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On Tuesday, UBS analysts downgraded Guangzhou Kingmed Diagnostics Group Co., Ltd. (603882:CH) stock from Neutral to Sell, adjusting their price target to RMB22.80 from the former RMB28.90. The downgrade reflects the firm’s assessment of the company’s financial performance and market challenges that have recently come to fruition.
The analysts at UBS cited specific concerns in their evaluation of Kingmed Diagnostics, noting that the risks they had previously identified regarding potential price cuts have now impacted the company’s profits. They observed that these issues have led to a decline in revenue and margins in the fourth quarter of 2024 and the first quarter of 2025.
The report further detailed expectations that policy headwinds are likely to continue affecting the company over the next two years. The analysts believe that Kingmed’s current slow growth trajectory is insufficient to justify its previously high valuation.
In response to these challenges, UBS has significantly revised its earnings per share (EPS) estimates for Kingmed for the years 2025 to 2027, with reductions ranging from 78% to 65%. This recalibration underpins their decision to downgrade the stock rating.
The new price target set by UBS suggests a 33% decrease from the previous target, indicating a 31.5 times price-to-earnings (PE) ratio based on the firm’s 2026 estimates. This PE ratio is accompanied by a 1.1 times price-to-earnings growth (PEG) ratio, which aligns with the average for A-share healthcare services companies, as per UBS analysis.
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