中国中药(00570) - 2025 - 中期业绩

Company Information and Performance Highlights The company's revenue decreased by 11.0% to RMB 7.463 billion, resulting in a RMB 142 million loss, primarily due to centralized procurement price cuts and goodwill impairment Performance Highlights for H1 2025 | Indicator | 2025 (RMB thousands) | 2024 (RMB thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | 7,463,383 | 8,385,473 | (11.0)% | | Gross Profit | 3,634,593 | 4,061,254 | (10.5)% | | (Loss)/Profit for the Period | (141,760) | 214,143 | (166.2)% | | (Loss)/Profit Attributable to Owners of the Company | (107,918) | 210,979 | (151.2)% | | Basic and Diluted (Loss)/Earnings Per Share (RMB cents) | (2.14) | 4.19 | (151.1)% | Interim Condensed Consolidated Financial Statements This section presents the company's interim financial performance and position, detailing the shift from profit to loss and changes in assets and liabilities Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income This statement details the six-month profit or loss, indicating a shift from profit to loss, driven by revenue decline, goodwill impairment, and higher credit losses Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (Summary) | Indicator | 2025 (RMB thousands) | 2024 (RMB thousands) | | :--- | :--- | :--- | | Revenue | 7,463,383 | 8,385,473 | | Gross Profit | 3,634,593 | 4,061,254 | | Operating (Loss)/Profit | (35,689) | 384,582 | | (Loss)/Profit Before Tax | (82,939) | 299,434 | | (Loss)/Profit for the Period | (141,760) | 214,143 | | (Loss)/Profit Attributable to Owners of the Company | (107,918) | 210,979 | Interim Condensed Consolidated Statement of Financial Position As of June 30, 2025, total assets slightly decreased, with a significant rise in current liabilities, impacting net current assets and the current ratio, while net assets remained stable Interim Condensed Consolidated Statement of Financial Position (Summary) | Indicator | June 30, 2025 (RMB thousands) | Dec 31, 2024 (RMB thousands) | | :--- | :--- | :--- | | Total Non-current Assets | 15,556,213 | 16,224,215 | | Total Current Assets | 18,970,577 | 18,839,503 | | Total Current Liabilities | 9,449,353 | 7,800,198 | | Net Current Assets | 9,521,224 | 11,039,305 | | Net Assets | 23,392,280 | 23,933,034 | | Total Equity | 23,392,280 | 23,933,034 | Notes to the Interim Condensed Consolidated Financial Information This section provides detailed notes on the basis of preparation, accounting policy changes, operating segments, revenue, and other key financial items Basis of Preparation and Changes in Accounting Policies Financial information is prepared under HKAS 34 and should be read with annual statements, with no significant impact from new HKFRS amendments - Financial information is prepared in accordance with HKAS 34 Interim Financial Reporting and should be read in conjunction with the Group's annual consolidated financial statements for the year ended December 31, 2024[8] - The application of amended HKFRS accounting standards during the reporting period had no significant impact on the Group's financial performance and position or the disclosures in these interim condensed consolidated financial statements for the current and prior periods[9] Operating Segment Information The company operates four reportable segments, with Tianjiang recognizing goodwill impairment due to underperformance in Chinese herbal formula granules - The Group's operating and reportable segments are identified based on internal management reports and regularly reviewed by the executive directors (who are also the Group's chief operating decision-makers) to allocate resources and assess performance, categorized into four reportable operating segments: Yifang, Tianjiang, Tongjitang, and Global[10] - The Tianjiang segment recognized an impairment loss on goodwill of approximately RMB 242.461 million for the cash-generating unit allocated to Jiangyin Tianjiang for the six months ended June 30, 2025, due to the underperformance of its Chinese herbal formula granule business[12][32] Revenue and Performance by Segment for H1 2025 | Segment | Revenue from External Customers (RMB thousands) | Segment Performance (RMB thousands) | | :--- | :--- | :--- | | Yifang | 2,450,040 | (38,194) | | Tianjiang | 1,598,484 | (325,352) | | Tongjitang | 1,081,458 | 116,043 | | Global | 2,333,401 | 112,128 | | Total | 7,463,383 | (135,375) | Revenue Total revenue for the period was RMB 7.463 billion, a 11.0% year-on-year decrease, mainly due to declines in Chinese herbal formula granules and proprietary Chinese medicines, with mainland China contributing most revenue Revenue by Product or Service Category for H1 2025 | Product or Service Category | 2025 (RMB thousands) | 2024 (RMB thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Chinese Herbal Formula Granules | 2,990,750 | 3,479,735 | (14.1)% | | Proprietary Chinese Medicines | 2,308,809 | 2,418,349 | (4.5)% | | Chinese Herbal Decoction Pieces | 1,596,128 | 1,576,914 | 1.2% | | Production and Operation of Chinese Herbal Medicines | 445,584 | 754,277 | (40.9)% | | Traditional Chinese Medicine (TCM) Big Health | 122,112 | 156,198 | (21.8)% | | Total | 7,463,383 | 8,385,473 | (11.0)% | - The mainland China market contributed RMB 