Financial Performance - The Group recorded sales revenue of approximately RMB2.59 billion, representing a 10.7% increase over the previous year[8] - Profit attributable to equity shareholders was approximately RMB0.78 billion, a 14.9% increase compared to the previous year[8] - The company achieved sales revenue of approximately RMB2.59 billion in 2023, representing a year-on-year increase of 10.7%, with net profit attributable to shareholders of approximately RMB780 million, up 14.9% year-on-year[10] - Revenue for 2023 increased by 10.7% to RMB 2,590,115,000 compared to RMB 2,339,650,000 in 2022[38] - Profit before taxation rose by 15.7% to RMB 863,703,000 in 2023 from RMB 746,393,000 in 2022[38] - Profit attributable to equity shareholders grew by 14.9% to RMB 784,534,000 in 2023 from RMB 682,907,000 in 2022[38] - Gross profit increased by 9.0% to RMB 1,921,678,000 in 2023, with a gross profit margin of 74.2%, down 1.1 percentage points from 2022[42] - Annual profit attributable to equity shareholders increased by 14.9% to RMB784,534,000 in 2023, with basic EPS rising by 15.1% to RMB0.99[49][53] Pharmaceutical Industry Challenges - The pharmaceutical industry faced challenges including a medical anti-corruption campaign and the normalization of centralized drug procurement[8] - The pharmaceutical industry in 2023 saw policies focusing on healthcare reform, medical insurance optimization, and traditional Chinese medicine development[72][73] - The NHSA normalized centralized quantity procurement of drugs, optimized procurement rules, and strengthened drug supply and quality supervision in 2023[83] - The NHSA issued a notice in December 2023 to promote fair and transparent pricing for drugs with the same generic name and manufacturer across provinces[82] Product Performance - The Consun Pharmaceutical Segment recorded sales revenue of approximately RMB2.2 billion in 2023, a year-on-year increase of 10.8%, with kidney medicines contributing approximately RMB1.74 billion, up 11.0% year-on-year[11] - The flagship product, Uremic Clearance Granules, achieved sales revenue of approximately RMB1.65 billion in 2023, a year-on-year increase of 10.2%, maintaining its leading position in the nephropathy oral modern Chinese medicine category[11] - Kidney Repair and Edema Alleviation Granules, a key product under incubation, achieved sales revenue of approximately RMB90 million in 2023, a year-on-year increase of 25.5%[13] - The medical contrast medium segment recorded sales revenue of approximately RMB160 million in 2023, a slight year-on-year decrease of 4.6%, with progress in R&D for imaging products[14] - The Yulin Pharmaceutical Segment achieved sales revenue of approximately RMB400 million in 2023, a year-on-year increase of 10.2%, with a profit of approximately RMB40 million, marking three consecutive years of recovery[15] - Sales of kidney medicines increased by 11.0%, with Uremic Clearance Granules maintaining market leadership[41] - Gynaecology and paediatrics medicines sales grew by 22.7%, becoming the second-largest revenue segment[41] Research and Development - The company completed Phase II clinical statistics for Astragalus Powder Tiny Pill and passed the consistency evaluation for Iopamidol injection, with progress in other R&D projects such as Lanthanum Carbonate and Iodixanol[18] - SK-07, a class I innovative drug in nephrology jointly developed with WuXi AppTec, entered Phase I clinical trials ahead of schedule, and Roxadustat capsule was successfully submitted for registration[19] - SK-07, a Class 1 innovative drug jointly developed with WuXi AppTec, entered Phase I clinical trials several months ahead of schedule[21] - The company collaborated with Xinji Pharmaceutical to establish a joint laboratory for innovative preparations and showcased research on Canton Love-pes Vine Herb Capsules at an international liver disease conference[19] Corporate Governance and Leadership - Mr. An Meng was appointed as Chairman and CEO of the company effective from 17 January 2024, responsible for comprehensive strategic planning and overall operational management[88][89] - Mr. An Meng has over 30 years of experience in the property insurance and venture capital industries, including roles at PICC Insurance Group and China Taiping Insurance Group[90] - Professor Zhu Quan, aged 84, is the executive Director and chief scientist of Guangzhou Consun, primarily responsible for the company's product research and development[92][93] - Mr. Xu Hanxing, aged 30, was appointed as an executive Director effective from 24 March 2021 and is currently acting as a commercial director[94][96] - Dr. Zhang Lihua, aged 47, was appointed as a non-executive Director effective from 9 July 2021[97] - The Board of Directors consists of six members: three executive Directors, one non-executive Director, and two independent non-executive Directors as of the report date[117] - The company's Chairman, Mr. An Meng, concurrently serves as the CEO since the resignation of Ms. Li Qian on 17 January 2024, despite a deviation from the Listing Rules[123] - The Board believes the current management structure, with Mr. An Meng as both Chairman and CEO, will improve the company's strategic planning efficiency and future development[124] Dividend and Shareholder Returns - Consun Pharmaceutical proposed a final dividend of HKD 0.3 per share for 2023, with a total dividend of HKD 0.45 per share, representing approximately 42% of the annual profit[28] - The Company paid an interim dividend of HKD0.15 per share in 2023, totaling approximately RMB109,068,000[194] - The Board proposed a final dividend of HKD0.3 per share for the year ended 31 December 2023, amounting to approximately RMB221,122,000[194] - The Company's distributable reserves as of 31 December 2023 amounted to RMB916,186,000, up from RMB812,046,000 in 2022[199][200] - The final dividend is subject to shareholder approval at the annual general meeting on 31 May 2024 and is expected to be paid on or about 21 June 2024[194] - The Company's dividend policy considers factors such as financial results, cash flow, capital requirements, and future expansion needs[195] Risk Management and Internal Controls - The company's internal control systems are designed to manage risks and ensure compliance, providing reasonable assurance against material misstatement or loss[174] - The company has established procedures for identifying, assessing, and managing significant risks, including regular project audits and annual risk assessments[175] - The company's audit and supervision department monitors and evaluates the adequacy and effectiveness of relevant procedures through internal audits and periodic evaluations[177] - The company engaged an independent internal control valuer to assess high-level risks and key business processes, providing recommendations for enhancing risk management and internal control capabilities[177] - The company's Board considers the risk management and internal control systems to be generally adequate and effective, with no significant deficiencies causing material misstatements in financial reports[178] - The company has taken or intends to take improvement measures to address general internal control deficiencies and will continue to review the effectiveness of its systems[178] Environmental, Social, and Governance (ESG) - Environmental sustainability is integrated into daily operations, with a focus on water, energy, and materials saving and recycling[70] - The ESG Committee reviewed the Group's ESG report for the year ended 31 December 2023, which is available on the Company and Stock Exchange websites[164] - The company provides ongoing compliance and anti-corruption training to employees at all levels, including the Board and senior management[176] Investor Relations and Shareholder Communication - The Company maintains a dedicated investor relations team to handle shareholder inquiries and communicate feedback to the Board and management team[191] - The Company's website (http://www.chinaconsun.com) serves as an alternative communication channel for shareholders and the public, providing corporate updates and information[188] - Shareholders can submit written inquiries to the Company's headquarters in China or Hong Kong, or via email (ir@chinaconsun.com) or phone ((86) 20 8226 4529)[189] - The Company's annual general meeting on 31 May 2023 was held with a combination of physical and online virtual meetings to facilitate shareholder participation[191] Strategic Development and Future Plans - The company is embarking on its "next 25 years" of development with confidence[8] - The company's development philosophy for 2024 is "Pursuing Integrity for Innovation, Building Team Spirit for Sustainability"[30] - The company aims to enhance management and core competitiveness to create growth momentum for the next 25 years[30] - The company's annual operation policy for 2024 is "Stabilizing Growth, Strengthening Compliance and Training Internally"[32] Brand and Market Position - The brand value of Consun Pharmaceutical reached RMB 11.236 billion, ranking 22nd in the "Top 100 Chinese Medicine Enterprises in China"[25] - Consun Pharmaceutical was ranked among the 200 "Top-performing publicly listed Small and Midsized Companies by Forbes Asia"[25] - Uremic Clearance Granules was awarded the "CPEO Gold Award" and selected in the "Chinese Pharmaceutical Brand List" for the 7th time[26] - Consun Pharmaceutical and Yulin Pharmaceutical were awarded the "Excellent Brand Enterprise of Chinese National Medicine in 2022-2023"[25] Financial Position and Capital Structure - Total assets increased by 12.6% to RMB 5,507,994,000 in 2023 from RMB 4,892,380,000 in 2022[39] - Total equity attributable to equity shareholders rose by 15.3% to RMB 3,626,503,000 in 2023 from RMB 3,145,139,000 in 2022[39] - The gearing ratio decreased to 13.9% as of 31 December 2023 from 14.3% as of 31 December 2022, primarily due to increased operating profit[61] - The company issued 4,044,154 ordinary shares in 2023 due to employee share option exercises, compared to 866,608 ordinary shares in 2022[65] - The capital structure remained stable in 2023, with no significant changes except for the issuance of shares related to employee share options[64][65] Operational Costs and Expenses - Distribution costs increased by 10.4% to RMB852,206,000 in 2023, compared to RMB771,960,000 in 2022, driven by higher sales[47] - Administrative expenses