Summary The Group's H1 2025 sales revenue decreased by 7.69%, profit attributable to owners by 21.01%, and earnings per share was RMB 0.26 yuan Key Financial Summary for H1 2025 | Metric | H1 2025 (RMB) | Year-on-Year Change | | :--- | :--- | :--- | | Sales Revenue | Decreased by approx. 7.69% | - | | Profit attributable to owners of the Company | Decreased by approx. 21.01% | - | | Earnings per share attributable to owners of the Company | RMB 0.26 yuan | - | - The Board resolved not to declare an interim dividend for the six months ended June 30, 20253 Interim Results (Unaudited) This section presents the unaudited condensed consolidated financial statements for H1 2025, including the income statement, comprehensive income, balance sheet, cash flow, and equity changes Condensed Consolidated Income Statement For H1 2025, the Group's revenue decreased by 7.69%, operating profit by 10.01%, profit for the period by 16.95%, and EPS fell from RMB 0.33 yuan to RMB 0.26 yuan Key Data from Condensed Consolidated Income Statement (For the six months ended June 30) | Metric | 2025 (RMB thousand) | 2024 (RMB thousand) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 3,738,503 | 4,050,094 | -7.69% | | Cost of sales | (2,311,985) | (2,512,973) | -7.99% | | Gross profit | 1,426,518 | 1,537,121 | -7.20% | | Operating profit | 569,787 | 632,045 | -10.01% | | Profit for the period | 484,030 | 582,784 | -16.95% | | Profit attributable to owners of the Company | 338,667 | 428,752 | -21.01% | | Basic and diluted earnings per share | RMB 0.26 yuan | RMB 0.33 yuan | -21.21% | - Impairment provisions for financial assets significantly increased from RMB 1,730 thousand in 2024 to RMB 14,516 thousand in 20254 - A gain on disposal of a subsidiary of RMB 46,544 thousand was recorded in 2024, with no such gain in 20254 Condensed Consolidated Statement of Comprehensive Income For H1 2025, total comprehensive income decreased by 27.76%, mainly due to a shift from positive to negative foreign currency translation differences and fair value changes in financial assets Key Data from Condensed Consolidated Statement of Comprehensive Income (For the six months ended June 30) | Metric | 2025 (RMB thousand) | 2024 (RMB thousand) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Profit for the period | 484,030 | 582,784 | -16.95% | | Exchange differences on translation - Group | (46,877) | 20,621 | shifted from positive to negative | | Changes in fair value of financial assets measured at fair value through other comprehensive income | (759) | 879 | shifted from positive to negative | | Total comprehensive income for the period | 436,352 | 604,055 | -27.76% | | Total comprehensive income attributable to owners of the Company | 320,508 | 436,766 | -26.61% | Condensed Consolidated Balance Sheet As of June 30, 2025, total assets slightly increased, with significant rises in cash and cash equivalents and bank time deposits, while inventories and accounts payable decreased; non-current borrowings increased substantially Key Data from Condensed Consolidated Balance Sheet | Metric | June 30, 2025 (RMB thousand) | Dec 31, 2024 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Total assets | 14,541,925 | 14,408,591 | +0.92% | | Inventories | 4,631,072 | 5,165,995 | -10.36% | | Cash and cash equivalents | 4,781,018 | 4,129,488 | +15.77% | | Bank time deposits | 254,776 | 164,205 | +55.16% | | Total equity | 10,210,760 | 10,165,079 | +0.45% | | Non-current liabilities - Borrowings | 1,842,098 | 1,202,332 | +53.21% | | Current liabilities - Borrowings | 375,465 | 1,051,966 | -64.31% | | Current liabilities - Accounts payable and notes | 806,271 | 1,015,258 | -20.58% | - Non-current borrowings significantly increased by 53.21%, while current borrowings decreased by 64.31%, indicating a shift towards longer-term debt structure8 Condensed Consolidated Cash Flow Statement For H1 2025, net cash flows from operating activities shifted from negative to positive, investing activities from positive to negative, and financing activities significantly decreased, leading to a lower net increase in cash and cash equivalents Key Data from Condensed Consolidated Cash Flow Statement (For the six months ended June 30) | Metric | 2025 (RMB thousand) | 2024 (RMB thousand) | Change | | :--- | :--- | :--- | :--- | | Net cash flows from operating activities | 1,120,336 | (452,882) | shifted from negative to positive | | Net cash flows from investing activities | (107,373) | 1,055,672 | shifted from positive to negative | | Net cash flows from financing activities | (341,250) | 581,162 | significantly decreased | | Net increase in cash and cash equivalents | 671,713 | 1,183,952 | -43.26% | | Cash and cash equivalents at end of period | 4,781,018 | 3,942,070 | +21.28% | - Net cash flows from operating activities significantly improved, shifting from RMB (452,882) thousand in 2024 to RMB 1,120,336 thousand in 20259 - Increased cash outflow from financing activities was primarily due to a significant increase in cash paid for repayment of borrowings and higher dividends paid to non-controlling interests10 Condensed Consolidated Statement of Changes in Equity As of June 30, 2025, equity attributable to owners of the Company slightly increased, driven by profit for the period but impacted by foreign currency translation differences and fair value changes in financial assets Changes in Equity Attributable to Owners of the Company (As of June 30) | Metric | 2025 (RMB thousand) | 2024 (RMB thousand) | Change | | :--- | :--- | :--- | :--- | | Balance at January 1 | 7,206,197 | 6,889,417 | +4.60% | | Profit for the period | 338,667 | 428,752 | -21.01% | | Exchange differences on translation - Group | (17,854) | 7,766 | shifted from positive to negative | | Dividends paid to owners of the Company | (230,541) | (230,541) | No change | | Balance at June 30 | 7,296,164 | 7,095,642 | +2.83% | - Exchange differences on translation had a negative impact on Group equity, shifting from RMB 7,766 thousand positive in 2024 to RMB (17,854) thousand negative