神威药业(02877) - 2025 - 中期财报

Company Information This section provides essential corporate details, including board composition, registration, key contacts, and stock information Board of Directors This section lists the composition of the company's Board of Directors, including executive, independent non-executive, and non-executive directors, along with members of various board committees - The Board of Directors comprises Executive Directors Li Zhenjiang (Chairman), Xin Yunxia, Li Huimin, Independent Non-executive Directors Liao Shunhui, Yao Yian, Wang Guihua, and Non-executive Director Zhou Wencheng[5] - The company has an Audit Committee, Remuneration Committee, Nomination Committee, and Corporate Social Responsibility and Sustainable Development Committee, each with a clearly defined membership structure[5] Registered Office and Principal Place of Business This section provides information on the company's registered office, head office, and principal place of business in Hong Kong, clarifying its legal registration and main operational addresses - The company's registered office is located at Cricket Square, Cayman Islands, and its head office is in Luancheng, Shijiazhuang, Hebei Province, China[5][6] - The principal place of business in Hong Kong is Room 3109, 31st Floor, Central Plaza, 18 Harbour Road, Wan Chai, Hong Kong[6] Principal Share Registrar and Transfer Office This section lists the company's share registrars in the Cayman Islands and Hong Kong, facilitating share-related operations for investors - The principal share registrar is Suntera (Cayman) Limited, and the Hong Kong share registrar is Hong Kong Central Securities Registrars Limited[6] Principal Bankers and Legal Advisers This section provides information on the company's main partner banks and legal advisers, showcasing its financial and legal support system - Principal bankers include The Hongkong and Shanghai Banking Corporation Limited, The Bank of East Asia, Limited, Bank of China Jinzhu West Road Branch, Lhasa City, Tibet, and China Construction Bank Luancheng Branch, Shijiazhuang, Hebei Province[6] - Legal advisers include Woo Kwan Lee & Lo, Hong Kong Lawyers, and Conyers Dill & Pearman, Cayman, Cayman Islands Lawyers[6] Stock Code and Website This section specifies the company's stock code on the Hong Kong Stock Exchange and its official websites, enabling investors to access company information - The company's stock code is 2877, listed on the Main Board of The Stock Exchange of Hong Kong Limited[6] - The company's websites are www.shineway.com.hk and www.shineway.com[6](index=6&type=chunk) Interim Results Highlights This report outlines key financial performance for the six months ended June 30, 2025, showing decreased revenue and gross margin, but stable net profit and declared interim dividends due to cost control and increased investment income Interim Results Highlights This report outlines key financial performance for the six months ended June 30, 2025, showing decreased revenue and gross margin, but stable net profit and declared interim dividends due to cost control and increased investment income | Indicator | H1 2025 (RMB '000) | YoY Change | | :--- | :--- | :--- | | Revenue | 1,652,698 | -20.8% | | Gross Margin | 72.2% | -3.1 percentage points | | Profit for the Period | 614,663 | -1.9% | | Earnings Per Share | RMB 0.81 | -2.4% | | Net Cash from Operating Activities | 566,319 | +0.4% | | Second Interim Dividend | RMB 0.11 per share | N/A | Company Overview This section provides an overview of the Group's core business, product portfolio, and market focus Main Business and Products This section describes China Shineway Pharmaceutical Group Limited's core business in R&D, production, and sales of modern traditional Chinese medicine injections, soft capsules, granules, and TCM formula granules, primarily for the Chinese market, listing key products and therapeutic areas - The Group primarily engages in the research, development, production, and sale of modern traditional Chinese medicine injections, soft capsules, granule products, and traditional Chinese medicine formula granules, with products mainly sold in the Chinese market[8] - In the first half of 2025, the revenue ratio of prescription drugs to OTC drugs was approximately 89.3% and 10.7%, respectively, with