remained stable at RMB315,599,000 in 2023, compared to RMB322,504,000 in 2022[47] - Reversals of impairment loss on trade and other receivables decreased to RMB12,596,000 in 2023 from RMB32,493,000 in 2022, due to improved trade debtor management[47] - Finance costs surged by 94.5% to RMB21,264,000 in 2023, compared to RMB10,933,000 in 2022, primarily due to higher bank borrowing interest rates[47] - Income tax expenses rose by 23.1% to RMB77,149,000 in 2023, with the effective tax rate increasing from 8.4% to 8.9%[47] Cash Flow and Liquidity - Net cash generated from operating activities decreased by 13.6% to RMB818,973,000 in 2023 compared to RMB947,679,000 in 2022, primarily due to increased wages, operational procurement, and tax expenses[57] - Net cash used in investing activities decreased by 37.2% to RMB231,772,000 in 2023 compared to RMB368,804,000 in 2022, mainly due to the withdrawal of bank deposits and increased interest income[57] - Net cash used in financing activities decreased by 18.1% to RMB280,100,000 in 2023 compared to RMB342,205,000 in 2022, driven by an increase in net bank loans[57] - Cash and bank balances increased by 12.2% to RMB2,748,262,000 as of 31 December 2023 compared to RMB2,450,173,000 as of 31 December 2022[57] - Total loans and borrowings increased by 11.7% to RMB503,418,000 as of 31 December 2023 compared to RMB450,521,000 as of 31 December 2022[57] Regulatory and Compliance - The Company adheres to the Corporate Governance Code and has complied with the Code Provisions set out in the Listing Rules during the year ended 31 December 2023[114] - The Company has adopted the Model Code for Securities Transactions by Directors, and all Directors complied with the required standards during the year ended 31 December 2023[115] - The Company has established written guidelines for relevant employees regarding dealings in the Company's securities, which are no less exacting than the Model Code[116] - No significant non-compliance with laws and regulations relevant to the Group's operations was reported in 2023[71] Board and Committee Activities - The Board held four meetings during the year ended 31 December 2023 to discuss the company's overall strategy, operational, and financial performance[132] - The Board of Directors held four meetings during the year ended December 31, 2023, with all directors attending all meetings[137] - The Chairman held two separate meetings with independent non-executive directors without the presence of other executive directors during the year[138] - The Audit Committee held two meetings during the year ended 31 December 2023, with all members attending both meetings[167][168] - The Audit Committee reviewed the Group's financial controls, risk management, and internal control systems, ensuring effective systems and sufficient resources for financial reporting and internal audit functions[169][170] - The Audit Committee met with the external auditor to ensure the effectiveness of the audit process and reviewed the annual report, including the financial statements[169][170] Remuneration and Compensation - The Remuneration Committee reviews and recommends remuneration policies for Directors and senior management, ensuring no Director determines their own remuneration[155] - Executive Directors' emoluments are determined based on skills, knowledge, performance, contributions, and market conditions[155] - Non-executive Directors' remuneration ensures adequate compensation for their efforts and time dedicated to the Company's affairs[155] - Senior management remuneration for 2023 ranged from RMB 500,001 to 2,000,000, with 2 individuals in the RMB 500,001-1,000,000 band, 3 in the RMB 1,000,001-1,500,000 band, and 1 in the RMB 1,500,001-2,000,000 band[161] External Audit and Financial Reporting - The company engaged KPMG as the external auditor for the year ended 31 December 2023, with audit fees amounting to approximately RMB2,500,000 and non-audit fees to RMB500,000[171] - The company's financial statements for 2023 are prepared based on the criteria set out in note 1(b) to the financial statements, covering pages 100 to 235[131] - The company's external auditor issued a declaration of reporting responsibility on the financial statements, detailed in the Independent Auditor's Report on pages 89 to 99[131] Employee and Workforce Management - Total employees increased to 3,127 in 2023 from 3,009 in 2022, with total staff costs rising to RMB483,508,000 from RMB445,669,000[66] - The gender ratio in the Group's workforce (including senior management) was 52.9% male to 47.1% female as of 31 December 2023[152] - The company provides funding for directors to attend professional development courses to ensure they maintain necessary knowledge and skills[139] Corporate Policies and Governance - The company's Articles of Association require one-third of directors to retire by rotation at each annual general meeting[143] - The Nomination Committee reviews the Board's structure, size, composition, and diversity policy annually[145] - The Nomination Committee identifies qualified candidates for directorship based on skills, experience, education, and personal integrity[145] - The Board Diversity Policy includes measurable objectives such as at least 40% of Board members being non-executive or independent non-executive Directors[151] - At least 1/3 of the Board members must be independent non-executive Directors according to the Board Diversity Policy[151] - At least 50% of the Board members must have 7 years or more of experience in their specialized industry[151] - The Board includes members with China-related work experience, with at least 2 members meeting this criterion[151] Strategic Partnerships and Collaborations - The company collaborated with Xinji Pharmaceutical to establish a joint laboratory for innovative preparations and showcased research on Canton Love-pes Vine Herb Capsules at an international liver disease conference[19] - The company engaged an independent internal control valuer to assess high-level risks and key business processes, providing recommendations for enhancing risk management and internal control capabilities[177] Government and Policy Support - The Chinese government has actively supported the development of traditional Chinese medicine, with the 14th Five-Year Plan providing strategic guidance for its growth[74][75] - The State Council issued the "Implementation Plan for Major Projects of the Revitalization and Development of Traditional Chinese Medicine" in February 2023, focusing on health, innovation, and solving key issues in the industry[77] - The National Medical Products Administration strengthened scientific supervision of Chinese medicine and promoted innovation through new regulations in January and February 2023[77] - The National Healthcare Security Administration issued the 2023 National Drug Catalogue, effective from January 1, 2024, including new drugs, rare disease drugs, and pediatric drugs[78] Shareholder and Investor Relations - The Company's annual report includes a Chairman's Statement (pages 5-14) and Management Discussion and Analysis (pages 16-26) discussing principal risks, uncertainties, and future business developments[193] - The Board proposes to amend the Company's memorandum and articles of association to comply with the Listing Rules' requirements, including the expansion of the paperless listing regime and electronic dissemination of corporate communications[191] - The Company's principal activity is investment holding, with the principal subsidiaries' activities detailed in note 14 of the financial statements[193] Corporate Social Responsibility - The company emphasizes the value of "achieving benefits while prioritizing righteousness" in its business philosophy, balancing economic benefits with ethical actions[114] - The company has established a comprehensive

Investment Rating - The report assigns a "Buy" rating to the company with a target price of HKD 8.67, representing a potential upside of 54% from the current price of HKD 5.63 [1][8][17]. Core Insights - The company has demonstrated sustained rapid growth since its listing in 2013, with a compound annual growth rate (CAGR) of 16.3% in revenue and 17.8% in net profit up to 2023, despite a slowdown in industry growth [5][9][17]. - The company emphasizes shareholder returns, having distributed over HKD 1.9 billion in dividends, with a payout ratio of approximately 42.1% in 2023 and a dividend yield of 8.02% [9][17]. - The core products, particularly in the nephrology sector, have shown strong competitive advantages, with significant sales growth in key products [6][11][17]. Financial Performance - For the fiscal year 2023, the company reported revenue of RMB 25.90 billion, a year-on-year increase of 10.7%, and a net profit of RMB 7.85 billion, up 14.9% [5][9]. - The company has improved its cash collection efficiency, with accounts receivable decreasing by 1.4% in 2023, while cash and cash equivalents grew by 17.9% to RMB 35.83 billion [9][11]. - The financial structure is healthy, with a reduction in accounts receivable turnover days by 11.3 days to 36.3 days [9]. Product Competitiveness - The company has strengthened its core product competitiveness, achieving sales of RMB 17.41 billion in the nephrology sector, with a notable 25.5% increase in sales of its key product, Yishen Huashi Granules [6][11]. - The pediatric and women's health product lines have also seen a revenue increase of 22.7%, with extensive coverage across medical institutions and pharmacies [6][11]. - The imaging segment has expanded its product line, achieving a market share increase for its gadopentetate dimeglumine injection from third to second nationally [6][12]. Research and Development - The company is focused on building a robust R&D pipeline, with six innovative drugs and eight generic drugs in development, collaborating with leading research institutions [7][15]. - Upcoming products include CT contrast agents expected to launch in 2024 and MRI contrast agents anticipated in 2025 [7][15]. Market Position and Strategy - The company has a significant market opportunity in the chronic kidney disease (CKD) sector, with a prevalence rate of 8.2% and a low awareness rate of 10% among the population, indicating substantial growth potential [17]. - The strategic focus on enhancing product coverage and optimizing brand positioning is expected to drive future revenue growth [12][17].