in 202511 Notes to the Financial Statements This section details the basis of preparation, accounting policies, risk management, revenue, finance income/expenses, income tax, EPS, dividends, asset changes, receivables/payables, share capital, segment info, commitments, and related party transactions 1. General Information Beijing Tongrentang Technologies Co., Ltd. was incorporated in China in 2000, listed on HKEX in 2010, with its ultimate holding company being China Beijing Tongrentang (Group) Co., Ltd., primarily engaged in TCM manufacturing and sales in mainland China and Hong Kong - The Company was incorporated in China on March 22, 2000, and transferred to the Main Board of HKEX on July 9, 201013 - The ultimate holding company is China Beijing Tongrentang (Group) Co., Ltd.13 - The Group's principal business is the manufacturing and sale of traditional Chinese medicine (TCM), primarily operating in mainland China and Hong Kong13 2. Basis of Preparation These condensed consolidated interim financial information are prepared in accordance with IAS 34 and should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2024 - These condensed consolidated interim financial information are prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting"16 - These condensed consolidated interim financial information do not include all the information and disclosures normally required in the annual financial statements and should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 202416 3. Accounting Policies Accounting policies are consistent with 2024 annual consolidated financial statements, income tax is accrued using the expected annual effective tax rate, and IFRS 21 (amendment) has no material impact - The accounting policies adopted in the preparation of these condensed consolidated interim financial information are consistent with those applied in the preparation of the Group's annual consolidated financial statements for the year ended December 31, 202417 - Income tax for the interim period is accrued using the tax rate that would be applicable to the expected total annual earnings18 - The adopted IFRS 21 (amendment) "Lack of Exchangeability" has no material impact on the condensed consolidated interim financial statements19 4. Estimates Preparing interim financial information involves management judgments, estimates, and assumptions, with actual results potentially differing; key sources of estimation uncertainty remain consistent with 2024 - The preparation of interim financial information requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, and expenses, and actual results may differ from these estimates20 - The significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the annual consolidated financial statements for the year ended December 31, 202420 5. Financial Risk Management The Group faces market (exchange rate, interest rate), credit, and liquidity risks; interim financial information does not include all annual disclosures, and risk management policies remain unchanged since 2024 year-end - The Group's activities are exposed to various financial risks: market risk (including foreign exchange risk and interest rate risk), credit risk, and liquidity risk21 - The condensed consolidated interim financial information do not include all financial risk management information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements for the year ended December 31, 202421 - There have been no material changes in risk management policies since the end of 202422 6. Revenue For H1 2025, total revenue was RMB 3,738,503 thousand, a 7.69% year-on-year decrease, with TCM product sales remaining the primary source, mainland China sales declining, but sales outside mainland China growing Revenue Breakdown (For the six months ended June 30) | Revenue Type | 2025 (RMB thousand) | 2024 (RMB thousand) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Sales of TCM products - Mainland China | 3,139,055 | 3,552,169 | -11.63% | | Sales of TCM products - Outside Mainland China | 573,019 | 467,391 | +22.60% | | Advertising service income - Mainland China | 4,048 | 5,954 | -31.99% | | Service income | 22,318 | 24,388 | -8.49% | | Brand usage rights income - Outside Mainland China | 63 | 192 | -67.19% | | Total Revenue | 3,738,503 | 4,050,094 | -7.69% | - Sales revenue of TCM products outside mainland China achieved a significant growth of 22.60%23 7. Finance Income and Expenses For H1 2025, net finance income was RMB 12,094 thousand, a slight increase year-on-year, primarily driven by a significant rise in exchange gains, while interest income and finance costs remained relatively stable Finance Income and Expenses (For the six months ended June 30) | Metric | 2025 (RMB thousand) | 2024 (RMB thousand) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Interest income | 42,734 | 43,253 | -1.20% | | Exchange gains, net | 2,152 | 2 | significantly increased | | Total finance income | 44,886 | 44,273 | +1.38% | | Interest on bank borrowings | (28,215) | (28,607) | -1.37% | | Interest on lease liabilities | (4,338) | (4,061) | +6.82% | | Total finance expenses | (32,792) | (32,668) | +0.38% | | Net finance income | 12,094 | 11,605 | +4.21% | - Net exchange gains significantly increased from RMB 2 thousand in 2024 to RMB 2,152 thousand in 202524 8. Expenses by Nature For H1 2025, the Group's depreciation, amortization, and inventory write-down provisions all increased, with a substantial rise in impairment provisions for receivables, reflecting increased asset impairment risk Expenses by Nature (For the six months ended June 30) | Expense Type | 2025 (RMB thousand) | 2024 (RMB thousand) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Depreciation of property, plant and equipment | 91,736 | 90,758 | +1.08% | | Amortization of right-of-use assets | 62,626 | 48,400 | +29.39% | | Amortization of other long-term assets | 6,130 | 4,174 | +46.85% | | Provision for impairment of inventories | 17,272 | 14,077 | +22.69% | | Provision for impairment of receivables | 14,516 | 1,730 | +739.08% | | Loss