products covering eight major therapeutic areas including cardiovascular and cerebrovascular, respiratory, digestive, pediatric, orthopedic, tonifying, nervous system, and gynecological conditions[8] - Key products include Qingkailing Injection, Shuxuening Injection, Shenmai Injection, Wufu Xinnaoqing Soft Capsule, Traditional Chinese Medicine Formula Granules, Huoxiang Zhengqi Soft Capsule, Xiaoer Qingfei Huatan Granules, Synovitis Granules, and Qingkailing Soft Capsule[9] Management Discussion and Analysis This section provides a comprehensive review of the Group's operational performance, financial position, and strategic initiatives for the reporting period Performance Overview In the first half of 2025, the Group's sales decreased by 20.8% year-on-year, with a decline in gross margin, but net profit only slightly decreased by 1.9% through stringent cost control and increased investment income - In the first half of 2025, the Group's sales decreased by 20.8% to RMB 1,652,698,000, and the gross margin fell from 75.3% to 72.2%[10] - Net profit only slightly decreased by 1.9% to RMB 614,663,000, primarily due to enhanced cost control (selling and distribution costs decreased by 20.7%, administrative expenses decreased by 12.9%) and increased investment income[10][11] - The net profit margin increased from 30.0% in the same period last year to 37.2%[11] - Net cash from operating activities slightly increased by 0.4% to RMB 566,319,000, with free cash flow of approximately RMB 465,705,000[11] Sales Overview by Dosage Form The Group's total sales significantly decreased by 20.8% in the first half of 2025, with most dosage forms experiencing declines, particularly injections, while oral products remain a key development strategy 2025 H1 Sales by Dosage Form | Dosage Form | H1 2025 Sales (RMB '000) | YoY Change | 2025 Sales Share | | :--- | :--- | :--- | :--- | | Injections | 565,628 | -27.4% | 34.2% | | Soft Capsules | 217,383 | -24.7% | 13.2% | | Granules | 272,695 | -21.0% | 16.5% | | TCM Formula Granules | 487,717 | -12.1% | 29.5% | | Others | 109,275 | -8.1% | 6.6% | | Total Sales | 1,652,698 | -20.8% | 100.0% | - Oral products accounted for 65.8% of total sales, while injection products accounted for 34.2%, with the Group continuing to prioritize the expansion of oral preparations as a key development strategy[12] Injection Products Sales of injection products decreased by 27.4% year-on-year, mainly due to significant reductions in sales of core products such as Qingkailing Injection and Shenmai Injection - Qingkailing Injection sales decreased by 50.1%, and Shenmai Injection decreased by 21.0%[13] - Shuxuening Injection, Guanxining Injection, and Danshen Injection sales decreased by 6.3%, 9.6%, and 24.6%, respectively[13] Soft Capsule Products Total sales of soft capsule products decreased by 24.7%, primarily due to significant reductions in Wufu Xinnaoqing Soft Capsule, Huoxiang Zhengqi Soft Capsule, and Qingkailing Soft Capsule sales, though exclusive products Jiangzhi Tongluo Soft Capsule and Dantong Tongnao Soft Capsule achieved growth - Wufu Xinnaoqing Soft Capsule sales decreased by 67.4%, Huoxiang Zhengqi Soft Capsule by 16.0%, and Qingkailing Soft Capsule by 24.6%[13] - Exclusive products Jiangzhi Tongluo Soft Capsule and Dantong Tongnao Soft Capsule recorded sales growth of 16.5% and 15.2%, respectively[13] Granule Products Sales of granule products decreased by 21.0% year-on-year, mainly affected by significant reductions in sales of respiratory medications Phenolamine Caffeine Granules and Xiaoer Qingfei Huatan Granules, but exclusive product Shujin Tongluo Granules achieved growth - Phenolamine Caffeine Granules sales decreased by 40.1%, and Xiaoer Qingfei Huatan Granules by 57.8%[13] - Exclusive product Shujin Tongluo Granules sales grew by 43.8%[13] TCM Formula Granules Sales of TCM formula granules decreased by 12.1%, primarily due to the Group's risk management measures, temporarily suspending shipments to hospitals and primary healthcare institutions with overdue accounts receivable, and intensified market competition - Sales decreased by 12.1%, mainly due to increased overdue accounts receivable, leading the Group to suspend shipments to institutions that did not meet risk management requirements[13] Essential