Investment Rating - The report suggests a positive investment outlook for 康臣药业 (1681.HK), indicating that the company is significantly undervalued with a PE ratio of 5.7 times, and recommends active attention to the stock [10]. Core Insights - 康臣药业 has demonstrated impressive financial performance with a revenue of 2.59 billion RMB in 2023, reflecting a year-on-year growth of 10.7%, and a net profit of 785 million RMB, up 14.9% [2][10]. - The company has a strong focus on shareholder returns, having distributed over 1.9 billion HKD in dividends since its listing in 2013, with a dividend payout ratio of 42% in 2023 and a dividend yield of 8.02% [10]. Financial Performance - The company has achieved a compound annual growth rate (CAGR) of 16.3% in revenue and 17.8% in net profit since its IPO in 2013, despite a slowdown in industry growth [2][10]. - Cash and cash equivalents increased by 17.9% to 3.583 billion RMB, while accounts receivable decreased by 1.4% in 2023, indicating improved operational efficiency [2]. Product Competitiveness - The core products, 尿毒清 and 益肾化湿颗粒, generated sales of 1.741 billion RMB, with a growth of 11.0%, and the latter saw a significant increase of 25.5% [4]. - The company has expanded its market reach, covering 38,000 terminal medical institutions and 260,000 pharmacies, with a notable growth in the妇儿 product segment, which increased by 22.7% [4]. R&D and Innovation - 康臣药业 is developing a rich pipeline of products, focusing on the kidney and imaging sectors, with 6 innovative drugs and 8 generic drugs in development [9]. - Collaborations with major research institutions aim to enhance R&D capabilities, with new imaging agents expected to launch in 2024 and 2025 [9]. Market Potential - The domestic prevalence of chronic kidney disease (CKD) is 8.2%, with a low awareness rate of 10.0%, indicating significant market potential for the company's products [10].

Core Viewpoint - 康臣药业 has announced the expiration of its 2013 Share Option Scheme, which will no longer offer or grant options after December 1, 2023, and has proposed a new 2024 Share Option Scheme to incentivize eligible participants starting January 1, 2023 [1] Summary by Relevant Sections - **2013 Share Option Scheme** - The 2013 Share Option Scheme was adopted on December 2, 2013, and is valid for 10 years until December 1, 2023 - As of the announcement date, there are 50.4639 million options granted but not yet exercised under this scheme [1] - **2024 Share Option Scheme Proposal** - The board recommends adopting the 2024 Share Option Scheme in accordance with the revised Listing Rules Chapter 17 - The new scheme aims to incentivize or reward eligible participants for their contributions to the group, effective from January 1, 2023 [1]

Revenue and Profit Growth - Revenue for the year ended December 31, 2023, was RMB 2,590,115,000, an increase of approximately 10.7% compared to the previous year[2] - Profit attributable to equity shareholders of the company for the year ended December 31, 2023, was RMB 784,534,000, an increase of approximately 14.9% compared to the previous year[2] - Basic and diluted earnings per share for the year ended December 31, 2023, were RMB 0.99 and RMB 0.98, respectively, representing increases of approximately 15.1% and 14.0% compared to the previous year[2] - Revenue from customer contracts in 2023 was RMB 2,590,115 thousand, a 10.7% increase from RMB 2,339,650 thousand in 2022[12] - The company achieved sales revenue of approximately RMB 2.59 billion in 2023, a year-on-year increase of 10.7%, with net profit attributable to equity shareholders of approximately RMB 780 million, up 14.9% year-on-year[66] - The company's revenue for 2023 was RMB 2,590,115,000, a 10.7% increase compared to RMB 2,339,650,000 in 2022[76] - The net profit attributable to shareholders for 2023 was RMB 784,534,000, a 14.9% increase from RMB 682,907,000 in 2022, with basic earnings per share of RMB 0.99, up 15.1% from RMB 0.86 in 2022[79] Segment Performance - Revenue from the nephrology drug segment in 2023 was RMB 1,741,298 thousand, up 11% from RMB 1,569,418 thousand in 2022[12] - Revenue from the gynecology and pediatric drug segment in 2023 was RMB 293,706 thousand, a 22.7% increase from RMB 239,393 thousand in 2022[12] - The Kangchen Pharmaceutical segment generated revenue of RMB 2,195,051 thousand in 2023, up 10.8% from RMB 1,981,051 thousand in 2022[16] - The Yulin Pharmaceutical segment generated revenue of RMB 395,064 thousand in 2023, up 10.2% from RMB 358,599 thousand in 2022[16] - The renal drug segment generated sales revenue of approximately RMB 1.74 billion in 2023, a year-on-year increase of 11.0%, with the flagship product Niaoduqing Granules contributing approximately RMB 1.65 billion, up 10.2% year-on-year[66] - The medical imaging contrast agent segment recorded sales revenue of approximately RMB 1.56 billion in 2023, a slight decrease of 4.6% year-on-year, with Iopamidol Injection passing consistency evaluation in December 2023[67] - The women and children's drug segment achieved sales revenue of approximately RMB 290 million in 2023, a year-on-year increase of 22.7%, driven by the success of Yuanlikang® Dextran Iron Oral Solution[67] - Yulin Pharmaceutical Division reported sales revenue of approximately RMB 400 million in 2023, a year-on-year increase of 10.2%, with profit of approximately RMB 40 million, marking the third consecutive year of recovery[67] Gross Profit and Operating Profit - Gross profit for the year ended December 31, 2023, was RMB 1,921,678,000, compared to RMB 1,762,912,000 in the previous year[4] - Operating profit for the year ended December 31, 2023, was RMB 884,967,000, compared to RMB 757,326,000 in the previous year[4] - Gross profit for the Kangchen Pharmaceutical segment in 2023 was RMB 1,721,408 thousand, a 9.3% increase from RMB 1,574,367 thousand in 2022[16] - Gross profit for the Yulin Pharmaceutical segment in 2023 was RMB 200,270 thousand, up 6.2% from RMB 188,545 thousand in 2022[16] - The gross profit for 2023 was RMB 1,921,678,000, a 9.0% increase from RMB 1,762,912,000 in 2022, with a gross margin of 74.2%, down 1.1 percentage points from 75.3% in 2022[77] Assets and Liabilities - Total assets as of December 31, 2023, were RMB 4,278,080,000, compared to RMB 3,622,671,000 in the previous year[6] - Net current assets as of December 31, 2023, were RMB 2,783,084,000, compared to RMB 2,272,183,000 in the previous year[6] - Total equity attributable to equity shareholders of the company as of December 31, 2023, was RMB 3,626,503,000, compared to RMB 3,145,139,000 in the previous year[7] - Total assets for the reportable segments in 2023 were RMB 5,488,737 thousand, a 13.1% increase from RMB 4,853,413 thousand in 2022[16] - Total liabilities for the reportable segments in 2023 were RMB 1,482,510 thousand, up 10.1% from RMB 1,346,440 thousand in 2022[16] - The company's inventory balance as of December 31, 2023, was RMB 367,087,000, a 33.0% increase from RMB 276,080,000 at the end of 2022[80] - The company's trade receivables and notes balance as of December 31, 2023, was RMB 255,838,000, a 1.4% decrease from RMB 259,562,000 at the end of 2022[79] - The company's trade payables balance as of December 31, 2023, was RMB 83,098,000, a 38.7% increase from RMB 59,891,000 at the end of 2022[81] - Cash and cash equivalents stood at RMB 2,748,262 thousand in 2023, up from RMB 2,450,173 thousand in 2022[56] - Trade payables increased to RMB 83,098 thousand in 2023 from RMB 59,891 thousand in 2022[57] - Contract liabilities decreased to RMB 16,008 