on disposal of non-current assets | 283 | 125 | +126.40% | - Provision for impairment of receivables significantly increased by 739.08% from RMB 1,730 thousand in 2024 to RMB 14,516 thousand in 202525 9. Income Tax Expense For H1 2025, total income tax expense was RMB 107,251 thousand, largely consistent with the prior year, with high-tech enterprises in mainland China enjoying a 15% preferential tax rate and Hong Kong profits subject to 16.5% - High-tech enterprises enjoy a preferential income tax rate of 15%, while non-high-tech enterprises are subject to 25%26 - The income tax rate for profits in the Hong Kong Special Administrative Region of China is 16.5%27 Income Tax Expense Breakdown (For the six months ended June 30) | Expense Type | 2025 (RMB thousand) | 2024 (RMB thousand) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Current income tax expense - Mainland China | 70,059 | 70,048 | +0.02% | | Current income tax expense - Hong Kong, China | 31,193 | 18,775 | +66.14% | | Current income tax expense - Other countries or regions | 2,833 | 4,624 | -38.74% | | Deferred income tax expense | 3,166 | 14,300 | -77.86% | | Total income tax expense | 107,251 | 107,747 | -0.46% | 10. Earnings Per Share For H1 2025, basic earnings per share were RMB 0.26 yuan, down from RMB 0.33 yuan in the prior year, with no potential dilutive shares during the reporting period - Basic earnings per share are calculated based on net profit attributable to owners of the Company of RMB 338,667,000, divided by the weighted average number of ordinary shares outstanding of 1,280,784,000 during the period31 Earnings Per Share (For the six months ended June 30) | Metric | 2025 | 2024 | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Profit attributable to owners of the Company (RMB thousand) | 338,667 | 428,752 | -21.01% | | Weighted average number of ordinary shares outstanding (thousand shares) | 1,280,784 | 1,280,784 | 0.00% | | Earnings per share | RMB 0.26 yuan | RMB 0.33 yuan | -21.21% | - There were no potential dilutive shares for the Company for the six months ended June 30, 2025 and 202432 11. Dividends The Board resolved not to declare an interim dividend for H1 2025; the 2024 annual cash dividend of approximately RMB 230,541,000 was paid on August 11, 2025 - The Board resolved not to declare an interim dividend for the six months ended June 30, 2025 (for the six months ended June 30, 2024: nil)34 - On March 28, 2025, the Board proposed a cash dividend of RMB 0.18 yuan (tax inclusive) per share for the year ended December 31, 2024, totaling approximately RMB 230,541,00034 - This dividend distribution plan was approved at the annual general meeting held on June 12, 2025, and was paid to shareholders on August 11, 202534 12. Additions to Right-of-Use Assets and Property, Plant and Equipment For H1 2025, the original cost of the Group's right-of-use assets increased by approximately RMB 63,156,000, and property, plant and equipment by approximately RMB 59,463,000 Additions to Asset Original Cost (For the six months ended June 30) | Asset Type | 2025 (RMB thousand) | 2024 (RMB thousand) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Additions to original cost of right-of-use assets | 63,156 | 37,484 | +68.49% | | Additions to original cost of property, plant and equipment | 59,463 | 87,723 | -32.22% | 13. Accounts Receivable and Notes As of June 30, 2025, net accounts receivable and notes were RMB 1,086,607 thousand, a slight decrease from 2024 year-end, with significant increases in related party receivables and decreases in notes receivable, alongside increased impairment provisions Accounts Receivable and Notes (As of June 30) | Metric | June 30, 2025 (RMB thousand) | Dec 31, 2024 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Accounts receivable - Third parties | 622,898 | 612,158 | +1.76% | | Accounts receivable - Related parties | 437,922 | 275,810 | +58.78% | | Notes receivable | 110,113 | 285,349 | -61.41% | | Less: Impairment provision | (84,326) | (69,752) | +20.89% | | Accounts receivable and notes, net | 1,086,607 | 1,103,565 | -1.54% | Aging Analysis of Accounts Receivable and Notes (As of June 30) | Aging | June 30, 2025 (RMB thousand) | Dec 31, 2024 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Within four months | 865,958 | 864,645 | +0.15% | | Four months to one year | 133,046 | 132,541 | +0.38% | | One to two years | 45,994 | 16,342 | +181.93% | | Two to three years | 75,173 | 109,576 | -31.39% | | Over three years | 50,762 | 50,213 | +1.09% | | Total | 1,170,933 | 1,173,317 | -0.20% | - Accounts receivable and notes aged one to two years significantly increased by 181.93%, which may warrant attention to collection risk38 14. Share Capital As of June 30, 2025, the Company's total and issued and fully paid share capital remained unchanged at 1,280,784,000 shares, with a par value of RMB 1,280,784 thousand, comprising domestic shares and H shares Share Capital Structure (As of June 30) | Share Type | June 30, 2025 Number of Shares | June 30, 2025 Par Value (RMB thousand) | Dec 31, 2024 Number of Shares | Dec 31, 2024 Par Value (RMB thousand) | | :--- | :--- | :--- | :--- | :--- | | Total share capital | 1,280,784,000 | 1,280,784 | 1,280,784,000 | 1,280,784 | | Domestic shares | 652,080,000 | 652,080 | 652,080,000 | 652,080 | | H shares | 628,704,000 | 628,704 | 628,704,000 | 628,704 | - The share capital structure remained stable with no changes during the reporting period39 15. Accounts Payable and Notes As of June 30, 2025, total accounts payable and notes were RMB 806,271 thousand, a 20.58% decrease from 2024 year-end, with significant declines in third-party payables and notes payable, and a reduced proportion of payables within four months Accounts Payable and Notes (As of June 30) | Metric | June 30, 2025 (RMB thousand) | Dec 31, 2024 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Accounts payable - Third parties | 630,849 | 780,258 | -19.15% | | Accounts payable - Related parties | 44,757 | 35,000 | +27.88% | | Notes payable | 130,665 | 200,000 | -34.67% | | Total accounts payable and notes | 806,271 | 1,015,258 | -20.58% | Aging Analysis of Accounts Payable (As of June 30) | Aging | June 30, 2025 (RMB thousand) | Dec 31, 2024 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Within four months | 473,008 | 877,920 | -46.12% | | Four months to one year | 319,643 | 127,332 | +151.03% | | One to two years | 9,342 | 6,813 | +37.12% | | Two to three years | 4,007 | 2,947 | +35.97% | | Over three years | 271 | 246 | +10.16% | | Total | 806,271 | 1,015,258 | -20.58% | - Accounts payable are unsecured, interest-free, and normally settled within 120 days, with carrying amounts approximating fair values4041 16. Segment Information The Group operates two main segments: "Company Segment" (TCM manufacturing/sales in mainland China) and "Tongrentang Chinese Medicine Segment" (TCM/healthcare products outside mainland China); in H1 2025, the Company Segment saw decreased revenue and profit, while the Tongrentang Chinese Medicine Segment achieved growth in both - The Group's principal operating segments are: (i) the Company's manufacturing and sale of TCM products in mainland China ("Company Segment"), and (ii) Beijing Tongrentang Chinese Medicine Co., Ltd. and its subsidiaries engaged in the production, retail, and wholesale of TCM products and healthcare products outside mainland China, and provision of TCM diagnostic and treatment services, and wholesale of healthcare products in mainland China ("Tongrentang Chinese Medicine Segment")42 Segment Revenue (For the six months ended June 30) | Segment | 2025 (RMB thousand) | 2024 (RMB thousand) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Company Segment | 2,456,181 | 2,721,158 | -9.74% | | Tongrentang Chinese Medicine Segment | 702,070 | 610,131 | +15.07% | | Other | 580,252 | 718,805 | -19.30% | | Total revenue from external customers | 3,738,503 | 4,050,094 | -7.69% | Segment Profit for the Period (For the six months ended June 30) | Segment | 2025 (RMB thousand) | 2024 (RMB thousand) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Company Segment | 240,220 | 302,703 | -20.64% | | Tongrentang Chinese Medicine Segment | 230,913 | 224,106 | +3.04% | | Other | 12,897 | 55,975 | -76.96% | | Total profit for the period | 484,030 | 582,784 | -16.95% | Segment Assets and Liabilities (As of June 30) | Segment | June 30, 2025 Total Assets (RMB thousand) | Dec 31, 2024 Total Assets (RMB thousand) | June 30, 2025 Total Liabilities (RMB thousand) | Dec 31, 2024 Total Liabilities (RMB thousand) | | :--- | :--- | :--- | :--- | :--- | | Company Segment | 7,885,384 | 7,591,913 | 3,480,337 | 3,286,738 | | Tongrentang Chinese Medicine Segment | 4,149,639 | 4,183,127 | 273,782 | 282,401 | | Other | 2,506,902 | 2,633,551 | 577,046 | 674,373 | | Total | 14,541,925 | 14,408,591 | 4,331,165 | 4,243,512 | - Revenue from entities controlled by the ultimate holding company (excluding the Group) accounted for over 10% of the Group's total revenue from external customers, amounting to RMB 1,526,714 thousand in H1 20255253 17. Commitments As of June 30, 2025, the Group had contracted capital commitments of approximately RMB 55,170,000 not reflected in the financial statements, a decrease from 2024 year-end, with short-term and low-value lease commitments due within one year totaling RMB 10,239 thousand Capital Commitments (As of June 30) | Commitment Type | June 30, 2025 (RMB thousand) | Dec 31, 2024 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Contracted capital commitments | 55,170 | 77,945 | -29.22% | Operating Lease Commitments (As of June 30) | Commitment Type | June 30, 2025 (RMB thousand) | Dec 31, 2024 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Not later than one year | 10,239 | 17,085 | -40.07% | - The Group's leases for warehouses and production/operation sites are irrevocable, with right-of-use assets recognized, except for short-term and low-value leases55 18. Related Party Transactions The Group engages in significant related party transactions with its ultimate holding company, subsidiaries, associates, and joint ventures, including trademark usage fees, product sales/purchases, advertising, property leases, and supply chain/technical services; related party balances show a significant increase in receivables and changes in payables and lease liabilities Transactions with Ultimate Holding Company Transactions with the ultimate holding company include trademark usage fees, TCM product sales, advertising services, property lease expenses, additions to right-of-use assets, and lease liability interest expenses, with trademark usage fees and new right-of-use assets significantly increasing Transactions with Ultimate Holding Company (For the six months ended June 30) | Transaction Type | 2025 (RMB thousand) | 2024 (RMB thousand) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Trademark usage fees | 5,916 | 2,350 | +151.74% | | Sales of TCM related products | 2 | 9 | -77.78% | | Advertising service income | 283 | 800 | -64.63% | | Property lease expenses | 75 | 91 | -17.58% | | Additions to right-of-use assets | 14,825 | 454 | +3165.42% | | Interest expense on lease liabilities - Property, plant and equipment | 585 | 522 | +12.07% | | Interest expense on lease liabilities - Land use rights | 174 | 341 | -48.97% | - Additions to right-of-use assets (property, plant and equipment) significantly increased from RMB 454 thousand in 2024 to RMB 14,825 thousand in 2025, an increase of over 30 times61 - The trademark license agreement has been renewed until December 31, 202762 Transactions with Subsidiaries, Associates and Joint Ventures of Ultimate Holding Company Transactions with subsidiaries, associates, and joint ventures of the ultimate holding company primarily involve TCM product sales and purchases, exclusive distribution product purchases, advertising income, property lease income, and supply chain/technical service purchases; TCM product sales slightly increased, while purchases of TCM related products and supply chain management services significantly