Goldman Sachs Downgrades Hualan Biological to Neutral: Plasma Supply Glut Intensifies; Vaccines Add Further Pressure

Overview

On May 7, 2026, Goldman Sachs published a review of China’s plasma derivatives industry, focusing on the FY25 and 1Q26 performance of seven A-share listed plasma products companies. The report notes persistent year-on-year revenue declines across the sector, driven by multiple pressures—including VAT rate adjustments, regional volume-based procurement (VBP) price reductions, and DRG/DIP payment reforms. More critically, accounts receivable days and inventory days across nearly all companies have hit post-pandemic highs, which Goldman Sachs interprets as clear evidence of a pronounced industry-wide supply glut that has now extended from distributors to manufacturers. Based on growing concerns over industry oversupply and new headwinds facing Hualan Biological’s vaccine business—stemming from WHO’s recommendation to transition to trivalent vaccines—Goldman Sachs downgrades Hualan Biological (002007.SZ) from Buy to Neutral, lowers its 12-month target price from RMB 17 to RMB 15, and revises downward its 2026–2028 earnings forecasts.

Core views

Key View 1: The Chinese plasma derivatives industry faces clear supply glut pressure. The report observes that total industry revenue among all seven A-share plasma products companies continued to decline year-on-year in FY25 and 1Q26. This pressure stems from three structural factors: (i) the VAT rate adjustment from 3% to 13%, leading to an ~9% decline in average selling price (ASP); (ii) regional VBP initiatives causing significant price reductions for certain plasma products (e.g., tetanus immunoglobulin); and (iii) DRG/DIP payment reforms constraining clinical usage of plasma products. Key View 2: Industry supply-demand imbalance has propagated from distributors to manufacturers. Goldman Sachs notes a critical shift: In its Q3 FY25 summary, operational stress was primarily borne by distributors. But two quarters later, the situation has changed. As of 1Q26, accounts receivable days and inventory days across all seven companies have risen nearly universally to post-pandemic highs. This indicates that the supply-over-demand trend has become unmistakable—and distributors can no longer absorb pressure on behalf of manufacturers. Key View 3: Hualan Biological’s vaccine business faces additional headwinds. The report highlights that WHO, for the first time in 2026, recommended discontinuing use of quadrivalent influenza vaccines in favor of trivalent ones. Goldman Sachs expects China’s National Medical Products Administration (NMPA) to follow WHO’s guidance. Given that quadrivalent vaccines are priced ~60% higher than trivalent ones—and that vaccines accounted for 25% of Hualan’s FY25 total revenue—this policy shift poses downside risks to both vaccine ASPs and overall revenue. Key View 4: Downgrade of Hualan Biological’s rating and earnings forecasts. Considering the cautious outlook for both core businesses—plasma derivatives and vaccines—Goldman Sachs lowers Hualan Biological’s 2026–2028 revenue and EPS forecasts by ~11% and ~10%, respectively. Using a constant 5-year exit P/E valuation methodology, its new 12-month target price is RMB 15 (previously RMB 17), offering only ~4% upside versus the current share price of RMB 14.46. The report notes that the company’s 1-year forward P/E currently sits in the second-highest quintile of its five-year historical range, indicating fair valuation.

Analysis framework

Goldman Sachs employs a 'sector scan + company focus' analytical framework in this report. First, it begins at the sector level, aggregating financial data from the seven A-share plasma products companies to extract key indicators—including aggregate revenue growth, product pricing, accounts receivable days, and inventory days—to construct a macro-level picture of sector supply-demand dynamics. By analyzing trends in these metrics—particularly the record-high accounts receivable and inventory days—and linking them to underlying policy drivers (VAT, VBP, DRG/DIP), Goldman Sachs arrives at its central conclusion: 'the sector is experiencing significant supply glut.' Second, building upon this sector-level judgment, Goldman Sachs narrows its analysis to Hualan Biological. Rather than treating it solely as a representative of sector-wide pressures, it identifies company-specific risks—namely, the independent downside risk confronting Hualan’s vaccine business due to WHO’s policy shift. This integrated approach—combining cyclical sector dynamics with idiosyncratic company risks—yields a more nuanced conclusion. Finally, at the valuation stage, Goldman Sachs applies a '5-year exit P/E' methodology. This involves forecasting future earnings (e.g., estimated net profit for 2026), applying a target P/E multiple (21x) based on projected 5-year net profit CAGR (10%), adjusting for the A-share premium over H-shares (37.5%), and discounting the resulting terminal value back to present value using an equity cost of capital (COE). The entire argument proceeds logically—from sector data to macro pressure, to company-specific risk, to revised earnings assumptions and valuation model inputs—culminating in a new rating and target price.

Methodology notes

• Sector/Industry Analysis FrameworkSupply-demand framework

  Assessing the supply-demand balance in the plasma derivatives industry through analysis of industry revenue growth, product pricing, accounts receivable days, and inventory days.

  In sector research, revenue and pricing directly reflect demand strength, whereas accounts receivable and inventory days reflect goods turnover speed and cash collection efficiency—key indicators of supply excess. This report draws its 'supply glut' conclusion precisely from observed deterioration in these metrics.

