Zhifei (300122.SZ): Earnings review: 3Q26 results beat with OCF improving; TP up to Rmb19; Buy

Zhifei released its 3Q26 results on Oct 26, 2026. Both its revenue (Rmb2,515mn, -7% yoy) and net profit (Rmb125mn, vs Rmb-743mn net loss in 3Q25) beat GSe (Rmb2,050mn/-230mn, respectively). We believe the company's destocking phase has largely concluded. With the clearance of near-expiry vaccines sold under agency agreements now complete, the company no longer needs to rely heavily on deep discounting to reduce inventory. As a result, both average selling prices and gross margins have recovered, and EBIT margin has turned positive again at +2.9%—marking a notable improvement given that only 1Q26 had posted a positive EBIT margin (+0.8%) since 4Q24. Meanwhile, partial reversals of previously recognized impairments on accounts receivable and inventory have not only boosted reported earnings but also contributed to sustained improvements in operating cash flow (+31% yoy). In our view, the most critical period—characterized by excessive inventory buildup and acute cash strain—is now behind