Shanghai Pharmaceuticals Interim Results Beat; Shares Remain Undervalued

Narrow-moat Shanghai Pharmaceuticals announced interim results that were better than our expectations, despite strict coronavirus restrictions during the second quarter, which had an adverse effect on hospital traffic. Revenue was CNY 111.7 billion for the six months, representing 6% year-on-year growth. Profit margins were stable as cost of sales for the distribution segment fell 78 basis points, but was offset by higher costs in production and retail pharmacies.