7,407,775 thousand in revenue, accounting for the vast majority of total revenue[18] Other Income and Gains/Losses Other income increased by 14.4% mainly from government subsidies, while other losses expanded significantly to RMB 262.394 million, primarily due to RMB 242.461 million goodwill impairment Other Income | Item | 2025 (RMB thousands) | 2024 (RMB thousands) | | :--- | :--- | :--- | | Government Subsidies | 68,350 | 59,766 | | Bank Deposit Interest Income | 17,900 | 16,320 | | Rental Income | 4,802 | 3,511 | | Total Other Income | 91,052 | 79,597 | Other Gains and Losses | Item | 2025 (RMB thousands) | 2024 (RMB thousands) | | :--- | :--- | :--- | | Impairment Loss Recognized on Goodwill | (242,461) | – | | Late Payment Penalties | (17,523) | (52,708) | | Donations | (1,510) | (13,114) | | Total | (262,394) | (64,768) | Finance Costs and Profit/Loss Before Tax Finance costs decreased by 44.0% to RMB 47.203 million due to reduced interest-bearing debt, resulting in a pre-tax loss of RMB 82.939 million, impacted by goodwill impairment and increased credit losses Finance Costs | Item | 2025 (RMB thousands) | 2024 (RMB thousands) | | :--- | :--- | :--- | | Interest on Bank Borrowings | 24,153 | 50,843 | | Effective Interest Expense on Unsecured Notes | 18,689 | 24,213 | | Total Borrowing Costs | 47,203 | 84,274 | - The Group's loss before tax was RMB 82,939 thousand, compared to a profit of RMB 299,434 thousand in the prior period, primarily due to goodwill impairment, inventory write-downs, and increased impairment losses on trade receivables[4][23] Income Tax Expense Income tax expense decreased by 31.0% to RMB 58.821 million, mainly due to reduced China corporate income tax and deferred tax adjustments, despite significant under-provision from prior periods Income Tax Expense | Item | 2025 (RMB thousands) | 2024 (RMB thousands) | | :--- | :--- | :--- | | China Corporate Income Tax | 75,776 | 114,262 | | Under-provision in Prior Periods | 37,367 | 78,004 | | Deferred | (54,322) | (106,975) | | Total Tax Expense for the Period | 58,821 | 85,291 | - Certain subsidiaries of the Group are qualified enterprises located in western China or recognized as high-tech enterprises, thus enjoying a preferential corporate income tax rate of 15%; certain subsidiaries engaged in primary processing of medicinal plants are fully exempt from corporate income tax[24] Dividends and Earnings/Loss Per Share The Board did not recommend an interim dividend, and basic earnings per share shifted from a RMB 4.19 cents profit to a RMB 2.14 cents loss, driven by a significant decline in profit attributable to owners - No dividend was proposed for the six months ended June 30, 2025 (six months ended June 30, 2024: nil)[26] Basic and Diluted (Loss)/Earnings Per Share | Indicator | 2025 (RMB cents) | 2024 (RMB cents) | | :--- | :--- | :--- | | Basic and Diluted (Loss)/Earnings Per Share | (2.14) | 4.19 | Goodwill and Other Intangible Assets A goodwill impairment loss of RMB 242.461 million was recognized due to the underperformance of Jiangyin Tianjiang's Chinese herbal formula granule business, with no additional impairment for other units - For the six months ended June 30, 2025, the Group's management recognized an impairment loss on goodwill of approximately RMB 242,461,000 (2024: nil) for the cash-generating unit allocated to Jiangyin Tianjiang, primarily due to the underperformance of its Chinese herbal formula granule business[32] Key Assumptions for Jiangyin Tianjiang Cash-Generating Unit | Indicator | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Average Growth Rate over Five Years | 2.65% | 8.32% | | Growth Rate after Five Years | 2.30% | 2.30% | | Pre-tax Discount Rate | 9.75% | 10.09% | Inventories As of June 30, 2025, total inventories were RMB 4.668 billion, slightly lower than year-end 2024, with inventory write-downs increasing to RMB 203.820 million Inventory Composition | Item | June 30, 2025 (RMB thousands) | Dec 31, 2024 (RMB thousands) | | :--- | :--- | :--- | | Raw Materials | 1,141,819 | 1,104,406 | | Work in Progress | 1,326,894 | 1,630,106 | | Finished Goods | 2,198,899 | 2,048,587 | | Total | 4,667,612 | 4,783,099 | - As of June 30, 2025, inventory write-downs amounted to approximately RMB 203,820,000 (December 31, 2024: RMB 192,485,000)[35] Trade and Other Receivables As of June 30, 2025, total trade and other receivables increased to RMB 9.022 billion, with a significant rise in credit loss provisions for trade receivables and an increase in receivables over one year old Trade and Other Receivables | Item | June 30, 2025 (RMB thousands) | Dec 31, 2024 (RMB thousands) | | :--- | :--- | :--- | | Trade Receivables (net of allowance) | 8,569,620 | 8,168,990 | | Deposits and Prepayments | 96,517 | 68,780 | | Prepaid Tax Payments | 147,380 | 160,681 | | Other Receivables (net of allowance) | 236,280 | 199,164 | | Total | 9,021,812 | 8,566,512 | Ageing Analysis of Trade Receivables (Based on Invoice Date) | Ageing | June 30, 2025 (RMB thousands) | Dec 31, 2024 (RMB thousands) | | :--- | :--- | :--- | | 0 to 90 Days | 3,927,935 | 4,377,309 | | 91 to 180 Days | 2,129,363 | 1,738,053 | | 181 to 365 Days | 2,045,640 | 1,813,051 | | Over 365 Days | 879,529 | 463,793 | | Total | 