Fangsheng Pharmaceutical reported 1H26 revenue of RMB960mn(+15%YoY),attributable NP of RMB200mn(+17%YoY)and recurring NP of RMB170mn(+23%YoY).In 2Q26,revenue was RMB490mn(+19%YoY),attributable NP was RMB110mn(+35%YoY)and recurring NP was RMB90mn(+25%YoY).The company launched its strategic refocus in 2020,prioritizing innovative traditional Chinese medicine(TCM).We expect the ramp-up of innovative TCM products to drive revenue growth and net margin expansion.Maintain BUY.
Orthopedics grow by 11%;VBP fuels cardiovascular revenue
1)Orthopedics generated revenue of RMB210mn(+11%YoY)in 1H26.We expect Tenghuang Jiangu Tablets to deliver steady revenue growth as pricing stabilizes.Xuanqi Jiangu could achieve rapid full-year revenue growth,supported by broader channel coverage and its inclusion through national reimbursement negotiations,and could develop into amajor product with long-term sales of RMB500mn-1.0bn.2)Cardiovascular and cerebrovascular products generated revenue of RMB410mn(+50%YoY),mainly because ezetimibe and irbesartan/hydrochlorothiazide captured volume-based procurement opportunities and expanded actively into retail pharmacy channels.We expect the segment to maintain rapid revenue growth in 2026.In addition,Yangxue Qufeng was included in the NRDL through national negotiations in 2025 and covered approximately 200 institutions in 1H26.We estimate that the product offers RMB1.0bn of market potential.
Peds&respiratory weakens;flu season could fuel rebound
1)Pediatric products generated revenue of RMB70mn(-17%YoY)in 1H26.Xiao’er Jingxing underperformed due to alower incidence of respiratory diseases.We expect the business to return to full-year growth as respiratory illnesses enter their autumn-winter peak season.Future incremental growth could come from the adult indication(new indications filed in June 2026),and expansion into retail pharmacy and primary-healthcare channels.2)Respiratory products generated revenue of RMB50mn(-20%YoY).Qiangli Pipa Gao—an exclusive product included in both the NRDL and the National Essential Medicines List—remained under pressure due to changes in seasonal disease patterns.The product won atender in the fourth national TCM VBP round in April,with aprice reduction of approximately 11%.As implementation begins across regions in 3Q26 and respiratory illnesses enter their autumn-winter peak season,we expect revenue to recover in 2H26.
Innovative TCM and chemical-drug pipelines advance
We remain positive on the company’s strengthening R&D and innovation capabilities.As of August 2026:1)TCM drugs:an NDA has been submitted for the adult indication of Xiao’er Jingxing.Jianwei Qutong and Zhilong Tongluo are in phase III clinical trials,while Xiangqin Jiere and Ziying are in phase II.More than ten projects,including Sanhua Jiegu Wan,are undergoing CMC or nonclinical development.2)Chemical drugs:among generics,loxoprofen sodium gel patches,bisoprolol/amlodipine tablets and selexipag tablets have been approved.NDAs have been submitted for iguratimod tablets,ezetimibe/atorvastatin calcium tablets and edoxaban tosylate tablets.For innovative drugs,the company signed agreements with China Pharmaceutical University and the Institute of Materia Medica,Chinese Academy of Medical Sciences,to acquire the patent rights for the active pharmaceutical ingredient and formulation project of IMM-H024,a Class 1innovative chemical drug.
Maintain BUY
We maintain our earnings estimates and forecast attributable NP of RMB370mn,RMB440mn and RMB510mn in 2026-28(+19%,+19%and+18%YoY),respectively.We apply 19x 2026E PE(in line with the peer average of 19x)and derive atarget price of RMB15.81(previously RMB16.64,based on 20x 2026E PE and attributable NP of RMB370mn;the reduction mainly reflects lower peer valuations).Maintain BUY.
Risks:weaker-than-expected market promotion,policy risks in the TCM industry.