thousand in 2023 from RMB 37,714 thousand in 2022[58] - Bank loans due within one year or on demand amounted to RMB 503,418 thousand in 2023, up from RMB 450,521 thousand in 2022[60] - Deferred income at the end of 2023 was RMB 20,730 thousand, slightly down from RMB 21,190 thousand in 2022[62] - Lease liabilities due within one year or on demand were RMB 4,218 thousand in 2023, compared to RMB 3,708 thousand in 2022[64] - Cash and bank balances increased by 12.2% to RMB 2,748,262,000 as of December 31, 2023, compared to RMB 2,450,173,000 in 2022[83] - Total loans and borrowings increased by 11.7% to RMB 503,418,000 as of December 31, 2023, compared to RMB 450,521,000 in 2022[83] - Capital-to-debt ratio decreased to 13.9% as of December 31, 2023, from 14.3% in 2022, driven by increased operating profits[85] - Capital commitments amounted to RMB 532,903,000 as of December 31, 2023, up from RMB 450,758,000 in 2022[88] Dividends and Shareholder Returns - The company proposed a final dividend of HK$0.3 per share for the year ended December 31, 2023, bringing the total dividend for the year to HK$0.45 per share[2] - Total dividends paid to equity shareholders in 2023 were RMB 330,190 thousand, including an interim dividend of RMB 109,068 thousand and a proposed final dividend of RMB 221,122 thousand[34] - The company proposed a final dividend of HKD 0.3 per share for 2023, bringing the total dividend for the year to HKD 0.45 per share, representing approximately 42% of the annual profit[73] - The company proposed a final dividend of HK$0.3 per share for the year ended December 31, 2023[104][106] - The final dividend is subject to approval by shareholders at the AGM on May 31, 2024, and is expected to be paid on or around June 21, 2024[106] - Shareholders must submit completed share transfer documents by June 12, 2024, to be eligible for the final dividend[107] Government Subsidies and Other Income - Other income in 2023 was RMB 118,498 thousand, a 110.2% increase from RMB 56,385 thousand in 2022, primarily due to higher government subsidies[19] - Unconditional government subsidies amounted to RMB 53,901,000 in 2023, a significant increase from RMB 16,275,000 in 2022, primarily due to operational subsidies and tax refunds for subsidiaries in mainland China[20] - Conditional government subsidies recognized in the 2023 consolidated income statement totaled RMB 2,260,000, slightly higher than RMB 2,241,000 in 2022[20] Employee Costs and R&D - Employee costs increased to RMB 483,508,000 in 2023 from RMB 445,669,000 in 2022, driven by higher salaries, wages, bonuses, and benefits[21][22] - R&D costs decreased to RMB 108,535,000 in 2023 from RMB 117,539,000 in 2022, including RMB 23,268,000 related to employee costs and depreciation[25] - The company's R&D achievements in 2023 included the completion of Phase II clinical statistics for Huangqi San Micro-pills and the approval of Iopamidol Injection's consistency evaluation[68] - The company's joint R&D efforts with WuXi AppTec resulted in the SK-07 renal innovative drug entering Phase I clinical trials ahead of schedule[69] - Total employee count increased to 3,127 as of December 31, 2023, from 3,009 in 2022, with total employee costs rising to RMB 483,508,000 from RMB 445,669,000[88] Tax and Financial Costs - Current tax expenses in mainland China amounted to RMB 65,363,000 in 2023, up from RMB 43,561,000 in 2022, driven by higher income tax provisions[26] - Deferred tax liabilities related to expected dividends from mainland China subsidiaries stood at RMB 18,045,000 as of December 31, 2023, down from RMB 19,915,000 in 2022[28] - Certain subsidiaries in mainland China, such as Guangzhou Kangchen and Inner Mongolia Kangchen, enjoy preferential income tax rates of 15% from 2023 to 2025 and 2023 to 2030, respectively[27] - Tax expenses for 2023 amounted to RMB 77,149 thousand, compared to RMB 62,696 thousand in 2022, with a nominal tax rate impact of RMB 233,220 thousand and tax relief impact of RMB (226,201) thousand[29] - Financing costs rose to RMB 21,264,000 in 2023, up from RMB 10,933,000 in 2022, mainly due to increased bank loan interest expenses[22] Inventory and Depreciation - Inventory costs increased to RMB 668,437,000 in 2023 from RMB 576,738,000 in 2022, with RMB 119,169,000 attributed to employee costs and depreciation[25] - Depreciation and amortization expenses totaled RMB 78,089,000 in 2023, compared to RMB 76,355,000 in 2022, with significant contributions from property, plant, and equipment[24] - The company's inventory cost of goods sold increased to RMB 668,437 thousand in 2023 from RMB 576,738 thousand in 2022[50] - Total inventory value rose to RMB 367,087 thousand in 2023, up from RMB 276,080 thousand in 2022, with significant increases in raw materials, work-in-progress, and finished goods[52] - Depreciation expenses related to right-of-use assets rose to RMB 6,505 thousand in 2023 from RMB 5,875 thousand in 2022[40] Cash Flow and Financing - The company's net cash generated from operating activities in 2023 was RMB 818,973,000, a 13.6% decrease from RMB 947,679,000 in 2022[82] - The company's net cash used in investing activities in 2023 was RMB 231,772,000, a 37.2% decrease from RMB 368,804,000 in 2022[82] - The company's net cash used in financing activities in 2023 was RMB 280,100,000, an 18.1% decrease from RMB 342,205,000 in 2022[82] - The company issued 4,044,154 ordinary shares in 2023 due to employee stock option exercises, compared to 866,608 shares in 2022[87] - Four patents with a book value of RMB 1,897,000 were pledged as collateral for loans as of December 31, 2023[89] - The company issued a total of 4,044,154 ordinary shares in 2023 due to employee stock option exercises, with a total consideration of approximately HKD 15,872,000 (approximately RMB 14,202,000)[103] - A total of 970,200 ordinary shares were issued at prices ranging from HK$3.28 to HK$4.476 per share, with a total consideration of approximately HK$3,843,000 (approximately RMB 3,495,000)[104] - The weighted average closing price of the company's shares immediately before the exercise date of the share options was approximately HK$5.01[104] Property, Plant, and Equipment - Investment properties had a net book value of RMB 14,634 thousand as of December 31, 2023, down from RMB 15,127 thousand in 2022[36] - Future undiscounted lease payments for investment properties as of December 31, 2023, totaled RMB 1,219 thousand, with RMB 222 thousand due within one year[37] - Property, plant, and equipment had a net book value of RMB 739,056 thousand as of December 31, 2023, slightly down from RMB 746,213 thousand in 2022[38] - The total cost of right-of-use assets increased to RMB 161,617 thousand in 2023, up from RMB 159,246 thousand in 2022, with additions of RMB 2,371 thousand in 2023 compared to RMB 846 thousand in 2022[39][40] - The company added RMB 1,000 thousand to its intangible assets in 2023, bringing the total cost to RMB 510,516 thousand[43][44] - Accumulated amortization of intangible assets increased to RMB 221,887 thousand in 2023 from RMB 192,123 thousand in 2022[44][45] - The net book value of intangible assets decreased to RMB 283,140 thousand in 2023 from RMB 311,904 thousand in 2022[47] - The company's prepayments for property, plant, and equipment rose to RMB 41,358 thousand in 2023 from RMB 24,747 thousand in 2022[49] Trade Receivables and Payables - Trade receivables, net of impairment, increased to RMB 195,068 thousand in 2023 from RMB 163,237 thousand in 2022[53] - Trade receivables and bills receivable totaled RMB 255,838 