rose Transactions with Related Party Subsidiaries, Associates and Joint Ventures (For the six months ended June 30) | Transaction Type | 2025 (RMB thousand) | 2024 (RMB thousand) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Sales of TCM related products | 1,523,865 | 1,516,013 | +0.52% | | Purchases of TCM related products | 155,567 | 53,091 | +193.03% | | Purchases of exclusive distribution products | 10,314 | 47,188 | -78.16% | | Purchases of e-commerce services | - | 1,387 | -100.00% | | Advertising service income | 1,599 | 5,149 | -68.94% | | Purchases of supply chain management services | 3,524 | - | New | | Purchases of technical services | 1,853 | - | New | - Purchases of TCM related products significantly increased by 193.03% from RMB 53,091 thousand in 2024 to RMB 155,567 thousand in 202563 - New purchases of supply chain management services and technical services reflect increased cooperation with related parties in operations and technical support63 Balances with Related Companies As of June 30, 2025, total receivables from related companies (including the ultimate holding company, its subsidiaries, associates, and joint ventures) significantly increased, driven by growth in net receivables from related party subsidiaries, associates, and joint ventures; payables to related companies and lease liabilities also changed Balances with Related Companies (As of June 30) | Balance Type | June 30, 2025 (RMB thousand) | Dec 31, 2024 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Amounts due from ultimate holding company | 1,721 | 1,105 | +55.75% | | Amounts due from related party subsidiaries, associates and joint ventures | 416,596 | 257,342 | +62.04% | | Amounts due to related party subsidiaries, associates and joint ventures | 69,535 | 65,137 | +6.75% | | Lease liabilities (Ultimate holding company and its subsidiaries) | 37,650 | 25,971 | +44.97% | | Borrowings from related companies (Ultimate holding company) | 32,300 | 32,300 | 0.00% | - Net amounts due from related party subsidiaries, associates, and joint ventures increased by 61.80% from RMB 255,304 thousand at 2024 year-end to RMB 413,081 thousand as of June 30, 202566 - Related company balances are unsecured, interest-free, and normally settled within twelve months; related company borrowings are unsecured entrusted loans with interest rates referencing the PBOC benchmark lending rate, settled within three years68 Management Discussion and Analysis This section reviews the Group's H1 2025 business performance and financial position, noting revenue and profit declines due to marketing reforms and inventory optimization, but progress in key product strategies and overseas market expansion Business Review In H1 2025, the Group's sales revenue and net profit decreased due to marketing reforms and inventory optimization, but it deepened production, quality, product line, channel, and R&D efforts, with Tongrentang Chinese Medicine achieving double-digit growth in overseas sales and net profit Group Performance Overview for H1 2025 | Metric | H1 2025 (RMB) | H1 2024 (RMB) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Sales Revenue | 3,738,503 thousand | 4,050,094 thousand | -7.69% | | Net Profit | 484,030 thousand | 582,784 thousand | -16.95% | | Net profit attributable to owners of the Company | 338,667 thousand | 428,752 thousand | -21.01% | | Net profit attributable to owners of the Company after deducting impact of disposal of subsidiary equity | - | - | -11.39% | | Tongrentang Chinese Medicine Sales Revenue | 702,070 thousand | - | +15.99% | | Tongrentang Chinese Medicine Net Profit attributable to owners | 216,168 thousand | - | +8.23% | - The decrease in sales revenue and net profit was primarily due to the deepening of marketing reforms, accelerating market inventory turnover, optimizing inventory structure, and improving market order69 - The Group concentrated its advantageous resources to implement lean operations for six major product lines: "major products, mid-tier products, imperial medicines, national medicine精品, Ejiao, and pediatric medicines"71 - Among leading products, sales revenue of the Liuwei Dihuang Wan series increased by approximately 47.99%, the Jinkui Shenqi series by approximately 19.55%, and the Jingzhi Niuhuang Jiedu Pian series by approximately 4.03%72 - Tongrentang Chinese Medicine continued to lead the "medicine-driven by medical services, culture-first" Tongrentang model to expand overseas, achieving a year-on-year sales revenue increase of 15.99% and a net profit increase of 8.23%73 Employees and Remuneration Policy As of June 30, 2025, the Group had 3,888 employees, a slight decrease from 2024 year-end; the company continues to reform and improve its remuneration policy, focusing on talent development, training, career opportunities, and comprehensive employee benefits Number of Employees | Metric | June 30, 2025 | Dec 31, 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total number of Group employees | 3,888 | 3,991 | -2.58% | | Number of Company employees | 1,914 | 1,931 | -0.88% | - The Company continuously reforms and improves its employee remuneration policy and system to ensure employees are fairly compensated and share in results based on their contributions74 - Employee benefits include pension insurance, medical insurance, unemployment insurance, work injury insurance, maternity insurance, and housing provident fund74 Financial Review The Group maintains a sound financial position with ample liquidity, good quick and inventory turnover ratios, and a stable capital structure with a reasonable capital gearing ratio; expense ratios remained stable, gross profit margin slightly rose, but net profit margin declined; R&D and capital expenditures fluctuated, with no asset pledges or contingent liabilities Liquidity and Financial Resources The Group's funds primarily come from daily operations and borrowings, denominated in RMB and HKD; as of June 30, 2025, cash and cash equivalents and bank time deposits significantly increased, while short-term borrowings