Hengrui Medicine Investment Quality Review (600276.SH)
Data timestamp: 2026-07-24 22:05 UTC
Quality score: 74/100
Valuation position: current price/base fair value (FV) 2.90
Final signal: WATCHLIST
Core Conclusion
Hengrui Medicine is a WATCHLIST name. The company has a credible pharma franchise and a strong balance sheet, but the score is below the 75 upgrade threshold and the current price is far above base FV.
- Quality: 74/100, supported by five-year revenue, FCF, ROE/ROIC, and balance sheet.
- Price: current price is CNY53.45 and market value is about CNY354.76 billion. Conservative/base FV is CNY15.86/CNY18.41 per share.
Business Breakdown
Innovative-drug and formulation main-business revenue was CNY25.91 billion in 2021, CNY21.28 billion in 2022, CNY22.82 billion in 2023, CNY27.98 billion in 2024, and CNY31.63 billion in 2025, a 5.1% CAGR. Segment margin/profit was not disclosed. Turnaround quality still needs confirmation through FCF and product progress.
Quality Gate
Five-year average FCF/Net Income was 0.75 and OCF/Net Income was 1.13. Latest net cash/debt was CNY40.88 billion, a meaningful balance-sheet cushion. The report still holds back because price safety is weak, quality score is 74, and formal segment/growth evidence remains incomplete.
Financial Audit
The valuation uses fiscal 2025-2021 in CNY. Latest balance-sheet inputs were CNY40.96 billion cash, CNY0.55 billion current financial assets, CNY1.47 billion non-current financial assets, and CNY0.07 billion debt. Goodwill, receivables, inventory, financial assets, and R&D capitalization should remain filing checks.
Valuation
CNY 10Y government yield was 1.7282% from ChinaBond on 2026-07-24.
| Scenario | Core Assumption | Multiple Basis | Fair Market Value | FV/Share | Price/FV | Weight | Next Check |
|---|---|---|---|---|---|---|---|
| Conservative | Normalized FCF CNY5.63bn with heavier haircut | g 1.0%, 12.0x | CNY105.27bn | CNY15.86 | 3.37 | 30% | Next revenue, FCF, capital allocation |
| Base | Normalized FCF CNY5.63bn continues | g 2.0%, 15.0x | CNY122.18bn | CNY18.41 | 2.90 | 50% | Next revenue, FCF, capital allocation |
| Optimistic | Quality rerating without exceeding cap | g 3.0%, 17.0x | CNY133.45bn | CNY20.11 | 2.66 | 20% | Next revenue, FCF, capital allocation |
Balance-sheet bridge is CNY37.66 billion. Price/base FV of 2.90 fails the 2x and BUY gates.
Buy And Monitor
Current action is watch. Upgrade requires price/base FV below 0.70, quality score at least 75, and stronger evidence that innovation/recovery is not already priced in. Track revenue, FCF/Net Income, ROIC, net cash/debt, product progress, dividends, buybacks, governance, and R&D accounting.
Risks
Risks include drug-pricing policy, pipeline execution, R&D intensity, FCF durability, disclosure limits, and capital allocation. FCF/Net Income below 0.60 for two periods, debt expansion, impairment, or shareholder-value dilution would lower FV and signal.
Research only. Not personalized investment advice.
Sources
Public market and financial data supplied price, market value, share count, and baseline financials. Official disclosures are required for annual reports, dividends, buybacks, governance, related parties, incentives, and risks. Risk-free rate: ChinaBond, 2026-07-24.