Medicines The Group has 18 regularly produced medicines listed in the National Essential Medicines List, but overall sales of essential medicines decreased by 30.7% in the period, accounting for 35.2% of total Group sales, with national policies expected to drive future growth - The Group has 18 regularly produced medicines listed in the National Essential Medicines List, including Qingkailing Injection and Shenmai Injection[14] - In the first half of 2025, overall sales of essential medicines decreased by 30.7% to RMB 582,080,000, accounting for 35.2% of the Group's total sales[14] - The National Health Commission emphasizes improving the national drug system, implementing grassroots drug linkage services, and revising the "National Essential Medicines List Management Measures," which is expected to drive sustained growth in essential medicines[15][16] Prescription and OTC Drug Sales Analysis In the first half of 2025, sales of both prescription and OTC drugs declined, with significant drops in TCM formula granules and respiratory/cardiovascular injection prescription drugs, but exclusive oral prescription drugs maintained growth 2025 H1 Sales by Drug Category and Efficacy | Category | H1 2025 Sales (RMB '000) | Sales Share | Sales Change | | :--- | :--- | :--- | :--- | | TCM Formula Granules | 487,717 | 29.5% | -12.1% | | Respiratory Prescription Drugs | 264,410 | 16.0% | -47.6% | | Cardiovascular and Cerebrovascular Injection Prescription Drugs | 294,462 | 17.8% | -14.9% | | Exclusive Oral Prescription Drugs | 266,627 | 16.1% | +3.6% | | Other Prescription Drugs | 162,726 | 9.9% | -15.2% | | Total Prescription Drugs | 1,475,942 | 89.3% | -20.4% | | Total OTC Drugs | 176,756 | 10.7% | -24.0% | | Total Sales | 1,652,698 | 100% | -20.8% | TCM Formula Granules (Sales Analysis) Sales of TCM formula granules decreased by 12.1%, primarily due to overdue accounts receivable risk management and intensified market competition; the Group is reorganizing its team and expanding market development - Sales decreased by 12.1% to RMB 487,717,000, accounting for 29.5% of total sales, ranking among the top five listed companies for TCM formula granules nationwide[18] - The sales decline was attributed to risk management for overdue accounts receivable and price competition from new suppliers[19] - The Group plans to reorganize its formula granule business unit team, increase national market personnel, and prioritize developing hospital markets in 10 other provinces beyond Hebei and Yunnan[19] - The two major production bases in Shijiazhuang, Hebei, and Chuxiong, Yunnan, have an annual output value of RMB 5 billion, with plans to expand capacity based on market development[20] Respiratory Prescription Drugs Sales of respiratory prescription drugs significantly decreased by 47.6%, mainly due to high social inventory post-pandemic, weak demand from a slowing macroeconomy, and active inventory adjustments by terminal channels; the Group's self-developed 'JC Capsule' has completed Phase III clinical trials and is expected to obtain production approval in the second half of the year, adding new momentum to this area - Sales significantly decreased by 47.6% to RMB 264,410,000, accounting for 16.0% of overall sales[21] - Qingkailing Injection and Phenolamine Caffeine Granules sales significantly decreased by 50.1% and 40.1%, respectively[21] - The sales decline was mainly due to a high inventory base post-pandemic, weak demand from a slowing macroeconomy, and inventory adjustments by medical institutions[21] - The self-developed "JC Capsule" for upper respiratory tract infections has completed Phase III clinical trials and is expected to obtain a production license in the second half of 2025[21] Cardiovascular and Cerebrovascular Injection Prescription Drugs Sales of cardiovascular and cerebrovascular injection prescription drugs experienced a negative growth of 14.9%, primarily due to the national centralized procurement 'dual control' policy, which led to a significant decline in hospital procurement demand - Sales experienced negative growth of 14.9% to RMB 294,462,000, accounting for 17.8% of overall sales[22] - Shenmai Injection and Shuxuening Injection sales decreased by 21.0% and 6.3%, respectively[22] - The sales decline was mainly due to the national centralized