive of tax.

Quick Take

Revenue and profit declined YoY, mainly due to lower product prices and the VAT rate adjustment

In 2Q26, the company recorded operating revenue of RMB1.454bn, down 18.91% YoY. The net profit attributable to shareholders of the parent company was RMB173mn, down 55.45% YoY. The net profit attributable to shareholders of the parent company after deducting non-recurring profit or loss was RMB171mn, down 54.74% YoY. The company’s revenue came under pressure in 1H26, mainly because: 1) Industry competition intensified due to factors including medical insurance cost controls and payment reform, driving a downward trend in product selling prices. 2) The company adjusted product prices in 2025 as appropriate, and product prices in 1H26 remained at the 4Q25 level. 3) The VAT rate adjustment for biological products created further headwinds. Profit declined more sharply than revenue, mainly because costs and expenses were relatively rigid. Price adjustments and the VAT rate adjustment caused the gross margin to decline YoY, while all expense ratios increased YoY.

By product, revenue from human albumin was RMB1.007bn in 1H26, down 25.11%, with a gross margin of 29.10%, down 11.92 pcts. Revenue from intravenous human immunoglobulin, including chromatography products, was RMB1.287bn, down 9.81%, with a gross margin of 41.67%, down 8.15 pcts. Revenue from other plasma-derived products was RMB291mn, down 11.28%, with a gross margin of 33.36%, down 9.93 pcts. Revenue and gross margin across all product lines came under varying degrees of pressure, with human albumin recording relatively larger declines in both revenue and gross margin.

Advantages in plasma collection station resources continued to strengthen, with plasma collection volume maintaining steady growth. The company has an industry-leading number of plasma collection stations and plasma collection scale. As of the end of 1H26, it had 107 plasma collection stations, including 85 in operation. Plasma collection volume reached 1,453 metric tons in 1H26, up 6.8% YoY, and continued to account for approximately 20% of the domestic industry’s total collection volume. In plasma source management, the company continued to optimize its management structure. It dissolved the former Plasma Source Management Center and established six regional plasma source management divisions, bringing guidance and services closer to frontline plasma collection stations. Meanwhile, the company strengthened oversight of plasma collection stations, advanced centralized testing at these stations, and conducted regular interlaboratory proficiency comparisons to comprehensively improve their quality management.

Capacity expansion and international deployment advanced steadily. In terms of capacity expansion, the company is constructing three major plasma-derived product manufacturing bases in Yong’an, Yunnan, and Lanzhou, each with a designed capacity of 1,200 metric tons. It is also building a recombinant coagulation factor production workshop with a capacity of 1.3bn IU at the Yong’an base. As of the end of 1H26, the Yunnan project had completed final acceptance, on-site registration inspection, and on-site GMP inspection; the Lanzhou project had completed final acceptance and continued to conduct process validation and pharmaceutical research; the Guizhou project had completed the topping-out of the main structure, secondary structural work, and general site work for its warehousing center, where installation work was underway. As the Yunnan and Lanzhou projects gradually commence production, the Company's designed plasma processing capacity will exceed 5,000 metric tons. In international markets, the Company steadily expanded the overseas presence of its new products. In 1H26, it generated export sales of chromatography-purified intravenous human immunoglobulin, human tetanus immunoglobulin, and other products; completed the marketing filing for PCC (300 IU, 15 ml/vial) in Macao, China; and obtained marketing licenses for intra venous human immunoglobulin in Türkiye (5 g/vial, 10%, 50 ml) and Hong Kong, China (two specifications: 5 g/vial, 10%, 50 ml and 2.5 g/vial, 5%, 50 ml). The Company now holds more than 10 overseas marketing licenses in total.

China's first subcutaneous human immunoglobulin approved for marketing, with the R&D pipeline continuing to expand. The Company achieved several milestones in its R&D activities in 1H26: Chengdu Rongsheng's subcutaneous human immunoglobulin injection was approved for marketing in June 2026, making it the first such product in China and playing a leading role in upgrading China's human immunoglobulin products; the marketed recombinant coagulation factor VIII product completed clinical trials and passed the onsite clinical inspection for its additional indication in children, while new specifications of 250 IU/vial and 500 IU/vial were added to better meet different clinical needs; and Tiantan Guizhou's marketing application for PCC was accepted. In addition, clinical studies progressed smoothly for Chengdu Rongsheng's recombinant human coagulation factor VIII-Fc fusion protein for injection, chromatography-purified intravenous human immunoglobulin for the treatment of CIDP, and other products, further strengthening the product pipeline.

