Manufacturing Performance: YB's Manufacturing Delivered Revenue of RMB 16.0bn
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Morgan Stanley highlights that Yunnan Baiyao (000538.SZ) reported full-year 2025 revenue of RMB 41.2 billion, up 2.9%, and net profit of RMB 5.153 billion, up 8.5%. These figures fell 3.7% and 1.2% below Morgan Stanley's expectations, respectively. Fourth-quarter revenue reached RMB 10.5 billion, while net profit declined 11.0% to RMB 376 million. Despite the slight miss, the manufacturing segment delivered strong performance with revenue of RMB 16.0 billion, representing 10.7% growth, although its gross margin dipped slightly by 0.7 percentage points.
The pharmaceutical business grew 12.5%, driven by an 18% increase in core products. The Baiyao series sprays and patches both achieved over 20% growth, while oral rehydration salts surged 68%. The company now boasts 10 SKUs generating over RMB 100 million in sales. Additionally, e-commerce GMV skyrocketed 139% to RMB 500 million, positioning O2O channels as a key growth driver for 2026.
The board approved distributing 90% of net profit as dividends, comprising a 35% special dividend and a 55% annual dividend, yielding approximately 4.6%. Management provided conservative 2026 guidance, anticipating low single-digit revenue growth and high single-digit net profit growth. Morgan Stanley maintains an Overweight rating with a target price of RMB 66, offering 16% upside from the current share price of RMB 56.78. The valuation relies on a DCF model assuming an 8.5% cost of equity.