FY25 net profit missed expectations due to impairment drag, and 1Q26 also missed expectations; Goldman Sachs maintains Neutral on Lepu

Overview

This report is Goldman Sachs' earnings review of Lepu (300003.SZ). The company's FY25 revenue was broadly in line with expectations, but net profit came in below Goldman Sachs forecasts due to higher-than-expected inventory impairment and R&D impairment; 1Q26 revenue and net profit also missed expectations. The report also assesses the clearing of VBP impact, progress in innovative drug pipelines, medical aesthetics, and BCI and other new businesses, and after updating the model, lowers the target price while maintaining Neutral.

Core views

Goldman Sachs' core view is that Lepu's long-term transformation direction remains attractive, especially in medical aesthetics, selected innovative devices, and innovative drug pipelines for obesity and cardiovascular metabolism; however, mature businesses such as medical consumables and generics have limited growth room, innovative drugs still require substantial capital investment, and intensified medical aesthetics competition and new product promotion expenses will pressure future earnings. The current valuation already largely reflects the near-term growth outlook, so Neutral is maintained.

Analysis framework

The report starts with the gap between actual FY25 and 1Q26 results and Goldman Sachs forecasts, breaking down changes in revenue, net profit, impairment, VBP, one-off financial expenses, and expense ratios; it then updates 2026E-2028E forecasts based on management guidance on VBP normalization and core business growth, and re-derives the 12-month target price using a 20-year two-stage DCF.

Methodology notes

• Valuation methodstwo-stage DCF

  20-year two-stage DCF valuation

  The target price of Rmb17 is based on an unchanged 20-year two-stage DCF model, with key assumptions including 10% WACC and a 2% terminal growth rate.

• factorGS Factor Profile

  Growth, Financial Returns, Multiple, and Integrated factor framework

  Goldman Sachs' factor framework compares individual stocks with the covered market and industry peers through growth, financial returns, valuation multiples, and integrated indicators.

• riskM&A Rank

  M&A probability score

  Goldman Sachs uses an M&A Rank from 1 to 3 across its global coverage to assess the likelihood of a company becoming an acquisition target; this framework is a disclosure methodology, and the report does not indicate that it directly affects Lepu's target price in this case.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Lepu (300003.SZ)

  Report coverage target

  Strengths

  The company provides treatment and diagnostic solutions for cardiovascular diseases in China, with businesses spanning coronary stents, pacemakers, occluders, pharmaceutical APIs, and consumer healthcare products; medical aesthetics, innovative devices, and innovative drugs offer transformation-driven growth opportunities.

  Weaknesses

  Mature businesses, including medical consumables and generics, have limited growth room; innovative drugs still require substantial capital investment; 1Q26 results were dragged by VBP and one-off financial expenses.

  Comparison

  Goldman Sachs believes MWN109's early weight-loss data are better than those of disclosed comparable GLP-1 products, but the pipeline remains at a mid-stage, with commercialization visibility skewed toward the medium term.

  Risks

  Mature businesses underperform expectations under VBP, medical aesthetics business ramps more slowly than expected, progress in innovative drugs and innovative devices is slower than expected, and intensified medical aesthetics competition puts pressure on sales forecasts and margins.

Key data

• FY25 revenueRmb6,483mn, +6% yoyBroadly in line with Goldman Sachs expectations of Rmb6,720mn.
• FY25 net profitRmb962mn, +290% yoyBelow Goldman Sachs expectations of Rmb1,098mn, mainly due to higher-than-expected inventory impairment and R&D impairment.
• 1Q26 revenue / net profitRmb1,672mn / Rmb247mnBelow Goldman Sachs expectations of Rmb1,834mn / Rmb395mn, mainly due to VBP and one-off financial expenses from convertible bond redemption.
• Core business revenue guidance0-10% yoyThe company guides 2026 core business revenue to grow 0-10% YoY, with operations stabilizing after VBP.
• Early efficacy of MWN109About 4-8% weight loss after 4 weeks for oral formulation; up to about 16.7% in early studies for the injectableA core asset in the company's obesity pipeline; the injectable is expected to enter Phase III in 4Q26.
• 2026 medical aesthetics revenue targetExisting dermatology products about Rmb200mn; Thermage about Rmb200mnPDRN may be approved in 3Q26, and medical aesthetics is positioned as a key growth pillar.
• Target priceRmb17, previous Rmb19Goldman Sachs lowered the target price and maintained Neutral.
• Current price and upsideRmb14.57; 16.7% upsidePrice as of the close on April 24, 2026.

Impact & implications

In the short term, the FY25 and 1Q26 earnings miss and target price cut are negative for sentiment; however, if the VBP impact was largely reflected in 4Q25-1Q26 as management indicated, operations in 2026 will enter a recovery and normalization phase. Medium- to long-term upside depends on ramp-up of new medical aesthetics products, commercialization of innovative devices, and clinical progress of innovative drugs, but these directions still carry risks related to competition, investment, and realization timing.

Risks

• Upside risks include stronger-than-expected growth in the medical aesthetics business, as well as faster-than-expected progress in innovative drug and innovative device pipelines.
• Downside risks include mature businesses underperforming expectations under the impact of VBP.
• A slower-than-expected ramp in the medical aesthetics business could weigh on growth realization.
• The innovative drug pipeline is still at a mid-stage, with limited commercialization visibility and a need for continued capital investment.
• New product promotion may push up the selling expense ratio and lower net profit forecasts.

What to watch

• Ramp-up of new medical aesthetics products in 2026, especially existing dermatology products, Thermage, and the approval progress of PDRN.
• Sales ramp-up of innovative devices, including the Rmb50mn 2026 sales target for DES.
• Whether the MWN109 injectable enters Phase III in 4Q26 as the company expects.
• Whether core business revenue after VBP can achieve 0-10% YoY growth.
• Whether pricing pressure and short-term destocking in device segments such as cutting balloons end in 2Q26.