8,982,467 | 8,392,206 | Impairment Assessment of Financial Assets Credit impairment losses of RMB 185.875 million were recognized this period, a RMB 27.107 million increase year-on-year, primarily due to a rise in trade receivables over one year old Impairment Losses Recognized/(Reversed) | Item | 2025 (RMB thousands) | 2024 (RMB thousands) | Change (RMB thousands) | | :--- | :--- | :--- | :--- | | Trade Receivables | 189,717 | 156,817 | 32,900 | | Other Receivables | (3,118) | 1,934 | (5,052) | | Debt Instruments at Fair Value Through Other Comprehensive Income | (724) | 17 | (741) | | Total | 185,875 | 158,768 | 27,107 | - As of June 30, 2025, the Group's trade receivables over one year old increased by approximately RMB 176,965,000 year-on-year, leading to an increase in credit impairment losses recognized this period[88] Trade and Other Payables As of June 30, 2025, total trade and other payables increased to RMB 5.961 billion, with significant increases in trade payables and dividends payable Trade and Other Payables | Item | June 30, 2025 (RMB thousands) | Dec 31, 2024 (RMB thousands) | | :--- | :--- | :--- | | Trade Payables | 1,833,522 | 1,432,901 | | Bills Payable | 715,561 | 803,992 | | Deposits | 1,005,012 | 1,015,315 | | Accrued Salaries and Benefits | 283,840 | 528,859 | | Other Taxes Payable | 137,056 | 185,091 | | Accrued Operating Expenses | 909,856 | 908,072 | | Dividends Payable | 405,590 | 29,345 | | Total | 5,960,639 | 5,437,645 | Ageing Analysis of Trade and Bills Payables (Based on Invoice Date) | Ageing | June 30, 2025 (RMB thousands) | Dec 31, 2024 (RMB thousands) | | :--- | :--- | :--- | | 0 to 90 Days | 2,224,591 | 1,479,694 | | 91 to 180 Days | 247,921 | 527,182 | | 181 to 365 Days | 63,451 | 160,895 | | Over 365 Days | 13,120 | 69,122 | | Total | 2,549,083 | 2,236,893 | Business Overview and Review This section provides an overview of the company's overall performance and outlines its five major business development strategies across various TCM segments Overall Performance Overview The company's revenue decreased by 11.0% due to centralized procurement and market competition, while gross profit margin slightly increased by 0.3 percentage points to 48.7% from sales structure optimization - During the reporting period, the Group's revenue was approximately RMB 7,463,383,000, a 11.0% decrease compared to the prior period, primarily due to a significant increase in the proportion of centralized procurement business for Chinese herbal formula granules and intensified market competition[40] - Gross profit was approximately RMB 3,634,593,000, a 10.5% decrease from the prior period, with a gross profit margin of 48.7%, an increase of 0.3 percentage points from 48.4% in the prior period, mainly due to optimized sales structure and improved gross profit margin in the Chinese herbal decoction pieces segment[41] Five Major Business Development Strategies The Group pursues high-quality development across five key TCM business segments, leveraging resource integration, reform, efficiency enhancement, and collaborative innovation - The Group is based on five major business segments: production and operation of Chinese herbal medicines, Chinese herbal decoction pieces, Chinese herbal formula granules, proprietary Chinese medicines, and Traditional Chinese Medicine (TCM) big health, with a stable industrial layout as the foundation, resource integration and reform transformation as means, and quality improvement, efficiency enhancement, and collaborative innovation as drivers, continuously optimizing development quality and operational efficiency[42] Production and Operation of Chinese Herbal Medicines Facing volatile prices, the Group strategically exited high-risk, low-margin businesses, initiated an inventory management system, and expanded GAP base construction to strengthen full-chain quality traceability - The Group strategically exited high-risk, low-margin businesses and implemented refined cost control plans to address market challenges and enhance development resilience[43] - The Group initiated the construction of a Chinese herbal medicine inventory management system at the beginning of 2025, which will gradually achieve visualized presentation and standardized management of inventory data[43] - As of June 30, 2025, the Group participated in the co-construction of 162 Chinese herbal medicine production bases across 22 provinces (regions, municipalities) nationwide, involving 109 Chinese herbal medicine varieties, with a total base area exceeding 459,000 mu[44] Chinese Herbal Decoction Pieces The Group expanded into medical terminal markets, increasing medical decoction piece sales by 10.3%, and successfully participated in national centralized procurement, facing short-term price pressure but enhancing brand recognition - The Group continued to deeply cultivate the medical terminal market, developing over 400 new medical terminal clients, with medical decoction piece sales revenue increasing by 10.3% year-on-year[45] - A total of 3.83 million prescriptions were processed for decoction and dispensing, producing 28.48 million doses, an increase of approximately 15% year-on-year[45] - A total of 13 subsidiaries, 45 varieties, and 84 specifications of