substantially decreased and long-term borrowings increased, indicating a shift towards longer-term debt Liquidity and Borrowings (As of June 30) | Metric | June 30, 2025 (RMB thousand) | Dec 31, 2024 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | 4,781,018 | 4,129,488 | +15.77% | | Bank time deposits | 254,776 | 164,205 | +55.16% | | Short-term borrowings | 375,465 | 1,051,966 | -64.31% | | Long-term borrowings | 1,842,098 | 1,202,332 | +53.21% | | Short-term borrowings as % of total liabilities | 8.67% | 24.79% | -16.12% | | Long-term borrowings as % of total liabilities | 42.53% | 28.33% | +14.20% | - The Group primarily conducts borrowings and holds cash and cash equivalents in RMB and HKD76 Capital Structure As of June 30, 2025, the Group's total assets, total equity, and total liabilities all increased; funds were primarily used for production and operations, fixed asset acquisitions, repayment of borrowings, and dividend payments Capital Structure Overview (As of June 30) | Metric | June 30, 2025 (RMB thousand) | Dec 31, 2024 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Total assets | 14,541,925 | 14,408,591 | +0.92% | | Non-current liabilities | 2,049,447 | 1,402,041 | +46.18% | | Current liabilities | 2,281,718 | 2,841,471 | -19.69% | | Equity attributable to owners of the Company | 7,296,164 | 7,206,197 | +1.25% | | Non-controlling interests | 2,914,596 | 2,958,882 | -1.49% | - The Group's capital management policy aims to safeguard its ability to continue as a going concern, provide returns to shareholders, and maintain an optimal capital structure to reduce the cost of capital78 Liquidity As of June 30, 2025, the Group's current ratio and quick ratio both improved, reflecting ample financial resources and good liquidity; accounts receivable turnover slightly decreased, while accounts payable and inventory turnover improved Liquidity Ratios (As of June 30) | Metric | June 30, 2025 | Dec 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Current ratio | 4.82 | 3.81 | +1.01 | | Quick ratio | 2.73 | 1.93 | +0.80 | | Accounts receivable turnover | 8.34 | 9.84 | -1.50 | | Accounts payable turnover | 6.20 | 4.00 | +2.20 | | Inventory turnover | 1.52 | 1.47 | +0.05 | - The improvement in current ratio and quick ratio reflects the Group's ample financial resources and good liquidity79 Capital Gearing Ratio As of June 30, 2025, the Group's capital gearing ratio was 0.30, a slight decrease from 2024 year-end, indicating a stable capital structure Capital Gearing Ratio (As of June 30) | Metric | June 30, 2025 | Dec 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Capital gearing ratio | 0.30 | 0.31 | -0.01 | Expenses and Expense Ratios For H1 2025, the Group's selling expenses, administrative expenses, and finance income, both in absolute terms and as a percentage of revenue, remained relatively stable with no significant changes Expenses and Expense Ratios (As of June 30) | Metric | 2025 (RMB thousand) | 2024 (RMB thousand) | 2025 Expense Ratio | 2024 Expense Ratio | Expense Ratio Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Selling expenses | 576,087 | 664,296 | 0.15 | 0.16 | -0.01 | | Administrative expenses | 266,056 | 239,062 | 0.07 | 0.06 | +0.01 | | Finance income | 12,094 | 11,605 | 0.0032 | 0.0029 | +0.0003 | - Various expense ratios did not undergo significant changes compared to the same period last year, maintaining reasonable levels81 Gross Profit Margin and Net Profit Margin For H1 2025, the Group's gross profit margin slightly increased to 38.16%, while its net profit margin decreased to 12.95% Gross Profit Margin and Net Profit Margin (As of June 30) | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Gross profit margin | 38.16% | 37.95% | +0.21% | | Net profit margin | 12.95% | 14.39% | -1.44% | Research and Development Expenditure For H1 2025, the Group's R&D expenditure, excluding staff welfare, depreciation, and amortization, was RMB 26.732 million, representing 0.72% of revenue; including all expenses, R&D expenditure was RMB 53.005 million, representing 1.42% of revenue Research and Development Expenditure (As of June 30) | Metric | 2025 (RMB million) | 2024 (RMB million) | 2025 % of Revenue | 2024 % of Revenue | | :--- | :--- | :--- | :--- | :--- | | R&D expenditure (excluding staff welfare, depreciation, amortization) | 26.732 | 27.510 | 0.72% | 0.68% | | R&D expenditure (including all expenses) | 53.005 | 52.652 | 1.42% | 1.30% | Capital Expenditure For H1 2025, the Group's capital expenditure was RMB 63 million, primarily for purchasing production equipment, a decrease from the prior year Capital Expenditure (As of June 30) | Metric | 2025 (RMB million) | 2024 (RMB million) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Capital expenditure | 63 | 84 | -25.00% | - Capital expenditure was primarily used for purchasing production equipment84 Pledge of Group Assets As of June 30, 2025, none of the Group's assets were pledged for any debts - As of June 30, 2025, none of the Group's assets were pledged for any debts (December 31, 2024: nil)85 Contingent Liabilities As of June 30, 2025, the Group had no contingent liabilities - As of June 30, 2025, the Group had no contingent liabilities (December 31, 2024: nil)86 Foreign Exchange Risk The Group primarily operates in mainland China with RMB-settled business, but faces foreign exchange risk from overseas trade, assets/liabilities, and net investments (mainly HKD); the Group currently has no foreign currency hedging policy and manages risk by closely monitoring exchange rate fluctuations - The Group's principal operations are located in mainland China, with its main business settled in RMB87 - The Group remains exposed to foreign exchange risk from its overseas trade business, recognized assets and liabilities, and net investments in overseas operations (primarily involving HKD)87 - The Group currently has no foreign currency hedging policy and primarily manages foreign exchange risk by closely monitoring exchange rate fluctuations87 Material Investments Held/Plans for