thousand in 2023, a slight decrease from RMB 259,562 thousand in 2022[54] - Other receivables of RMB 3,253 thousand were fully impaired as of December 31, 2023, compared to RMB 524 thousand in 2022[54] - Prepayments for raw materials and other items increased to RMB 17,823 thousand in 2023 from RMB 11,583 thousand in 2022[55] Risk Management and Sustainability - The company faces currency risk due to transactions primarily denominated in RMB and HKD, with no hedging against foreign exchange risk[86] - The company maintains a prudent treasury policy, focusing on liquidity management and credit risk reduction[84] - The company adheres to environmental sustainability practices, encouraging resource conservation and recycling[91] Regulatory and Market Environment - The National Medical Insurance Bureau issued the "National Basic Medical Insurance, Work Injury Insurance, and Maternity Insurance Drug List (2023)" on December 13, 2023, which will be officially implemented from January 1, 2024[95] - The National Medical Insurance Bureau issued a notice at the end of 2023 to promote fair, transparent, and balanced inter-provincial pricing for drugs with the same generic name, dosage form, specification, and manufacturer[96] Corporate Governance and Audits - The company's Audit Committee reviewed the financial controls, risk management, and internal control systems, ensuring effective systems and sufficient resources for financial reporting and internal audit functions[101] - The company's external auditor, KPMG, confirmed that the financial data disclosed in the announcement matched the audited consolidated financial statements for the year ended December 31, 2023[102] Shareholder Meetings and Reporting - The Annual General Meeting (AGM) will be held on May 31, 2024 (Friday)[105] - The company will suspend share transfer registration from May 28, 2024, to May 31, 2024, for the AGM[107] - The annual report for the year ended December 31, 2023, will be published on the company's website and the HKEX website[108] Production Capacity and Brand Value - The company's production capacity continued to improve, with the Xinjiang Horgos Base Phase II production line project commencing

Financial Performance - Revenue for the six months ended June 30, 2023, was RMB 1,119,679,000, representing a 12.70% increase from RMB 993,528,000 in the same period of 2022[8]. - Profit before taxation increased by 22.00% to RMB 377,605,000 compared to RMB 309,517,000 in the previous year[8]. - Profit attributable to equity shareholders of the Company was RMB 347,894,000, up 17.24% from RMB 296,729,000 in the prior period[8]. - Basic earnings per share rose by 17.77% to RMB 0.4408 from RMB 0.3743 in the same period last year[8]. - The Group's gross profit for the first half of 2023 was RMB 836,416,000, reflecting a 13.3% increase from RMB 738,091,000 in the same period of 2022, with an average gross profit margin of 74.7%[14]. - Other income for the first half of 2023 was a net income of RMB 29,634,000, up from RMB 25,451,000 in the same period of 2022, primarily due to increased interest income[16]. - The Group's consolidated profit before taxation for the first half of 2023 was RMB 377,605,000, an increase from RMB 309,517,000 in the previous year, representing a growth of 21.9%[114]. - The company reported a total comprehensive income for the period of RMB 347,793,000, compared to RMB 295,583,000 in the previous year, indicating overall financial health[75]. Assets and Equity - Total assets as of June 30, 2023, amounted to RMB 5,027,374,000, reflecting a 2.76% increase from RMB 4,892,380,000 at the end of 2022[8]. - Total equity attributable to equity shareholders increased by 4.81% to RMB 3,296,266,000 from RMB 3,145,139,000 in the previous year[8]. - Net assets per share improved by 4.36% to RMB 4.07 from RMB 3.90[8]. - The Company's shareholders' equity increased to approximately RMB 3,586,391,000 as of June 30, 2023, up from RMB 3,439,005,000 as of December 31, 2022, representing a growth of approximately 4.3%[43]. - Total current assets as of June 30, 2023, amounted to RMB 3,784,416,000, an increase from RMB 3,622,671,000 at the end of 2022[77]. - Total non-current assets decreased to RMB 1,242,958,000 from RMB 1,269,709,000, primarily due to changes in property and equipment[77]. - The total comprehensive income for the period includes profit for the period and other comprehensive income, contributing to the overall equity changes[86]. Cash Flow and Financing - Net cash inflow from operating activities was RMB 253,975,000, a decrease of approximately 23.7% from RMB 332,749,000 in the same period of 2022[35]. - Cash and bank balances increased by approximately 7.9% to RMB 2,644,196,000 from RMB 2,450,173,000 as of December 31, 2022[36]. - The total loans and borrowings increased by approximately 17.2% to RMB 528,012,000 from RMB 450,521,000 as of December 31, 2022[36]. - The gearing ratio increased to 16.0% as of June 30, 2023, up from 14.3% as of December 31, 2022[39]. - The Group's finance costs for the first half of 2023 were RMB 7,207,000, representing a significant increase of approximately 76.0% compared to RMB 4,094,000 for the same period in 2022[24]. - The Group's secured bank loans were RMB 30,000,000, backed by four patents with a carrying value of RMB 1,979,000 as of June 30, 2023[167]. Inventory and Receivables - As of June 30, 2023, the balance of inventories was RMB 343,463,000, an increase of 24.4% from RMB 276,080,000 as of December 31, 2022[31]. - The Group's inventory turnover days increased to 196.8 days, up by 32.5 days from 164.3 days in 2022, due to increased inventory reserves[31]. - As of June 30, 2023, trade receivables decreased by approximately 26.3% to RMB 191,365,000 from RMB 259,562,000 as of December 31, 2022[33]. - The total trade receivables, net of loss allowance, decreased to RMB 191,365,000 as of June 30, 2023, from RMB 259,562,000 as of December 31, 2022, indicating a decline of about 26.3%[155]. Research and Development - The management discussion highlighted ongoing investments in research and development for new dermatologic and gastroenterology medicines[10]. - Research and development costs for the six months ended June 30, 2023, amounted to RMB 47,962,000, a decrease from RMB 49,084,000 in the same period of 2022[122]. - The Group plans to solidify its nephrology product foundation, expand gynecology and pediatrics products, and achieve breakthroughs in imaging products in the second half of 2023[66]. Market and Future Outlook - Future outlook includes plans for market expansion and potential acquisitions to enhance product offerings and market presence[10]. - The pharmaceutical industry policies in 2023 emphasize deepening healthcare reform, improving the health insurance system, and promoting the development of traditional Chinese medicine[62]. - The Group aims to integrate in-hospital/out-of-hospital services and online/offline operations to seize post-pandemic development opportunities[66]. - The Group achieved a ranking of 22nd in the "2022 China TOP 100 Chinese Medicine Enterprises List," an increase of 7 places compared to the previous year[65]. Compliance and Governance - There were no incidents of significant non-compliance with laws and regulations relevant to the Group's operations during the first half of 2023[59]. - KPMG conducted an independent review of the interim financial report, ensuring compliance with Hong Kong standards[95]. - The interim financial report was authorized for issue on August 24, 2023, and is prepared in accordance with HKAS 34[95].