the Group successfully won bids in the national centralized procurement of Chinese herbal decoction pieces, which will bring certain downward pressure on the operating performance of the Chinese herbal decoction pieces business in the short term but is conducive to enhancing brand benefits[46] Chinese Herbal Formula Granules Revenue and profitability for Chinese herbal formula granules declined due to centralized procurement price cuts, rising costs, and market competition, leading the Group to enhance academic research, clinical promotion, and smart manufacturing - During the reporting period, the Group's revenue and profitability for Chinese herbal formula granules experienced a phased decline due to factors such as centralized procurement price reductions, rising costs, and intensified market competition[47] - In terms of marketing expansion, the Group continued to strengthen academic research and clinical application of Chinese herbal formula granules, building an evidence chain system to enhance physician awareness and acceptance[47] - In terms of cost control, the Group optimized production processes and extraction procedures, deepened smart manufacturing and digital applications, improved production efficiency, and enhanced responsiveness to centralized procurement orders[48] Proprietary Chinese Medicines Prescription drug business expanded with over 1,750 new medical institutions and key products exceeding RMB 100 million in sales, while OTC business adapted to policy changes by actively developing online channels - In the prescription drug business, over 1,750 new secondary and above medical institutions were developed, with Xianling Gubao and Jingshu Granules continuously enhancing their market position in the orthopedics field[49] - Key products such as Xianling Gubao and Jinye Baidu Granules achieved sales exceeding RMB 100 million, realizing positive year-on-year growth[49] - In the OTC business, affected by factors such as outpatient统筹, medical insurance policy adjustments, and diversion to online channels, the Group actively developed online business and continuously improved its national chain client network[49] Traditional Chinese Medicine (TCM) Big Health The Group re-planned its TCM big health product system, focusing on specialty and medicinal food products, expanded marketing channels, and introduced new rehabilitation projects for its TCM clinics, which served approximately 74,000 patient visits - In the TCM big health product segment, the existing product system was re-planned, focusing on specialty products, premium decoction pieces, and medicinal food products, while simultaneously promoting the expansion and integration of marketing channel resources[51] - In the TCM clinic segment, approximately 74,000 patient visits were received during the reporting period; new rehabilitation projects such as "posture correction" were introduced, continuously promoting the iteration and upgrade of business categories[51] Technological Innovation and Research & Development The Group strengthened R&D platforms, added a provincial engineering technology research center, received multiple awards, made significant progress in TCM standards, and had its Class 1.1 innovative TCM, Yushuda Tablets, accepted for market application - During the reporting period, the Group continued to develop high-level scientific research platforms, adding the Guangdong Provincial Engineering Technology Research Center for Chinese Herbal Decoction Pieces (Fengliaoxing), and as of June 30, 2025, the Group possessed 52 provincial-level and above government-recognized laboratories and technology platforms[52] - The project "Evidence-based Evaluation and Mechanism of Qingda Granules for Prevention and Treatment of Hypertension," in which Jiangyin Tianjiang Pharmaceutical Co., Ltd. participated, won the Second Prize of the China Academy of Chinese Medical Sciences Science and Technology Award[53] - The National Pharmacopoeia Commission newly released 26 national drug standards for Chinese herbal formula granules, of which the Group completed research on 18, accounting for approximately 69%[53] - During the reporting period, the Group's Class 1.1 innovative Chinese medicine, Yushuda Tablets, was accepted for market application by the National Medical Products Administration[54] Modern Governance and Sustainable Development This section details the company's governance structure, risk management, talent development, and efforts in safety production and environmental protection Governance Structure and Risk Management Board adjustments strengthened governance with experienced directors, ESG principles were integrated achieving an International A-level rating, and internal controls were enhanced through "strategy + operation" and dynamic risk monitoring - The composition of the Company's Board of Directors and specialized committees was adjusted, with newly appointed directors possessing extensive experience in key areas such as corporate governance, organizational human resources, financial auditing, and pharmaceutical investment[55] - The Group deeply embedded Environmental, Social, and Governance (ESG) principles into its corporate strategy, achieving an International A-level rating from