procurement "dual control" policy, leading to reduced hospital procurement demand[22] Exclusive Oral Prescription Drugs Sales of exclusive oral prescription drugs grew against the trend by 3.6%, with Jiangzhi Tongluo Soft Capsule, Dantong Tongnao Soft Capsule, and Shujin Tongluo Granules performing exceptionally; Qihuang Tongmi Soft Capsule and Dantong Tongnao Soft Capsule received expert consensus and guideline recommendations, further enhancing their clinical status and market potential - Exclusive oral prescription drug sales increased by 3.6%, accounting for 16.1% of overall sales[23][24] - Jiangzhi Tongluo Soft Capsule, Dantong Tongnao Soft Capsule, and Shujin Tongluo Granules grew by 16.5%, 15.2%, and 43.8%, respectively[23] - Qihuang Tongmi Soft Capsule was recommended by the "Expert Consensus on Integrated Traditional Chinese and Western Medicine Diagnosis and Treatment of Functional Constipation (2025)," effective for functional constipation by invigorating qi, nourishing blood, and moistening the intestines[24] - Dantong Tongnao Soft Capsule was included in the "Guidelines for Rational Drug Use in Cerebrovascular Diseases," effectively promoting neurological recovery, improving microcirculation in ischemic areas, and providing anti-ischemic reperfusion injury effects[25] - The Group will continue to increase evidence-based medicine research, terminal investment, and academic promotion for its exclusive products[26] OTC Drugs Overall sales of OTC drugs decreased by 24.0% year-on-year, mainly due to a high base from public and pharmacy stockpiling post-pandemic, and reduced consumer confidence affected by a slowing macroeconomy - Overall OTC drug sales decreased by 24.0% year-on-year[27] - Huoxiang Zhengqi Soft Capsule and Qingkailing Soft Capsule declined by 16.0% and 24.6%, respectively, while Xiaoer Qingfei Huatan Granules sales decreased by 57.8%[27] - The sales reduction was mainly due to a high post-pandemic stockpiling base and reduced consumer confidence affected by a slowing macroeconomy[27] Research and Development and Innovation The Group continues to increase R&D investment, focusing on chronic disease treatment, especially areas without Western medicine solutions, to develop innovative traditional Chinese medicines; multiple new drugs are in clinical trials, with 'Q-B-Q-F Concentrated Pills' in Phase III, and 'Sailuotong Capsule' and 'JC Capsule' having completed Phase III, expected to submit production license applications by year-end - The Group continues to strengthen R&D investment, precisely targeting the development of modern traditional Chinese medicine new drugs with unique efficacy, focusing on chronic disease treatment areas[28] - The exclusive innovative drug "Q-B-Q-F Concentrated Pills" is in Phase III clinical trials[28] - "Sailuotong Capsule" and "JC Capsule" have completed Phase III clinical trials, with the goal of submitting production license applications by the end of this year[28] - R&D expenses accounted for 3.0% of total sales revenue during the period, and future efforts will focus on developing innovative traditional Chinese medicines in advantageous areas such as cardiovascular and cerebrovascular diseases, pediatric diseases, orthopedic diseases, gynecological diseases, and geriatric diseases[28] - The "Research and Application of Shan Zha Ye and Formula Granules, a Characteristic Traditional Chinese Medicine Material in Hebei" project won the Third Prize of Hebei Provincial Science and Technology Progress Award, solving the problem of unclear material basis and lack of quality control standards for Shan Zha Ye formula granules[29] Ancient Classic Prescriptions The Group actively promotes the inheritance and innovation of traditional Chinese medicine, developing and researching over 100 new drugs transformed from ancient classic prescriptions; the self-developed 'Shaoyao Gancao Tang Granules' has been approved for market by the NMPA, becoming the first classic prescription approved in 2025, while Phase II clinical trials for 'Yigong San Granules' for chronic anemia are progressing well - The Group is developing and researching over 100 new drugs transformed from ancient classic prescriptions and accelerating the registration application for multiple traditional Chinese medicine classic prescription