Gross margin under YoY pressure, expense ratios increased, and operating cash flow improved significantly

In 1H26, the company's overall gross margin was 35.99%, down 9.40 pcts YoY, mainly due to lower product selling prices and adjustments to the value-added tax rate. Selling expense was RMB53mn (-12.99%), with the selling expense ratio at 2.02% (+0.08 pct); administrative expense was RMB244mn (+4.71%), with the administrative expense ratio at 9.40% (+1.91 pcts); R&D expense was RMB72mn (+26.31%), with the R&D expense ratio at 2.77% (+0.94 pct); financing expense was RMB0.6513mn, with the financing expense ratio at 0.03% (+0.05 pct). Administrative expense declined slightly YoY after excluding compensation from an external company in the same period last year; the increase in R&D expense was mainly due to an increase in expensed projects as project development progressed. In 1H26, the company's net operating cash flow was RMB289mn, up 243.31% YoY, mainly because the company discounted notes in advance when discount rates were relatively low to meet dividend funding needs, facilitate internal fund allocation, and prepare for future funding needs, resulting in a YoY increase in the amount of notes discounted. In addition, the company plans to distribute total dividends of RMB198mn, including tax, demonstrating management's proactive commitment to shareholder returns.

2H26 outlook: Focus on price stabilization and new product ramp-up, with long-term growth potential intact

In 1H26, the company's results came under short-term pressure due to intensified industry competition, product price adjustments, and changes to value-added tax policies, but the company maintained its domestic leadership in the number of plasma collection stations, plasma collection volume, production capacity, and breadth of product portfolio. In 2H26, the company's operations are expected to improve at the margin as product prices gradually stabilize, operating efficiency improves following adjustments to its source plasma management structure, new production capacity in Yunnan and Lanzhou gradually comes online, and new products such as subcutaneous immunoglobulin and recombinant factor VIII ramp up. Over the medium to long term, the company has established a diversified R&D pipeline focused on new products such as highconcentration human immunoglobulin, plasma-derived coagulation factors, recombinant coagulation factors, and microprotein preparations. It is also conducting process optimization and indication expansion studies for intravenous immunoglobulin while steadily expanding into overseas markets, which is expected to create room for long-term growth.

Earnings forecast and investment rating

We forecast the company’s revenue at RMB5.578bn, RMB6.248bn, and RMB7.110bn for 2026 –2028, respectively, representing an expected YoY decline of 9.6% in 2026 and YoY growth of 12.0% and 13.8% in 2027 and 2028, respectively. Net profit attributable to shareholders of the parent company is forecast at RMB776mn, RMB970mn, and RMB1.223bn, respectively; it is expected to decline by 28.8% YoY in 2026 and grow by 24.9% and 26.1% YoY in 2027 and 2028, respectively. EPS is forecast at RMB0.39, RMB0.49, and RMB0.62 per share, respectively, corresponding to PE multiples of 31.1x, 24.9x, and 19.7x; we maintain “Buy” rating.

Risks

1. Blood product safety issues and regulatory risks for plasma stations: In theory, blood products may still contain certain unknown pathogens that cannot be identified and removed, and the resulting safety issues may adversely affect the company’s operations. Continuously standardized operation of plasma stations is one of the key factors in the overall operation of blood product companies, and changes in regulatory policies for plasma companies may have a certain impact on the company.

2. Slower-than-expected growth in plasma station construction and plasma collection volume: The expansion of the company's product supply primarily depends on increasing the number of plasma stations and improving collection volume per station. If future growth in plasma station construction and collection volume falls short of expectations, it may impact the company's anticipated future performance and profitability levels.

3. New product R&D and launch progress falling short of expectations: The biopharmaceutical industry is innovation-driven and characterized by long development cycles, substantial investment, and high risks. The company currently has multiple products under development, and their R&D progress may fall short of expectations or their regulatory approval and market launch may be delayed.

4. Risk of declining gross profit margin: The cost of raw plasma accounts for a significant portion of blood product production costs, and plasma costs are gradually rising as nutritional compensation for plasma donors continues to increase; as raw plasma collection volume grows, competition among blood product manufacturers is intensifying, which may lead to price fluctuations and a decline in the overall gross profit margin of blood products. In addition, the expansion and deepening of volume-based procurement, medical insurance cost controls, reforms to medical insurance payment methods, prescription outflows and regulation of appropriate drug use, stricter compliance requirements and judicial interpretations, and the change in the value -added tax on ordinary blood products from the simplified 3% levy to the general 13% taxation method effective January 1, 2026 may all have a certain impact on the company’s profitability.