China Chengxin Green Finance in 2025[55] - The Group strengthened internal control and risk prevention by implementing a "strategy + operation" model and deepening the construction of a "annual major risk assessment + quarterly dynamic monitoring" prevention and control mechanism[55] Talent System Development The Group strengthened its young cadre team, refined its TCM talent development system, increased certified internal trainers, improved high-caliber talent and senior professionals, and received the "2025 Outstanding Employer" award - The Group continuously strengthened the development of its excellent young cadre team, iterated and updated the "General Plan" training program, and continuously improved the "Five Elements Famous Formulas" talent development system[56] - As of June 30, 2025, the Group had 587 certified internal trainers, an increase of approximately 8.1% compared to the end of 2024[56] - The Group currently has 3 individuals enjoying special government allowances from the State Council, 2 Grand Craftsmen, approximately 6% of its talent graduated from high-level institutions, and the number of individuals with senior professional titles increased by approximately 19.4% compared to the end of 2024[57] Safety Production and Environmental Protection The Group continued safety production and energy-saving initiatives, enhancing hazard identification, professional training, and deploying work around pollution control, risk prevention, and carbon neutrality, deepening technical expertise - In terms of safety production, the Group continued to strengthen hazard identification and rectification, conducted 27 supervisory inspections of its subsidiaries, and organized 784 specialized training sessions, with 30,428 participants[58] - In terms of energy conservation and environmental protection, work was deployed across 5 major areas, including pollution control in key areas, ecological environment risk prevention and control, and promotion of carbon peaking and carbon neutrality, with 96 internal training sessions conducted[58] Policy Updates National departments issued multiple TCM development policies covering drug regulation, medical insurance, anti-bribery, anti-monopoly, traceability, quality improvement, and smart manufacturing, aiming to promote high-quality TCM industry development and market order - The General Office of the State Council issued "Opinions on Comprehensively Deepening the Reform of Drug and Medical Device Regulation to Promote High-Quality Development of the Pharmaceutical Industry," clarifying the improvement of the TCM-specific review evidence system, supporting the transformation of new TCM drugs, and granting market exclusivity periods for exclusive TCM varieties[60] - The National Healthcare Security Administration issued the "Notice on Promoting the Reform of Real-time Settlement of Basic Medical Insurance Funds," explicitly requiring 80% of national统筹 regions to achieve real-time settlement by 2025 and full coverage by 2026[61] - The State Administration for Market Regulation issued "Compliance Guidelines for Pharmaceutical Enterprises to Prevent Commercial Bribery Risks," providing a full-process compliance operational framework for pharmaceutical enterprises[61] - The General Office of the State Council issued "Guidelines on Anti-Monopoly in the Pharmaceutical Sector," focusing on regulating monopolistic behaviors such as joint pricing, channel manipulation, and abuse of intellectual property rights[62] - The National Healthcare Security Administration and three other departments jointly issued the "Notice on Strengthening the Collection and Application of Drug Traceability Codes in Medical Security and Work Injury Insurance Fields," requiring all medical institutions to fully collect and upload drug traceability codes starting from January 1, 2026[64] - The General Office of the State Council issued "Opinions on Improving the Quality of Traditional Chinese Medicine and Promoting High-Quality Development of the Traditional Chinese Medicine Industry," proposing 8 aspects and 21 key tasks across the entire TCM industry chain, including strengthening the protection and utilization of TCM resources, improving the development level of the Chinese herbal medicine industry, and accelerating the transformation and upgrading of the TCM industry[65] Next Steps and Work Plan The Group will prioritize "specialized management, intensive operation, and integrated coordination" to build a leading TCM industrial cluster, shifting to value-creation, focusing on optimizing structure, lean management, transformation, and risk prevention - The Group will adhere to the principles of "specialized management, intensive operation, and integrated coordination" to accelerate the construction of a leading TCM industrial cluster, promoting a shift in development model from scale-oriented to value creation[72] - Optimize layout and structure, systematically build a new collaborative system, including promoting the layout of origin processing clusters, focusing on the supply of authentic medicinal materials, optimizing production structure layout, and establishing a marketing collaborative system[72] - Enhance efficiency through lean management, by integrating