• Sector/Industry Analysis FrameworkUpstream-Midstream-Downstream Industrial Chain Transmission

  Analyzing how operational pressure propagates from downstream distributors to upstream plasma derivatives manufacturers.

  Industrial chain pressure transmission is a vital lens for assessing sector health. When end-demand weakens, pressure typically hits downstream distributors first (evidenced by inventory buildup); once inventories reach unsustainable levels, distributors reduce orders from upstream manufacturers—causing manufacturers’ accounts receivable and inventory days to rise. Goldman Sachs explicitly traces this process in the report and confirms pressure has now reached manufacturers.

• Sector/Industry Analysis FrameworkVolume-price decomposition

  Decomposing drivers of corporate revenue and profit into 'volume' and 'price' components for separate analysis.

  For plasma products, pricing pressure stems from VAT and VBP policies, while volume pressure arises from DRG/DIP reforms. For vaccines, pricing pressure emerges from WHO’s policy shift potentially shrinking demand for quadrivalent vaccines. This decomposition clarifies the precise sources and nature of enterprise-level risks.

• Valuation MethodologyP/E and PEG Valuation

  Valuing Hualan Biological using a 5-year exit P/E methodology.

  This is a forward-looking earnings- and P/E-based valuation method. Specifically, it forecasts net profit at a future point (e.g., five years ahead), multiplies it by a justified P/E multiple at that horizon, then discounts that terminal value back to present value using an appropriate cost of equity (COE). Goldman Sachs uses this approach to derive Hualan Biological’s target price in this report.

• Corporate Fundamentals & Financial FrameworkDuPont analysis

  Although the DuPont formula is not explicitly shown, the report evaluates corporate fundamentals via ROE, ROA, margins, and turnover ratios.

  The report provides a detailed financial forecast table containing return on equity (ROE), return on assets (ROA), gross margin, net margin, and various turnover days. Collectively, these metrics constitute the core elements of DuPont analysis, enabling holistic assessment of profitability, operational efficiency, and financial leverage.

Asset mapping & comparison

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

• Hualan Biological Engineering Co., Ltd. (002007.SZ)

  Core subject of the report, downgraded due to industry-wide plasma supply glut and deteriorating vaccine business prospects.

  Strengths

  Market leader in China’s plasma derivatives industry (plasma collection station growth enables faster-than-industry-average capacity expansion); vaccines business serves as a secondary growth engine; minority stake in Hualan Gene, which has secured regulatory approval for two biosimilars.

  Weaknesses

  Both core businesses—plasma derivatives and vaccines—face substantial pressure; plasma business impacted by industry-wide supply glut, policy-driven price cuts, and DRG/DIP reform; vaccine business exposed to WHO policy shifts and potential domestic immunization program price reductions.

  Risks

  Vaccine price cuts exceeding expectations; further tightening of clinical usage restrictions on plasma products.

Key data

• Hualan Biological RatingDowngraded from Buy to NeutralDriven by dual concerns over plasma and vaccine businesses
• Hualan Biological 12-Month Target PriceRMB 15 (previously RMB 17)Implies ~3.7% upside
• Revenue Forecast Reduction (Avg. 2026–2028E)~11%Reflects more conservative assumptions for plasma and vaccine product sales
• EPS Forecast Reduction (Avg. 2026–2028E)~10%Largely aligned with revenue reduction
• VAT Adjustment Impact on ASP~9% declineTax rate increased from 3% to 13%
• Price Gap Between Quadrivalent and Trivalent Influenza VaccinesQuadrivalent vaccines priced ~60% higher on averageWHO’s recommendation against quadrivalent vaccines poses pricing risk for Hualan’s vaccine business
• Hualan Biological’s Current 1-Year Forward P/ESecond-highest quintile of its 5-year historical rangeGoldman Sachs deems valuation fair

Impact & implications

Goldman Sachs believes this downgrade reflects its view that both of Hualan Biological’s core businesses face material pressure. In plasma derivatives, the industry-wide supply glut is unlikely to reverse in the near term, continuing to weigh on the company’s revenue growth and profitability. In vaccines, if China’s NMPA follows WHO’s recommendation, Hualan’s influenza vaccines will face ASP declines—a notable risk given this segment contributed one-quarter of the company’s FY25 revenue. Overall, the report concludes that Hualan Biological’s stock price no longer supports the prior optimistic expectations embedded in the Buy rating, and its current valuation already reflects its prevailing business conditions. Hence, Goldman Sachs judges the stock ‘fairly valued’ and adjusts its rating to Neutral. Investors are advised to monitor evolving plasma derivatives supply-demand dynamics and influenza vaccine uptake and policy developments in China.

Risks

• Vaccine price cuts may exceed expectations: If influenza vaccines are included in provincial or national immunization programs across most provinces, prices could fall significantly further.
• Clinical usage restrictions on plasma products may tighten further: DRG/DIP reforms have already curbed off-label use of plasma products; any further regulatory tightening would exert additional revenue pressure.

What to watch

• Changes in supply-demand dynamics within the plasma products market—the key indicator for assessing whether sector sentiment may reverse.
• Influenza vaccine uptake rates and policy developments in China, which will directly affect the revenue outlook for Hualan’s vaccine business.