Material Investments or Capital Assets The Group had no material investments during the reporting period and no plans for material investments or capital asset acquisitions as of the announcement date - The Group had no material investments during the reporting period88 - As of the date of this announcement, the Group had no plans for any material investments or acquisitions of capital assets88 Material Acquisitions and Disposals of Subsidiaries, Joint Ventures and Associates The Group had no material acquisitions or disposals of subsidiaries, joint ventures, or associates during the reporting period - The Group had no material acquisitions or disposals of subsidiaries, joint ventures, or associates during the reporting period89 No Material Changes There have been no material changes in the Group's business since the publication of the 2024 annual report on April 25, 2025 - There have been no material changes in the Group's business since the publication of the most recent annual report for the year ended December 31, 2024, on April 25, 202590 Future Outlook The Group anticipates the TCM industry to shift towards technology-driven, high-quality development, and will continue to deepen its "quality and efficiency improvement" strategy, focusing on reform, innovation, lean management, optimizing production, strengthening "all-staff marketing," and implementing a "major product strategy" to achieve revenue and profit targets and lay the foundation for the "15th Five-Year Plan" - The TCM industry is undergoing profound changes, accelerating its transformation from a traditional experience-based model to a technology-driven model, expected to become a significant representative of new quality productive forces91 - The Group will continue to implement its "quality and efficiency improvement" strategy, focusing on reform and innovation, and promoting a lean management model covering the entire process, value chain, and all levels91 - The focus of production work in the second half of the year will be on "optimization and supply assurance", centered on "ensuring output value, controlling costs, adjusting structure, and reducing inventory", to promote the development of smart manufacturing91 - Marketing efforts will strengthen the "all-staff marketing" awareness, steadfastly implement the "major product strategy", strictly control market order, and actively explore markets driven by innovation91 Other Information This section covers corporate governance, directors' and supervisors' securities transactions, risk management and internal control, director changes, audit committee review, disclosure of interests for directors and substantial shareholders, listed securities transactions, and competing interests Corporate Governance Code During the reporting period, the Company consistently complied with the Code Provisions of the HKEX Corporate Governance Code, with no non-compliance identified by the directors - During the reporting period, the Company consistently complied with the Code Provisions in Part 2 of the Corporate Governance Code as set out in Appendix C1 to the HKEX Listing Rules92 - The Directors are not aware of any information that would reasonably indicate the Company's failure to comply with the requirements of the Corporate Governance Code at any time during the reporting period92 Securities Transactions by Directors and Supervisors The Company adopted a code of conduct no less stringent than the Model Code, and all directors and supervisors confirmed strict compliance with relevant codes during the reporting period after inquiry - The Company has adopted a code of conduct regarding securities transactions by its Directors and Supervisors that is no less stringent than the standards set out in the Model Code for Securities Transactions by Directors of Listed Issuers in Appendix C3 to the Listing Rules93 - Following specific inquiries with all Directors and Supervisors, they confirmed strict compliance with the standards set out in the Model Code and the Company's code of conduct during the reporting period93 Risk Management and Internal Control The Board is responsible for assessing and determining the nature and extent of risks, ensuring effective risk management and internal control systems; the Group's system is built referencing various standards, with the legal department managing risk and the internal audit department independently reviewing operations and reporting to the Audit Committee - The Board is responsible for assessing and determining the nature and extent of the risks it is willing to take in achieving the Group's strategic objectives, and for ensuring that the Group establishes and maintains sound and effective risk management and internal control systems94 - The terms of reference of the Audit Committee under the Company's Board of Directors cover responsibilities in risk management94 - The Group has an internal audit function, with a dedicated internal audit department that conducts regular independent reviews of the Group's operations and reports any key findings, internal audit processes, and results to the Audit Committee95 Changes in Directors, Abolition of Supervisory Committee and Retirement of Supervisors Effective June 12, 2025, Mr. Chen Fei was appointed Non-executive Director, and Ms. Wang Chunrui resigned; effective June 4, 2025, Mr. Di Shubing was re-designated as Non-executive Director, Mr. Zhang Yi as Executive Director and Chairman, Mr. Chen Jiafu and Ms. Feng Zhimei as Non-executive Directors, and Mr. Zhang Chunyou and Ms. Wen Kaiting were appointed General Manager and Chief Accountant, with proposed election as Executive Directors; the Supervisory Committee was abolished, and supervisors retired, effective August 18, 2025 - Effective June 12, 2025, Mr. Chen Fei was appointed as a Non-executive Director of the Ninth Board of Directors, and Ms. Wang Chunrui resigned as a Non-executive Director96 - Mr. Di Shubing resigned from his positions as Director and Chairman, and was re-designated as a Non-executive Director97 - Mr. Zhang Yi was