Key takeaway

The company delivered a strong recovery in 2025 performance. Both revenue and profit recorded significant growth. This was mainly driven by the resumption of growth in the respiratory product category after channel inventory clearance, as well as the steady growth of the cardiovascular and cerebrovascular category supported by deeper academic promotion. Performance was in line with our previous expectations. In 1Q26, the company maintained its growth momentum. Profit grew rapidly driven by improved gross margin, and profit performance exceeded expectations. Looking ahead to 2026: 1) we remain optimistic about the continued recovery of the cardiovascular and cerebrovascular category; 2) the respiratory category maintains healthy channel conditions and continues to expand application scenarios; 3) R&D pipeline achievements continue to materialize, and new product launches will contribute incremental growth.

Event

The company releases 2025 annual report and 1Q26 report On the evening of April 27, the company released its 2025 annual report and 1Q26 report.In 2025, the company recorded operating revenue, net profit attributable to shareholders of the parent company, and net profit excluding non-recurring itemsof RMB7.831bn, RMB1.286bn, and RMB1.222bn respectively, representing YoY growth of 20.24%, 277.56%, and 254.16%, with performance in line with our previous expectations; in 1Q26 the company recorded operating revenue, net profit attributable to shareholders of the parent company, and net profit excluding non-recurring items of RMB2.44bn, RMB409mn, and RMB407mn respectively, up 3.46%, 25.43%, and 25.19% YoY, with profit performance exceeding expectations.

Quick Take

2025 performance in line with expectations, 1Q26 profit exceeded expectations

In 2025, the company recorded revenue of RMB7.831bn, up 20.24% YoY. Net profit attributable to shareholders of the parent company reached RMB1.286bn, while net profit attributable to shareholders of the parent company excluding non-recurring items reached RMB1.222bn. The profit side achieved a significant YoY turnaround. The strong recovery in performance was mainly due to: 1) in the same period of 2024, asset impairment losses were recognized for respiratory products nearing expiration and sales revenue was offset, resulting in a low base; 2) channel inventory gradually returned to normal levels, respiratory product sales resumed normal growth, and cardiovascular and cerebrovascular products maintained steady growth. The 2025 results were in line with the previously guided expectations.

In 1Q26, the company recorded operating revenue of RMB2.44bn, up 3.46% YoY. Revenue achieved steady growth driven by the cardiovascular and cerebrovascular category. Net profit attributable to shareholders of the parent company reached RMB409mn, up 25.43% YoY. Net profit attributable to shareholders of the parent company excluding non-recurring items reached RMB407mn, up 25.19% YoY. Profit grew rapidly, mainly benefiting from strong sales of cardiovascular and cerebrovascular products and improved gross margin driven by falling raw material prices. Profit growth in 1Q26 exceeded expectations, and the company’s operations continued to recover.

Continued improvement in academic capabilities in cardiovascular and cerebrovascular fields; respiratory products broaden application scenarios. By segment in 2025 and 1Q26:

1) Cardio cerebrovascular segment continues to recover, academic influence further improves:Revenue reached RMB3.956bn in 2025, up 2.06% YoY, and the revenue side resumed stable growth; gross margin was 68.60%, up 11.47 pcts YoY, and the significant improvement in profitability mainly benefited from the decline in raw material prices. The company continues to advance evidence? based medical research on three core products: Tongxinluo, Shensong Yangxin, and Qili Qiangxin. Multiple landmark results have been published in top international journals such as JAMA, Nature Medicine, and European Heart Journal. Academic influence continues to strengthen. In 1Q26, sales of the company’s cardio? cerebrovascular segment are expected to achieve solid recovery under the low base in the same period last year, and continued recovery is expected throughout the year. Through evidence? based medicine evaluation and real? world studies, the company has established the academic influence and academic standing of its core products and continuously enhanced their clinical value. We are optimistic that its academic advantages will translate into market value and drive sales volume growth.

2) Respiratory segment expands application scenarios, volume growth of Lianhua Qingke Tablets is promising:Revenue reached RMB2.017bn in 2025, up 153.71% YoY. After channel inventory was cleared, the revenue side achieved a notable recovery; gross margin was 75.16%, up 32.19 pcts YoY, gradually returning to a reasonable profitability level. After earlier channel inventory adjustments, inventory of products such as Lianhua Qingwen has now fallen to historical lows. Meanwhile, the company continues to expand product application scenarios. An evidence? based study on Lianhua Qingwen for influenza prevention has been submitted for publication, and sales are expected to continue recovering. Guided by the TCM collateral disease theory, Lianhua Qingke Tablets are an exclusive patented innovative TCM developed by integrating classic tradi tional formulas and clinical practice for the treatment of acute tracheitis and bronchitis. The product was officially converted to an over? the? counter drug in 2024. As the company gradually expands market coverage and channel deployment while strengthening brand promotion, and with relatively low channel inventory pressure and clear advantages in efficient cough relief treatment, Lianhua Qingke Tablets are expected to achieve volume growth in 2026.

Continue advancing new product R&D: Innovation expected to continuously empower growth

As of the end of 2025, the company had 17 patented new drugs covering eight clinical disease systems, forming a relatively rich product portfolio. The company continues to focus on core therapeutic areas including cardiovascular and cerebrovascular, respiratory, neurological, endocrine, urinary, and digestive diseases. It continuously improves project management across different stages including new drug screening, project initiation, R&D, and post-marketing re? evaluation. It explores target patient populations as well as clinical application advantages and pharmacological characteristics of products, objectively evaluates product efficacy advantages and safety, and advances the R&D and pipeline of new products. In January 2025, the company’s new drug Qifang Bitong Tablets received formal approval for marketing registration. In July of the same year, it obtained the “Traditional Chinese Medicine Registration Certificate” issued by the Drug Regulatory Authority of the Macao Special Administrative Region Government, becoming the first innovative traditional Chinese medicine approved by the Macao drug regulator. In December, the drug was included in the new national medical insurance catalogue. The company has currently obtained clinical approvals for products involving diseases in the rheumatology and immunology system, digestive system, ENT, and pediatrics. We remain optimistic that continued innovation progress will empower the company’s long-term development.

Risks

1) Worse-than-expected product promotion: the company has increased investment in sales. If product promotion fails to meet expectations, it will affect sales revenue and further affect the company's profits; 2) Risk of product price reduction: the intensifying competition may lead to a price reduction of the core products, further affecting the company's expected profits; 3) Price hike of raw materials and labor costs: the planting cycle of traditional Chinese medicine is long. The price fluctuations of raw materials will lead to an increase in costs, which will affect the company's overall profit; 4) Unstable policy environment for traditional Chinese medicine: The current regulatory environment for traditional Chinese medicine is not fully stable. If relevant policies are introduced in the future, they could create market disruption and impact the company’s operations.