Financial Performance - Revenue for the six months ended June 30, 2023, was RMB 1,119,679,000, an increase of approximately 12.7% compared to RMB 993,528,000 for the same period in 2022[2] - Profit attributable to equity shareholders for the six months ended June 30, 2023, was RMB 347,894,000, representing an increase of approximately 17.2% from RMB 296,729,000 in the prior year[2] - Basic and diluted earnings per share for the six months ended June 30, 2023, were approximately RMB 0.4408 and RMB 0.4367, respectively, reflecting increases of about 17.8% and 17.0% compared to RMB 0.3743 and RMB 0.3733 in 2022[2] - The company reported a total comprehensive income of RMB 347,793,000 for the six months ended June 30, 2023, compared to RMB 295,583,000 for the same period in 2022[4] - The company recorded a net profit before tax of RMB 377,605,000 for the six months ended June 30, 2023, compared to RMB 309,517,000 in 2022, representing an increase of approximately 21.9%[13] - The company's net profit attributable to equity shareholders for the first half of 2023 was RMB 347,894,000, a 17.2% increase from RMB 296,729,000 in the same period last year[56] Dividends - The board declared an interim dividend of HKD 0.15 per share for the six months ended June 30, 2023[2] - The company declared an interim dividend of HKD 0.15 per share, totaling RMB 109,068,000, compared to no dividend declared for the same period in 2022[37] - The company announced an interim dividend of HKD 0.15 per share, totaling approximately RMB 109,068,000, expected to be paid on or around September 20, 2023[72] Assets and Liabilities - Total assets as of June 30, 2023, were RMB 3,704,032,000, compared to RMB 3,541,892,000 as of December 31, 2022[6] - Current assets as of June 30, 2023, totaled RMB 3,784,416,000, an increase from RMB 3,622,671,000 at the end of 2022[5] - The net asset value attributable to equity shareholders as of June 30, 2023, was RMB 3,296,266,000, compared to RMB 3,145,139,000 at the end of 2022[6] - The total liabilities for the reporting segments as of June 30, 2023, were RMB 1,346,012,000, compared to RMB 1,346,440,000 as of December 31, 2022, indicating a slight decrease[12] - The total bank financing as of June 30, 2023, was RMB 1,463,060,000, slightly up from RMB 1,459,975,000 as of December 31, 2022[35] - The bank loans outstanding as of June 30, 2023, were RMB 528,012,000, up from RMB 450,521,000 as of December 31, 2022, representing a 17% increase[34] Inventory and Receivables - The total inventory as of June 30, 2023, was RMB 343,463,000, an increase from RMB 276,080,000 as of December 31, 2022, representing a rise of 24.4%[30] - Trade receivables and other receivables totaled RMB 240,813,000 as of June 30, 2023, down from RMB 295,663,000 as of December 31, 2022, indicating a decline of 18.6%[31] - Trade receivables decreased by approximately 26.3% to RMB 191,365,000 compared to RMB 259,562,000 at the end of 2022[58] Costs and Expenses - Research and development costs for the six months ended June 30, 2023, were RMB 47,962,000, slightly down from RMB 49,084,000 in 2022[18] - Distribution costs increased by approximately 10.6% to RMB 362,026,000, attributed to enhanced marketing and academic promotion activities[52] - The total employee cost for the six months ended June 30, 2023, was RMB 217,560,000, compared to RMB 192,163,000 in the same period of 2022[65] Cash and Cash Equivalents - The cash and cash equivalents in mainland China amounted to RMB 2,383,575,000 as of June 30, 2023, up from RMB 2,071,203,000 as of December 31, 2022, showing an increase of 15.1%[32] - Cash and bank balances increased by approximately 7.9% to RMB 2,644,196,000 as of June 30, 2023, compared to RMB 2,450,173,000 at the end of 2022[60] Capital Expenditure and Commitments - The company acquired property, plant, and machinery at a cost of RMB 7,414,000 for the six months ended June 30, 2023, a decrease from RMB 37,459,000 for the same period in 2022[27] - The company had unfulfilled capital commitments for property, machinery, and equipment amounting to RMB 448,952,000 as of June 30, 2023, compared to RMB 450,758,000 as of December 31, 2022[46] Stock and Shareholder Information - The average number of ordinary shares in issue decreased to 789,314,000 as of June 30, 2023, from 792,824,000 as of June 30, 2022[23] - The company exercised a total of 3,237,000 stock options during the six months ended June 30, 2023, raising RMB 11,335,000, compared to 866,000 options exercised in the same period of 2022[40] - The company issued a total of 3,237,320 shares due to employee stock options exercised, compared to 866,608 shares in the same period of 2022, with a total consideration of approximately HKD 12,744,000 (approximately RMB 11,335,000)[64] Compliance and Governance - The company maintained compliance with all financial covenants related to drawn loans as of June 30, 2023, with no violations reported[35] - The audit committee, consisting of three independent non-executive directors, reviewed the interim financial information[77] - All directors complied with the standard code regarding securities trading during the six months ended June 30, 2023[75] Market Position and Strategy - The company ranked 22nd in the "2022 China Traditional Chinese Medicine Enterprises TOP 100" list, an improvement of 7 positions from the previous year[71] - The company aims to leverage opportunities in the post-pandemic era by enhancing product collaboration and integration across various channels and sectors[71] - The management is focused on addressing operational risks, financial risks, and compliance risks while adapting to recent developments in national policies affecting the pharmaceutical industry[67]

Financial Performance - The Group recorded sales revenue of approximately RMB2.34 billion for the year ended December 31, 2022, representing an increase of approximately 14.4% over the previous year[12]. - Profit attributable to equity shareholders of the Company was approximately RMB0.68 billion, reflecting an increase of approximately 15.7% compared to the prior year[12]. - The Group's revenue for 2022 was RMB 2,339,650,000, an increase of approximately 14.4% compared to RMB 2,044,660,000 in 2021[82]. - The profit before taxation for 2022 was RMB 746,393,000, a 7.3% increase compared to RMB 695,861,000 in 2021[75]. - The average gross profit margin for 2022 was approximately 75.3%, an increase of 0.6% from 74.7% in the previous year[83]. - The annual profit attributable to equity shareholders for 2022 was RMB 682,907,000, an increase of approximately 15.7% compared to RMB 590,172,000 in 2021[96]. - Basic earnings per share for 2022 increased by approximately 16.2% to RMB 0.86 from RMB 0.74 in 2021[96]. - The Group's gross profit for 2022 was RMB 1,762,912,000, representing a growth of approximately 15.4% from RMB 1,527,336,000 in 2021[83]. Sales Revenue Breakdown - Sales revenue from the Consun Pharmaceutical Segment amounted to approximately RMB1.98 billion, representing a year-on-year increase of approximately 14.3%[15]. - Sales revenue of kidney medicines amounted to approximately RMB1.57 billion in 2022, representing a year-on-year increase of approximately 15.0%[16]. - The Uremic Clearance Granules achieved sales revenue of approximately RMB1.50 billion, with a year-on-year increase of approximately 14.4%[16]. - The Kidney Repair and Edema Alleviation Granules achieved sales revenue of approximately RMB0.07 billion in 2022, representing a year-on-year increase of approximately 31.1%[18]. - Sales revenue of medical contrast medium was approximately RMB0.16 billion in 2022, representing a year-on-year increase of 16.1%[19]. - Sales revenue of gynecology and pediatrics drugs was approximately RMB0.24 billion in 2022, representing a year-on-year increase of 16.3%[20]. - The Yulin Pharmaceutical Segment recorded sales revenue of approximately RMB0.36 billion, representing a year-on-year increase of approximately 15.1%[21]. Research and Development - The R&D center focuses on independent R&D of traditional Chinese medicine and aims to rapidly increase product lines under the "1+6" strategy, targeting international standards over the next 10 years[27]. - The Kidney Repair and Edema Alleviation Granules received a national invention patent and new drug certificate, confirming safety and efficacy through clinical studies[28]. - Research on Kidney Repair and Edema Alleviation Granules published in