Zhangzhou Pientzehuang Pharmaceutical: Risk Reward Update

Research evidence excerpt

Zhangzhou Pientzehuang Pharmaceutical: Risk Reward Update

UpdateM

RiskRisk RewardReward– Zhangzhou- ZhangzhouPientzehuang PharmaceuticalPientzehuang(600436.SS)Pharmaceutical

(600436.SS)Premium TCM Brand at Stretched Valuation Multiples

PRICE TARGET Rmb125.00 UNDERWEIGHT THESIS

We use a discounted cash flow methodology assuming an 8.0% cost of equity and a terminal ▪Market share leader in TCM hepatitis

growth rate of 4%, similar to our pharmaceutical and TCM stock coverage. Our DCF valuation category.

has a long-term ROE of 13.0% and 20 years to reach steady state growth. ▪Exclusive recipe and protected supply of

natural musk from the government. Rmb193.77

pricing and defensive growth inConsensus Price Target Distribution Rmb125.00 Rmb275.64 ▪Defensive the consumer channel; we estimate 16% MS PT

Source: Refinitiv, Morgan Stanley Research Mean Morgan Stanley Estimates earnings CAGR over 2025-28e.

▪We rate the stock Underweight on over-

stretched P/E multiple - 28x on 2026e EPS.

▪We expect a correction as input costs rise,

RISK REWARD CHART constraining end-product supply and growth

to single digit p.a. or less for the liver

CNY lozenges.

Rmb195.00Rmb195.00(+63.70%)Rmb195.00(+63.70%)(+63.70%)

Consensus Rating Distribution

43% Overweight

29% Equal-weight

29% Underweight

Rmb119.12Rmb119.12Rmb119.12 Rmb125.00Rmb125.00(+4.94%)Rmb125.00(+4.94%)(+4.94%) MS Rating

100 Source: Refinitiv, Morgan Stanley Research

50 Rmb75.00Rmb75.00(-37.04%)Rmb75.00(-37.04%)(-37.04%) Risk Reward Themes

Contrarian: Negative

Pricing Power: Positive

JUN '25 DEC '25 JUN '26 JUN '27 View descriptions of Risk Rewards Themes here

Key: Historical Stock Performance Current Stock Price Price Target

Source: Refinitiv, Morgan Stanley Research

BULL CASE Rmb195.00 BASE CASE Rmb124.00 BEAR CASE Rmb75.00