Zhejiang Merchants Securities: Upgrades YILING PHARMACEUTICAL to "Buy" rating, with future performance expected to continue improving

Zhejiang Merchants Securities research report pointed out that YILING PHARMACEUTICAL achieved a net profit attributable to the parent company of 1 billion yuan in the first three quarters, with a net profit of 332 million yuan in Q3, slightly exceeding expectations, and the research and development of traditional Chinese medicine is progressing smoothly. The operating performance in the first three quarters of 2025 is expected to show a good recovery growth, and we are optimistic about steady progress for the whole year. Looking ahead to 2026, benefiting from the decline in the prices of traditional Chinese medicinal materials, the recovery of gross profit margins for respiratory series products, and continuous quality improvement and efficiency enhancement, we expect the company's gross profit margin to continue to rise, driving the net profit growth rate to consistently exceed the revenue growth rate. Considering that the company's channel inventory has basically returned to normal levels, and with the recovery of profit margins, future performance is expected to continue to improve. Coupled with the company's unique patent drug research and development guided by the theory of collateral diseases and its academic marketing promotion model, we assign a 23x PE for 2026 and upgrade to a "Buy" rating