SCI-indexed journal "Frontiers in Pharmacology," demonstrating significant improvements in kidney function and reduction of urinary protein[32]. - Yulin Pharmaceutical's Jigucao Capsules for hepatitis B published in "Hepatology International," showcasing its efficacy and competitive advantages in treating liver diseases[35]. - The study on Jigucao Capsules clarified its compound composition and treatment mechanism through antiviral experiments and network pharmacology[36]. - The company aims to expand its product portfolio and enhance R&D capabilities to meet both domestic and international market demands[27]. Strategic Initiatives - The company plans to enhance academic cooperation with public hospitals to increase market share beyond centralized procurement[19]. - The company will introduce new products through research and development and active cooperation with external parties to improve production chains[19]. - The Group plans to strengthen its leading position in nephrology and expand its product lines in gynecology and pediatrics[68]. - The Group will actively participate in centralized procurement for Chinese medicines to maintain pricing stability and explore new marketing strategies[72]. - The Group aims to enhance supply chain protection and improve workforce capabilities to drive future business growth[68]. - The new marketing strategy for the new retail sector has shown significant results, particularly during key sales events like "Double Eleven"[26]. Corporate Governance - The Company has adopted and complied with the Corporate Governance Code during the year ended 31 December 2022[184]. - All Directors have confirmed compliance with the Model Code regarding securities transactions for the year ended 31 December 2022[185]. - The company adopted and complied with the corporate governance code provisions as outlined in the Hong Kong Stock Exchange's Listing Rules Appendix 14 for the year ended December 31, 2022[186]. - The Board of Directors consists of eight members, including four executive directors, one non-executive director, and three independent non-executive directors[190]. - Three independent non-executive directors represent one third or more of the Board, with one having accounting professional qualifications[199]. - The roles of Chairman and Chief Executive Officer are clearly separated to enhance independence and ensure a balance of power[197]. - The company has established written guidelines for relevant employees regarding dealings in the company's securities, ensuring compliance with the Model Code[189]. Market and Industry Trends - The prevalence of chronic kidney diseases in the adult population in China is 10.8%, with over 132 million patients[47]. - The "Blue Ribbon – Public Welfare Chronic Disease Management" project has attracted over 15,000 patients, providing a data foundation for future kidney disease drug research[48]. - The Chinese medicine industry is expected to continue its development towards standardization and internationalization, supported by various government policies during the 14th Five-Year Plan period[135]. - The strategic documents released by the State have elevated the importance of Chinese medicine within the broader context of national health strategies[137]. - The government’s support is anticipated to lead to increased investment and growth opportunities within the Chinese medicine sector[135]. Leadership and Management - The overall management and strategic direction of the company are overseen by experienced executives with extensive backgrounds in the pharmaceutical and insurance industries[142]. - Ms. Li holds a master's degree in business administration and has obtained 3 invention patents, contributing to the company's product research and development[150]. - The company has been recognized for its leadership in the pharmaceutical industry, with Ms. Li receiving multiple awards including the Best Business Leader Award in 2017 and the 2022 Public Charity Figure Award[149]. - Professor Zhu Quan, the chief scientist, has over 50 years of experience in the pharmaceutical industry and has held various significant positions in traditional Chinese medicine[152]. - The leadership team includes experienced professionals with extensive backgrounds in both academia and the pharmaceutical industry, enhancing the company's strategic direction[152]. Operational Efficiency - The Group's total assets as of December 31, 2022, were RMB 4,892,380,000, a 12.1% increase from RMB 4,362,738,000 in 2021[76]. - The total equity attributable to equity shareholders of the Company was RMB 3,145,139,000, representing a 20.1% increase from RMB 2,617,705,000 in 2021[76]. - The Group's total staff costs for the year ended December 31, 2022, were RMB 445,669,000, compared to RMB 365,996,000 in 2021, indicating a rise in employee expenses[117]. - The Group employed a total of 3,009 employees as of December 31, 2022, an increase from 2,768 employees in 2021[117]. - The gearing ratio decreased to 14.3% as of December 31, 2022, down from 22.9% in 2021, attributed to reduced bank borrowings and increased total equity[111].

Financial Performance - For the year ended December 31, 2022, the revenue was RMB 2,339,650,000, an increase of approximately 14.4% compared to the year ended December 31, 2021[2] - The profit attributable to equity shareholders for the year ended December 31, 2022, was RMB 682,907,000, representing an increase of approximately 15.7% from the previous year[2] - Basic and diluted earnings per share for the year ended December 31, 2022, were approximately RMB 0.86, an increase of about 16.2% and 17.8% respectively compared to the previous year[2] - The gross profit for the year was RMB 1,762,912,000, compared to RMB 1,527,336,000 in the previous year[4] - Operating profit for the year was RMB 757,326,000, an increase from RMB 708,766,000 in the previous year[4] - Total comprehensive income for the year was RMB 683,928,000, compared to RMB 587,280,000 in the previous year[5] - The pre-tax profit for 2022 was RMB 746,393,000, an increase from RMB 695,861,000 in 2021, reflecting a growth of approximately 7.3%[30] - The actual tax expense for 2022 was RMB 62,696,000, down from RMB 108,744,000 in 2021, showing a decrease of about 42.4%[30] - The total dividend declared for the year was RMB 208,065,000, with a proposed final dividend of HKD 0.30 per share[35] Assets and Liabilities - Non-current assets as of December 31, 2022, totaled RMB 1,269,709,000, a slight decrease from RMB 1,306,909,000 in the previous year[6] - Current assets included cash and cash equivalents of RMB 2,450,173,000, an increase from RMB 2,196,323,000 in the previous year[6] - Total equity attributable to equity shareholders was RMB 3,145,139,000, up from RMB 2,617,705,000 in the previous year[7] - The total assets of the reporting segments increased to RMB 4,853,413,000 in 2022 from RMB 4,352,646,000 in 2021, reflecting a growth of 11.5%[16] - The total liabilities of the reporting segments decreased slightly to RMB 1,346,440,000 in 2022 from RMB 1,416,885,000 in 2021, a reduction of 4.9%[16] Revenue Breakdown - Revenue from customer contracts for 2022 reached RMB 2,339,650,000, an increase of 14.4% from RMB 2,044,660,000 in 2021[11] - The major product lines include nephrology drugs with revenue of RMB 1,569,418,000, up from RMB 1,364,683,000 in 2021, representing a growth of 15.0%[11] - The leading product, Uremic Granules, generated sales revenue of approximately RMB 1.50 billion, with a year-on-year growth of about 14.4%[63] - Sales revenue from the nephrology segment was approximately RMB 1.57 billion, reflecting a year-on-year growth of about 15.0%[63] - The sales revenue of medical imaging contrast agents was approximately RMB 160 million in 2022, with a year-on-year increase of 16.1%[64] - The sales revenue of women's and children's medications was around RMB 240 million in 2022, showing a year-on-year growth of 16.3%[64] - Yulin Pharmaceutical Division achieved sales revenue of approximately RMB 360 million, with a year-on-year growth of about 15.1%[64] Costs and Expenses - Employee costs for 2022 totaled RMB 445,669,000, up from RMB 365,996,000 in 2021, representing a year-over-year increase of approximately 21.8%[22] - Distribution costs increased by approximately 24.5% to RMB 771,960,000 in 2022, primarily due to increased marketing and academic promotion activities[85] - The administrative expenses increased by approximately 