new drugs[30] - The self-developed "Shaoyao Gancao Tang Granules" received market approval from the National Medical Products Administration, becoming the first classic prescription approved in 2025 and the Group's second approved classic prescription[30] - Phase II clinical trials for "Yigong San Granules," a Class 1.1 new traditional Chinese medicine for chronic anemia, are progressing smoothly, with no clear traditional Chinese medicine for chronic anemia currently on the market[30] Policy Environment In the first half of 2025, the state introduced multiple policies supporting the high-quality development of the traditional Chinese medicine industry, including deepening the '14th Five-Year Plan' for TCM development, enhancing TCM quality and technological innovation, incorporating innovative and high-value TCM drugs into medical insurance, and promoting TCM resources to grassroots medical care, providing strong support for TCM enterprises' development - In January 2025, the National Administration of Traditional Chinese Medicine Directors' Meeting deployed key tasks including deepening the "14th Five-Year Plan" for TCM development, promoting the construction of a TCM standard system, and enhancing TCM quality and technological innovation[32] - In March 2025, the National Healthcare Security Administration announced that innovative drugs and high-value traditional Chinese medicine drugs would be included in medical insurance policy adjustments and management, supporting TCM innovation[32] - The government work report at the National People's Congress and Chinese People's Political Consultative Conference in 2025 explicitly proposed accelerating the review and approval of innovative traditional Chinese medicine drugs and promoting TCM technological innovation[33] - In June 2025, the National Health Commission promoted optimizing community and grassroots TCM service systems and enhancing TCM basic public health service capabilities, driving TCM enterprises to expand markets at the grassroots level[34] Eight Key Products Win Bids in National Centralized Procurement of Proprietary Chinese Medicines Eight of the Group's key products, including Qingkailing Injection, Shuxuening Injection, and Shenmai Injection, successfully won bids in the national centralized procurement of proprietary Chinese medicines, covering cardiovascular and cerebrovascular, respiratory, and digestive therapeutic areas, which will enhance the Group's market coverage and sales potential - Eight of the Group's key products, including Qingkailing Injection, Shuxuening Injection, and Shenmai Injection, won bids in the national centralized procurement of proprietary Chinese medicines[35] - The中标 products cover therapeutic areas such as cardiovascular and cerebrovascular diseases, respiratory system diseases, and digestive system diseases, all of which are commonly used medical insurance and essential drug varieties[35] - Winning the bids will make the products more compliant with DRGs/DIP payment requirements, increasing terminal market demand, market coverage, and sales potential[36] Financial Performance Analysis This section details the Group's financial indicators for the first half of 2025, explaining the reasons for decreased profit but improved net profit margin - In the first half of 2025, revenue decreased by 20.8% year-on-year, with sales of injections, soft capsules, granules, and TCM formula granules all declining[37] - Prescription drugs and OTC drugs accounted for 89.3% and 10.7% of revenue, respectively[37] Cost of Sales In the first half of 2025, the cost of sales was RMB 459,092,000, accounting for 27.8% of revenue, with direct materials representing 66.8% of total production costs - Cost of sales was RMB 459,092,000, accounting for 27.8% of revenue[38] - Direct materials, direct labor, and other production costs accounted for 66.8%, 14.3%, and 18.9% of total production costs, respectively[38] Operating Gross Margin The overall gross margin for the first half of 2025 was 72.2%, a decrease from 75.3% in the same period last year, mainly due to rising raw material procurement costs and the impact of centralized procurement on drug prices - The overall gross margin was 72.2%, compared to 75.3% in the same period last year[39] - The average gross margin for injections, soft