internal extraction and preparation capacities, leveraging centralized procurement for price control, implementing tiered supplier management, and comprehensively reducing selling expenses[73] - Focus on transformation and addressing shortcomings, continuously optimizing organizational structure and management levels, establishing a "leaderboard" mechanism, and deeply advancing digital transformation and the implementation of artificial intelligence scenarios[73] - Strengthen foundations and prevent risks, by enhancing policy research, improving the safety of the TCM industry chain, elevating the level of refined contract management, and strengthening service provider access supervision[74] Detailed Financial Performance Analysis This section offers an in-depth analysis of revenue and cost of sales by business segment, key financial items, liquidity, and employee remuneration Revenue and Cost of Sales Analysis by Business Segment This section details revenue, cost of sales, gross profit, and gross margin changes for each business segment, noting significant revenue declines in Chinese herbal medicines production and formula granules, but improved gross margins in several segments Revenue and Cost of Sales by Business Segment (H1 2025 vs H1 2024) | Segment | 2025 Revenue (RMB thousands) | 2024 Revenue (RMB thousands) | Revenue Change (%) | 2025 Cost of Sales (RMB thousands) | 2024 Cost of Sales (RMB thousands) | Cost of Sales Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Production and Operation of Chinese Herbal Medicines | 445,584 | 754,277 | (40.9)% | 402,050 | 690,575 | (41.8)% | | Chinese Herbal Decoction Pieces | 1,596,128 | 1,576,914 | 1.2% | 1,219,630 | 1,244,087 | (2.0)% | | Chinese Herbal Formula Granules | 2,990,750 | 3,479,735 | (14.1)% | 1,329,265 | 1,421,554 | (6.5)% | | Proprietary Chinese Medicines | 2,308,809 | 2,418,349 | (4.5)% | 793,301 | 853,221 | (7.0)% | | Traditional Chinese Medicine (TCM) Big Health | 122,112 | 156,198 | (21.8)% | 84,544 | 114,782 | (26.3)% | | Total | 7,463,383 | 8,385,473 | (11.0)% | 3,828,790 | 4,324,219 | (11.5)% | Production and Operation of Chinese Herbal Medicines (Detailed) Revenue decreased by 40.9% to RMB 446 million due to business refocus and market price fluctuations, while gross margin increased by 1.4 percentage points to 9.8% from sales structure optimization - Revenue from the production and operation of Chinese herbal medicines segment was approximately RMB 445,584,000, a 40.9% decrease compared to the prior period, primarily due to a proactive adjustment of the segment's development focus and the impact of fluctuating downward prices in the Chinese herbal medicine market[77] - The gross profit margin for the current period was 9.8%, an increase of 1.4 percentage points from 8.4% in the prior period, mainly benefiting from optimized sales structure[77] Chinese Herbal Decoction Pieces (Detailed) Revenue increased by 1.2% to RMB 1.596 billion due to expanded medical terminal sales, and gross margin rose by 2.5 percentage points to 23.6% from sales structure optimization and improved internal production management - Revenue from the Chinese herbal decoction pieces segment was approximately RMB 1,596,128,000, a 1.2% increase compared to the prior period, primarily due to continuous deep cultivation in the medical terminal sales sector[79] - The gross profit margin for the current period was 23.6%, an increase of 2.5 percentage points from 21.1% in the prior period, mainly benefiting from optimized sales structure and improved internal production management levels[79] Chinese Herbal Formula Granules (Detailed) Revenue decreased by 14.1% to RMB 2.991 billion due to increased centralized procurement business and market competition, with gross margin declining by 3.5 percentage points to 55.6% as centralized procurement further reduced margins - Revenue from the Chinese herbal formula granules segment was approximately RMB 2,990,750,000, a 14.1% decrease compared to the prior period, primarily due to a significant increase in the proportion of centralized procurement business and intensified market competition[81] - The gross profit margin for the current period was 55.6%, a 3.5 percentage point decrease from 59.1% in the prior period, mainly because the increased proportion of centralized procurement business further reduced gross profit margins[81] Proprietary Chinese Medicines (Detailed) Revenue decreased by 4.5% to RMB 2.309 billion due to healthcare reform, e-commerce growth, and sales strategy adjustments, while gross margin increased by 0.9 percentage points to 65.6% from lower raw material procurement costs - Revenue from the proprietary Chinese medicines segment was approximately RMB 2,308,809,000, a 4.5% decrease compared to the prior period, primarily due to the continued deepening of healthcare reform and the development of e-commerce platforms, which put pressure on OTC product sales, coupled with adjustments in sales pace and product strategy, leading to a decline in revenue[83] - The gross profit margin for the current period was 65.6%, an increase of 0.9 percentage points from 64.7% in the prior period, mainly benefiting from a decrease in Chinese herbal medicine procurement costs during the current