Key takeaway

On April 26, the company released its 2025 annual results, reporting revenue of RMB161.39bn, up 6.3% YoY, net profit attributable to shareholders of the parent company of RMB2.255bn, down 10.07% YoY, and recurring net profit attributable to shareholders of the parent company of RMB1.748bn, down 3.63%. Basic EPS was RMB0.44, with profit slightly below our previous forecast. Looking ahead to 2026, the company's upgraded new three-year strategic plan is being implemented. Traditional distribution is expected to grow steadily, the pharmaceutical CSO business continues to acquire new products, the medical device CSO business is gradually stabilizing, and new retail, new medical, and new service businesses are accelerating volume growth. Overall earnings growth is expected to pick up, and with the marginal impact of impairments diminishing, we expect profit growth to outpace revenue growth.

Event

The company released its 2025 annual results, with profit below our previous forecast.

The company released its 2025 annual results, reporting revenue of RMB161.39bn, up 6.3% YoY, net profit attributable to shareholders of the parent company of RMB2.255bn, down 10.07% YoY, and recurring net profit attributable to shareholders of the parent company of RMB1.748bn, down 3.63%. Basic EPS was RMB0.44, with profit slightly below our previous forecast. In 1Q26, the company reported revenue, net profit attributable to shareholders of the parent company, and recurring net profit attributable to shareholders of the parent company of RMB44.783bn, RMB733mn, and RMB543mn, respectively, representing YoY changes of 6.58%, -24.41%, and 7.12%. Results were in line with expectations.

The company plans to distribute a cash dividend of RMB2.00 (tax inclusive) for every 10 shares held by ordinary shareholders.

Risks:

1) Volume-based drug procurement risk: The gradually expanding scope of volume-based drug procurement may exert certain downward pressure on prices, affecting some of the company's business earnings. Moreover, as the number of volume-based procurement winning varieties increases, an excessively large scale could have a significant impact on the company's operating revenue and profit.

2) Intensified market competition: Major competitors or new entrants in the market may weaken the company's relative advantages and sustainable development capabilities, thereby affecting its long-term growth.

3) Product R&D risk: If the company's product R&D progress falls short of expectations, it may undermine the long-term competitiveness of its business.

4) Accounts receivable turnover risk: If the company's accounts receivable turnover cycle lengthens or amounts become uncollectible, it may result in both time and economic losses.

5) Regulatory risk: On March 2, 2023, the Shanghai Stock Exchange accepted JOINTOWN's application for a targeted issuance of preferred shares. During the subsequent inquiry process, the company stated that the portion of the Health City project permitted for sale by the government, apart from the portion with pre-sale permits sold to internal employees for employee benefits, would not be sold to the general public . However, actual sales to the general public did occur, resulting in a regulatory warning from the SSE, which may adversely affect the company's operations.

6) Policy risk: The pharmaceutical industry is a highly regulated sector. Should more stringent policies emerge, they may adversely affect the company's operations.