Key takeaway

Overall, in 2025, affected by multiple factors such as medical insurance cost control, pharmacy integration, and centralized procurement, the company continued to accelerate channel reform, leading to short-term pressure on its core business operations. Currently, the company's reform has entered a deep-water zone. With the gradual advancement of centralized procurement implementation for the Xuesaitong series, the deepening of channel restructuring, and preparations for new product launches, the company's core business is expected to achieve steady recovery, awaiting an inflection point in performance. Looking ahead to 2026, with the implementation of various strategic initiatives and the gradual digestion of external environmental impacts, the company's operations are expected to show a trend of lower in the first half and higher in the second half, with gradual recovery.

Event

The company releases 2025 financial results

On the evening of March 19, the company released its 2025 annual report. Full-year operating revenue, net profit attributable to shareholders, and non-GAAP net profit were 6.575 billion yuan, 350 million yuan, and 107 million yuan, respectively, representing year-on-year changes of -21.74%, -46.00%, and -74.45%. The performance was in line with the previously announced preliminary results.

In December 2024, the company acquired a 51% equity stake in China Resources Shenghuo and incorporated it into the consolidated scope, constituting a business combination under common control. The financial data for the same period of the previous year has been restated and adjusted accordingly, therefore the annual report data are all presented on an adjusted basis.

Risks:

1. Risk of corporate reforms falling short of expectations: The company is actively promoting reform efforts; however, there may be situations where the effectiveness of the reforms does not meet expectations, which could consequently affect the company's profit outlook. 2. Risk of drug price reductions: Competition in the market for the company's core products and others may intensify, leading to price declines for these products, which could consequently affect the company's profit outlook. 3. Risk of raw material price fluctuations: The prices of Chinese medicinal herbs can be significantly affected by various factors such as the macroeconomic environment, natural disasters, and cultivation conditions, making them prone to substantial fluctuations. If the prices of Chinese herbal medicine raw materials rise, the company's production costs may increase significantly, thereby impacting the company's profits. 4. Risk of product promotion falling short of expectations: The company is increasing its sales investment. If product promotion fails to meet expectations, it will affect sales revenue and consequently impact the company's profits.