period[83] Traditional Chinese Medicine (TCM) Big Health (Detailed) Revenue decreased by 21.8% to RMB 122 million due to strategic business adjustments and the suspension of inefficient product lines, while gross margin increased by 4.3 percentage points to 30.8% from sales structure optimization - Revenue from the Traditional Chinese Medicine (TCM) big health segment was approximately RMB 122,112,000, a 21.8% decrease compared to the prior period, primarily due to adjustments in business development strategy and the suspension of some inefficient product lines and businesses[85] - The gross profit margin for the current period was 30.8%, an increase of 4.3 percentage points from 26.5% in the prior period, mainly benefiting from optimized sales structure and improved profitability[85] Analysis of Key Financial Items This section analyzes changes and reasons for other income, gains/losses, impairment, selling, administrative, R&D, finance costs, share of loss of associates, and profit for the period and earnings per share Other Income (Detailed) Other income increased by 14.4% to RMB 91.052 million, primarily driven by a 14.4% increase in government subsidies to RMB 68.350 million - For the six months ended June 30, 2025, the Group's other income was approximately RMB 91,052,000, an increase of 14.4% compared to the prior period, mainly due to government subsidies of approximately RMB 68,350,000 received during the reporting period, an increase of 14.4% compared to the prior period[86] Other Gains and Losses (Detailed) Other losses expanded to RMB 262 million, mainly due to RMB 242 million goodwill impairment recognized this period, although late payment penalties significantly decreased by 66.8% - For the six months ended June 30, 2025, the Group's other losses were approximately RMB 262,394,000, primarily due to the recognition of goodwill impairment of approximately RMB 242,461,000 during the current period[87] - Late payment penalties for the current period were approximately RMB 17,523,000, a 66.8% decrease compared to approximately RMB 52,708,000 in the prior period[87] Impairment Losses under Expected Credit Loss Model Credit impairment losses of RMB 185.875 million were recognized this period, an increase of RMB 27.107 million year-on-year, primarily due to a RMB 176.965 million increase in trade receivables over one year old - Credit impairment losses of approximately RMB 185,875,000 were recognized this period, an increase of approximately RMB 27,107,000 compared to approximately RMB 158,768,000 in the prior period[88] - The increase was mainly due to a year-on-year increase of approximately RMB 176,965,000 in the Group's trade receivables over one year old as of June 30, 2025[88] Selling and Distribution Expenses (Detailed) Selling and distribution expenses decreased by 7.1% to RMB 2.556 billion, primarily due to a decline in revenue from Chinese herbal formula granules and proprietary Chinese medicines, leading to reduced associated sales expenses - For the six months ended June 30, 2025, the Group's selling and distribution expenses were approximately RMB 2,556,399,000, a 7.1% decrease compared to the prior period[89] - The decrease was mainly due to a year-on-year decline in revenue from Chinese herbal formula granules and proprietary Chinese medicines, resulting in reduced associated sales expenses[89] Administrative Expenses (Detailed) Administrative expenses decreased by 2.3% to RMB 501 million, mainly due to optimized management team structure, reduced personnel, and various cost-saving initiatives - For the six months ended June 30, 2025, the Group's administrative expenses were approximately RMB 500,543,000, a decrease of approximately 2.3% compared to the prior period[90] - The decrease was mainly due to optimized management team structure and reduced management personnel, leading to a decrease in remuneration expenses; and various measures implemented during the period to reduce various expenses, showing the effectiveness of cost reduction and efficiency improvement[90] Research and Development Expenses (Detailed) R&D expenses decreased by 4.4% to RMB 256 million, primarily allocated to new drug development, classic formula research, Chinese herbal formula granule standard studies, and production adaptability research - For the six months ended June 30, 2025, the Group's research and development expenses were approximately RMB 256,123,000, a 4.4% decrease compared to the prior period[91] - During the reporting period, research and development expenses were primarily used for research to enhance future benefits (new drug development and classic formula research), research to improve quality standards (Chinese herbal formula granule standards), and research to enhance future efficiency (adaptability of Chinese medicine product production)[91] Finance Costs (Detailed) Finance costs decreased by 44.0% to RMB 47.203 million, primarily due to a year-on-year reduction in interest-bearing debt, with an actual loan interest rate of 2.7% - For the six months ended June 30, 2025, the Group's finance costs were approximately RMB 47,203,000, a year-on-year decrease, mainly due to a year-on-year reduction in the Group's interest-bearing debt during the current