capsules, granules, and TCM formula granules all decreased[39] Other Income Other income primarily includes enterprise development funds of RMB 156,300,000, mainly from government-provided research activities and investment-related enterprise development funds - Other income primarily consisted of enterprise development funds of RMB 156,300,000 (H1 2024: RMB 162,297,000)[40] Investment Income Investment income significantly increased, mainly from interest income on bank deposits and structured deposits of RMB 119,821,000 and income from financial product investments of RMB 98,469,000 - Total investment income was RMB 218,290,000 (H1 2024: RMB 121,173,000)[41][89] - Interest income from bank deposits and structured deposits was RMB 119,821,000, and income from financial product investments was RMB 98,469,000[41] Other Gains and Losses In the first half of 2025, a net exchange gain of RMB 32,843,000 was recorded, primarily due to changes in the exchange rates of the Australian dollar and Hong Kong dollar against the RMB - A net exchange gain of RMB 32,843,000 was recorded (H1 2024: RMB 19,118,000), mainly due to changes in the exchange rates of the Australian dollar and Hong Kong dollar against the RMB[42] Impairment of Financial Assets In the first half of 2025, there was a reversal of impairment for trade receivables of RMB 2,706,000 and an impairment of RMB 871,000 for trade receivables secured by bank bills - Reversal of impairment for trade receivables was RMB 2,706,000 (H1 2024: impairment of RMB 4,788,000)[43] - Impairment for trade receivables secured by bank bills was RMB 871,000 (H1 2024: reversal of impairment of RMB 502,000)[43] Selling and Distribution Costs Selling and distribution costs decreased by 20.7% year-on-year, primarily due to the Group's enhanced cost control, reduced market development, marketing management, and promotional expenses, as well as a decrease in sales personnel and salaries - Selling and distribution costs decreased by 20.7%, accounting for 39.2% of revenue (H1 2024: 39.2%)[44] - The cost reduction was mainly due to decreased expenses for market development, marketing management, and market promotion, as well as a reduction in sales personnel and salaries[44] Administrative Expenses Administrative expenses decreased by 12.9% year-on-year, accounting for approximately 7.7% of revenue, mainly comprising administrative staff salaries, social insurance, depreciation of property, plant and equipment, and amortization of intangible assets - Administrative expenses decreased by 12.9%, accounting for approximately 7.7% of revenue (H1 2024: 7.0%)[45] - These primarily included administrative staff salaries and social insurance (accounting for 2.6% of revenue) and depreciation and amortization expenses (accounting for 1.4% of revenue)[45] Research and Development Costs In the first half of 2025, research and development costs accounted for approximately 3.0% of revenue, an increase from 2.1% in the same period last year - Research and development costs accounted for approximately 3.0% of revenue (H1 2024: 2.1%)[46] Taxation Total taxation for the first half of 2025 was RMB 160,015,000, with the effective tax rate decreasing from 27.3% in the same period last year to 20.7%, mainly due to reduced withholding tax on dividends distributed by domestic subsidiaries - Total taxation was RMB 160,015,000, with the effective tax rate decreasing from 27.3% to 20.7%[47] - The decrease in tax rate was mainly due to reduced withholding tax on dividends distributed by domestic subsidiaries[47] Profit for the Period Net profit for the first half of 2025 was RMB 614,663,000, a year-on-year decrease of 1.9%, primarily due to increased raw material procurement costs and the impact of centralized procurement on drug prices, leading to reduced revenue and gross profit - Net profit was RMB 614,663,000, a year-on-year decrease of 1.9%[48] - The decrease in profit was mainly due to increased raw material procurement costs and the impact of centralized procurement on drug prices, leading to reduced revenue and gross profit[48] Financial Position and Liquidity The Group maintains a robust financial position with ample bank balances and cash to support future development, while trade receivables turnover increased, inventory turnover