re-designated as an Executive Director of the Company, elected as the Chairman of the Company, appointed as the Chairman of the Board's Nomination Committee and Strategy and Planning Committee, and as an authorized representative of the Company97 - The Company abolished the Supervisory Committee effective August 18, 2025. All Supervisors also retired from their supervisory positions effective August 18, 202598 Audit Committee The Audit Committee reviewed the Group's unaudited financial statements for H1 2025, discussing internal audit, risk management, and internal control, with no objections to the accounting treatments - The Audit Committee has reviewed the operating results, financial position, and principal accounting policies of the Group's unaudited financial statements for the six months ended June 30, 2025101 - The Audit Committee had no objections to the accounting treatments in the Group's unaudited financial statements for the six months ended June 30, 2025101 Directors', Supervisors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company or its Associated Corporations As of June 30, 2025, among directors, supervisors, and chief executives, Mr. Chen Fei held 61,000 long positions in Beijing Tongrentang Chinese Medicine Co., Ltd., representing 0.00% of its shares Directors' Interests in Shares of Associated Corporations (As of June 30) | Director Name | Associated Corporation | Capacity | Number of Shares | Percentage of Issued Shares | | :--- | :--- | :--- | :--- | :--- | | Chen Fei | Beijing Tongrentang Chinese Medicine Co., Ltd. | Beneficial owner | 61,000(L) | 0.00% | - Beijing Tongrentang Chinese Medicine Co., Ltd. is a subsidiary of the Company and thus an associated corporation as defined in Part XV of the Securities and Futures Ordinance103 Substantial Shareholders' Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company or its Associated Corporations As of June 30, 2025, Tongrentang Co., Ltd. and Group Company were substantial shareholders, collectively holding 48.18% of the Company's voting shares; Yuan Sainan and Hillhouse Capital Advisors, Ltd. also held significant share interests Substantial Shareholders' Interests in Shares (As of June 30) | Shareholder Name | Capacity | Number of Shares (L) | Percentage of Issued Voting Shares | | :--- | :--- | :--- | :--- | | Tongrentang Co., Ltd. | Beneficial owner | 600,000,000 | 46.85% | | Group Company | Interest of corporation controlled by substantial shareholder | 600,000,000 | 46.85% | | Group Company | Beneficial owner | 9,480,000 (Domestic shares) + 7,649,000 (H shares) | 0.74% + 0.60% | | Yuan Sainan | Beneficial owner | 35,732,000 (H shares) | 2.79% | | Hillhouse Capital Advisors, Ltd. | Investment manager | 47,663,000 (H shares) | 3.72% | - Group Company holds 600,000,000 shares in the Company through Tongrentang Co., Ltd., and directly holds 9,480,000 domestic shares and 7,649,000 H shares108 - Hillhouse Capital Advisors, Ltd. indirectly holds H shares in the Company through Gaoling Fund, L.P. and YHG Investment, L.P.108 Purchase, Sale or Redemption of the Company's Listed Securities During the reporting period, neither the Company nor its subsidiaries purchased, sold, or redeemed any of the Company's listed securities, and the Company held no treasury shares at the end of the period - During the reporting period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities106 - As of the end of the reporting period, the Company held no treasury shares106 Material Events After the Reporting Period No material events significantly impacting the Group's operations or financials occurred from June 30, 2025, to the date of this announcement - No material events significantly impacting the Group's operations or financials occurred from June 30, 2025, to the date of this announcement107 Competing Interests The Company and Tongrentang Co., Ltd. both engage in TCM business but avoid direct competition through differing main products and dosage forms; Group Company and Tongrentang Co., Ltd. made a "October Undertaking" granting the Company priority rights for manufacturing and selling specific new products and committed to providing information for independent non-executive directors to review compliance with non-competition undertakings - Both the Company and Tongrentang Co., Ltd. are engaged in the production and sale of TCM products, but their respective main products differ, with the Company focusing on new dosage forms and Tongrentang Co., Ltd. primarily producing traditional dosage forms of TCM109 - Group Company and Tongrentang Co., Ltd. made an "October Undertaking" to the Company on October 19, 2000, promising not to produce any products with the same name or similar name but different dosage forms that would directly compete with the Company's products (except for Angong Niuhuang Wan)109 - Group Company and Tongrentang Co., Ltd. have granted the Company a preferential right to manufacture and sell any new products developed by them or any of their subsidiaries that fall into one of the Company's four main product categories (granules, honeyed pills, tablets, and soft capsules)111 - The independent non-executive directors will review compliance with the non-competition undertaking at least once a year and disclose the review results in the annual report112 Publication of Interim Report on HKEX and Company Websites The Group's 2025 interim report, containing unaudited consolidated financial statements and other information for the six months ended June 30, 2025, will be made available to shareholders and published on the HKEX and Company websites in due course - The Company's 2025 interim report, containing the Group's unaudited consolidated financial statements for the six months ended June 30, 2025, and other information required by Appendix D2 of the Listing Rules, will be made available to shareholders in due course113 - The interim report will be published on the HKEX website (www.hkexnews.hk) and the **Company's website (www.tongrentangkj.com)**[113](index=113&type=chunk)
同仁堂科技(01666) - 2025 - 中期业绩