period[92] - During the reporting period, the Group's actual loan interest rate was 2.7% (six months ended June 30, 2024: 2.8%)[92] Share of Loss of Associates (Detailed) Share of loss of associates significantly decreased to RMB 47,000, down from RMB 874,000 in the prior period, mainly due to investment losses recognized from certain equity-invested associates - For the six months ended June 30, 2025, the Group recorded a share of loss of associates of approximately RMB 47,000, compared to a share of loss of associates of approximately RMB 874,000 in the prior period[93] - This period's loss was primarily due to investment losses recognized from certain equity-invested associates[93] Profit for the Period and Earnings Per Share Profit for the period shifted from a RMB 214.143 million profit to a RMB 141.760 million loss, a 166.2% decrease, resulting in a net profit margin of -1.9% and basic loss per share of RMB 2.14 cents - For the six months ended June 30, 2025, the Group's profit for the period was approximately RMB -141,760,000, a decrease of approximately 166.2% compared to approximately RMB 214,143,000 in the prior period[94] - The net profit margin (defined as profit for the period divided by revenue) was -1.9%, a decrease of approximately 4.5 percentage points from 2.6% in the prior period[94] - Basic earnings per share was RMB -2.14 cents, a 151.1% decrease compared to basic earnings per share of RMB 4.19 cents in the prior period[95] Liquidity and Financial Resources As of June 30, 2025, net current assets were RMB 9.521 billion, with a current ratio of 2.0 times and a debt-to-equity ratio of 17.0%, supported by ample working capital and RMB 10.396 billion in unused bank credit facilities Liquidity and Financial Resources Overview | Indicator | June 30, 2025 (RMB thousands) | Dec 31, 2024 (RMB thousands) | | :--- | :--- | :--- | | Current Assets | 18,970,577 | 18,839,503 | | Current Liabilities | 9,449,353 | 7,800,198 | | Net Current Assets | 9,521,224 | 11,039,305 | | Current Ratio | 2.0 times | 2.4 times | | Debt-to-Equity Ratio | 17.0% | 18.5% | | Interest-bearing Bank and Other Borrowings | 2,306,923 | 2,697,314 | - As of June 30, 2025, the Group had approximately RMB 10,396,072,000 in unused bank credit facilities, indicating ample working capital and a stable financial position[99] - For the six months ended June 30, 2025, the Group's investment expenditure on property, plant and equipment and intangible assets was approximately RMB 179,508,000, primarily for the expansion and renovation of production capacity in the Chinese herbal decoction pieces segment[100] - As of June 30, 2025, the Group had no significant contingent liabilities, and foreign exchange risk was not material[102][103] Employees and Remuneration Policy As of June 30, 2025, the Group's total workforce decreased by 12.1% to 15,583 employees, with total remuneration for the period decreasing by 5.2% to RMB 1.113 billion Employee Count and Total Remuneration | Indicator | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total Employees | 15,583 people | 17,716 people | | Total Remuneration (RMB thousands) | 1,113,036 | 1,174,466 | Other Information This section covers interim dividend policy, corporate governance, securities transactions, and the review and publication of interim results Interim Dividend The Board did not recommend an interim dividend for the six months ended June 30, 2025 - The Board did not recommend an interim dividend for the six months ended June 30, 2025 (six months ended June 30, 2024: nil)[105] Corporate Governance and Securities Transactions The company complied with the HKEX Corporate Governance Code, directors adhered to the Model Code for securities transactions, and neither the company nor its subsidiaries purchased, sold, or redeemed any listed securities - The Company has complied with the applicable code provisions of the Corporate Governance Code set out in Appendix C1 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited for the six months ended June 30, 2025[106] - Following specific enquiries made to all Directors, all Directors confirmed that they had complied with the required standards set out in the Model Code during the reporting period[107] - For the six months ended June 30, 2025, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[108] Review and Publication of Interim Results The Audit Committee reviewed the unaudited consolidated interim financial results without disagreement, and the results announcement and interim report will be published on the company's website and HKEXnews website - The Audit Committee has reviewed the Group's unaudited consolidated financial results for the six months ended June 30, 2025, including the accounting principles, accounting treatments, and practices adopted by the Group, and the Audit Committee had no disagreement with the accounting principles, accounting treatments, and practices adopted by the Group[109] - This results announcement will be published on the Company's website and the HKEXnews website, and the Company's 2025 interim report, containing information required by the Listing Rules, will be sent to the Company's shareholders and published on the Company's website and the HKEXnews website[110]