15.2% to RMB 322,504,000 in 2022, driven by higher R&D and labor costs[86] - Research and development costs for 2022 were RMB 117,539,000, compared to RMB 102,160,000 in 2021, indicating an increase of about 15.0%[24] - The total cost of inventory sold in 2022 was RMB 576,738,000, up from RMB 517,324,000 in 2021, indicating a year-over-year increase of 11.5%[47] Shareholder Information - The board proposed a final dividend of HKD 0.3 per share for the year ended December 31, 2022, subject to shareholder approval at the annual general meeting[115] - The proposed final dividend is subject to approval at the annual general meeting on May 31, 2023, and if approved, is expected to be paid around June 21, 2023[117] - The company repurchased 15,761,000 shares during the year, impacting the weighted average number of shares[32] - The company issued a total of 866,608 shares at a price between HKD 3.28 and HKD 4.01 due to employee stock options, with a total consideration of approximately HKD 3,171,000 (about RMB 2,638,000)[114] Market and Strategic Developments - The company plans to strengthen its position in the nephrology sector and expand its product lines, particularly in women's and children's health, while also enhancing its OTC offerings[80] - The company is collaborating with WuXi AppTec and Betta Pharmaceuticals on the development of innovative small molecule drugs for kidney disease and its complications, with three drugs currently in progress[70] - The company has completed registrations for several products in international markets, including Indonesia and the United States[65] - The company received TGA certification in Australia, allowing its products to be legally sold in the Australian market, which supports its international expansion strategy[79] - The company successfully renewed its products in the National Medical Insurance Catalog, including pain-relieving soft capsules and chicken bone grass capsules[65] Recognition and Awards - The company received the first prize in the 2022 China Integrative Medicine Science and Technology Award for its innovative diabetes kidney disease treatment strategy[67] - The company ranked 29th in the "Top 100 Chinese Traditional Medicine Enterprises" list, showcasing its strong brand influence and product performance[75] - The company's brand value reached 6.416 billion yuan, an increase of 1.432 billion yuan from 2021, reflecting its strong market presence[76] - The company was recognized in the "Top 50 Comprehensive Competitiveness of Traditional Chinese Medicine" list, reaffirming its leadership in the kidney disease market[77] - The company received the "2022 ESG Practice Model Award" for its outstanding contributions in the public welfare sector[78] Future Outlook - The company plans to optimize its business layout and enhance supply chain capabilities to ensure sustainable and stable growth in the future[81] - The average budgeted sales growth rate over a five-year period is projected at 11.6%, down from 14.3% in 2021[45] - The company expects to benefit from a reduced tax rate of 10% for small and micro enterprises in 2022, consistent with the previous year[28] - The company is actively responding to policy changes by optimizing its business structure, promoting transformation and upgrading, accelerating new product development, and managing costs effectively[105]

Financial Performance - For the six months ended June 30, 2022, the Group's revenue was RMB 993,528,000, representing an increase of approximately 12.1% compared to RMB 886,526,000 for the same period last year[10]. - Gross profit for the same period was RMB 738,091,000, an increase of 11.6% from RMB 661,240,000[10]. - Profit before taxation was RMB 309,517,000, showing a slight increase of 0.6% from RMB 307,691,000[10]. - Profit attributable to equity shareholders of the Company was RMB 296,729,000, reflecting an 18.4% increase from RMB 250,644,000[10]. - Basic earnings per share increased by 19.5% to RMB 0.3743 from RMB 0.3132[10]. - The Group's gross profit margin was 74.3%, slightly down from 74.6%[10]. - Revenue for the six months ended June 30, 2022, was RMB 993,528,000, an increase of 12.1% from RMB 886,526,000 in the same period of 2021[81]. - Gross profit for the same period was RMB 738,091,000, representing a 11.6% increase from RMB 661,240,000 in 2021[120]. - The profit attributable to equity shareholders for the six months ended June 30, 2022, was RMB 296,729,000, an increase of 18.4% compared to RMB 250,644,000 for the same period in 2021[147]. Assets and Liabilities - Total assets as of June 30, 2022, were RMB 4,345,942,000, a decrease of 0.4% from RMB 4,362,738,000[10]. - Total equity attributable to equity shareholders of the Company increased by 5.4% to RMB 2,758,673,000 from RMB 2,617,705,000[10]. - The net assets per share increased by 7.6% to RMB 3.42 from RMB 3.18[10]. - Total non-current assets as of June 30, 2022, were RMB 1,292,824,000, a slight decrease from RMB 1,306,909,000 at the end of 2021[85]. - Current assets totaled RMB 3,053,118,000, showing a marginal decrease from RMB 3,055,829,000 at the end of 2021[85]. - The Group's total liabilities as of June 30, 2022, were RMB 718,796,000, a slight decrease from RMB 750,214,000 as of December 31, 2021[170]. - Bank loans, both secured and unsecured, totaled RMB 466,424,000 as of June 30, 2022, down from RMB 599,302,000 as of December 31, 2021, indicating a decrease of 22.1%[173]. Cash Flow - The net cash generated from operating activities in the first half of 2022 was RMB 332,749,000, an increase of approximately 71.8% compared to RMB 193,722,000 in the same period of 2021[38][40]. - Cash and cash equivalents at June 30, 2022, were RMB 1,940,625,000, a decrease of approximately 11.6% from RMB 2,196,323,000 as of December 31, 2021[42][43]. - The company reported a net cash used in investing activities of RMB 291,862 for the first half of 2022, compared to RMB 321,584 in the prior year[97]. - Financing activities resulted in a net cash outflow of RMB 302,234 for the six months ended June 30, 2022, compared to RMB 98,255 in the same period of 2021[97]. Expenses - Distribution costs increased by approximately 18.3% to RMB 327,422,000, driven by increased marketing and academic promotion campaigns[20]. - Administrative expenses rose by approximately 31.9% to RMB 135,299,000, mainly due to increased research and development expenses and staff costs[22]. - Research and development costs for H1 2022 were RMB 49,084,000, compared to RMB 34,377,000 in H1 2021, reflecting a significant increase of 42.7%[136]. - Staff costs, including salaries and benefits, totaled RMB 192,163,000 in H1 2022, up from RMB 181,368,000 in H1 2021, an increase of 5.4%[134]. Market and Operational Insights - Sales of kidney medicines increased by 14.0%, with Uremic Clearance Granules maintaining its leading market position; orthopedic medicines saw a significant increase of approximately 202.9%[14]. - The Group faced challenges in the pharmaceutical industry due to factors such as centralized procurement, medical insurance payment control, and rising raw material prices[76][77]. - Despite market pressures, the Group maintained positive growth in key indicators including sales revenue, profit, and cash flow[76][77]. - The Group improved production and operational efficiency by reducing costs and enhancing effectiveness[76][77]. - The Horgos production base commenced operations, aiding in overcoming challenges faced during the reporting period[76][77]. Shareholder Information - The company did not recommend an interim dividend for the six months ended June 30, 2022, and will consider a final dividend based on previous years' levels[79]. - Final dividends for the previous financial year of HKD0.2 per share were approved and paid during the interim period, totaling RMB 127,492,000, down from RMB 133,950,000 the previous year[185]. - The issued share capital as of June 30, 2022, was 806,973,000 shares, with a nominal value of HKD80,698,000 (approximately RMB63,450,000)[187]. Compliance and Governance - The Group did not have any material acquisitions or disposals of subsidiaries, associated companies, and joint ventures during the first half of 2022[56]. - The Group did not have any material contingent liabilities as of June 30, 2022, consistent with the previous year[59][64]. - The company did not apply any new standards or interpretations that are not yet effective for the current accounting period[105].