extended, and the debt-to-capital ratio decreased Interim Dividend The Board resolved to declare a second interim dividend of RMB 0.11 per share for 2025, totaling RMB 83,094,000, payable on September 26, 2025 - A second interim dividend of RMB 0.11 per share for 2025 was declared, totaling RMB 83,094,000[49] - Together with the first interim dividend, total dividends paid to shareholders in 2025 amounted to RMB 0.47 per share[11] - The dividend will be paid in HKD cash, converted at a specified exchange rate to HKD 0.120 per share[50] Share Capital Structure As of June 30, 2025, the Group's capital structure and issued share capital remained unchanged compared to December 31, 2024 - As of June 30, 2025, the Group's capital structure and issued share capital remained unchanged[52] Liquidity and Financial Resources As of June 30, 2025, the Group's bank balances and cash amounted to RMB 6,860,819,000, an increase from the end of 2024, indicating a strong financial position - As of June 30, 2025, bank balances and cash amounted to RMB 6,860,819,000 (December 31, 2024: RMB 6,140,153,000)[53] - Of this, RMB 4,390,659,000 was denominated in RMB, with the remainder in HKD, AUD, and USD[53] - The Directors believe the Group's financial position is robust, with sufficient financial resources to meet future development needs[54] Trade Receivables and Trade Receivables Secured by Bank Bills As of June 30, 2025, trade receivables increased by 0.8%, while trade receivables secured by bank bills decreased by 5.9%; the turnover period for trade receivables extended to 99.9 days, and for trade receivables secured by bank bills, it shortened to 31.2 days - Trade receivables increased by 0.8%, while trade receivables secured by bank bills decreased by 5.9%[55] - The turnover period for trade receivables was 99.9 days (H1 2024: 69.7 days), and for trade receivables secured by bank bills, it was 31.2 days (H1 2024: 41.9 days)[55] Inventories As of June 30, 2025, inventories decreased by 11.2% compared to the end of 2024; the finished goods inventory turnover period extended to 110.0 days - Inventories decreased by 11.2% compared to December 31, 2024[56] - The finished goods inventory turnover period was 110.0 days (H1 2024: 98.0 days)[57] Property, Plant and Equipment In the first half of 2025, the Group added approximately RMB 59,126,000 in construction in progress and purchased other property, plant and equipment totaling RMB 19,063,000; depreciation expense was RMB 69,511,000 - Approximately RMB 59,126,000 was added to construction in progress, and other property, plant and equipment totaling RMB 19,063,000 was purchased[58] - Depreciation expense was RMB 69,511,000 (H1 2024: RMB 75,634,000)[58] Intangible Assets Intangible assets primarily refer to patent rights and production licenses with definite useful lives, with amortization expense of RMB 4,424,000 - Amortization expense for intangible assets was RMB 4,424,000[59] Goodwill Goodwill primarily arose from equity acquisitions of several subsidiaries between 2005 and 2021 - Goodwill arose from equity acquisitions of Shineway Pharmaceutical Marketing Co, Ltd, Shineway Pharmaceutical (Zhangjiakou) Co, Ltd, Shineway Pharmaceutical (Sichuan) Co, Ltd, Shineway Pharmaceutical Group (Shandong) Co, Ltd, Yunnan Shineway Shiprui Pharmaceutical Co, Ltd, and Shineway Pharmaceutical (Kunming) Co, Ltd in 2005, 2010, 2014, 2015, and 2021, respectively[60] Trade Payables The turnover period for trade payables was 146.0 days, a reduction from 167.2 days in the same period last year - The turnover period for trade payables was 146.0 days (H1 2024: 167.2 days)[61] Bank Borrowings As of June 30, 2025, bank borrowings amounted to RMB 328,477,000, primarily for daily operations, with a debt-to-capital ratio of 4.2% - Bank borrowings amounted to RMB 328,477,000 (December 31, 2024: RMB 330,000,000)[62] - Borrowings bear interest at a range of 61 to 200 basis points below the prime lending rate and are repayable within one to two years[62] - The debt-to-capital ratio was 4.2% (December 31, 2024: 4.4%)[62] Other Operating Information This section provides information on the Group's employees, exchange rate risk, contingent liabilities, significant investments, and asset pledges Employees As of June 30, 2025, the Group's employee count was 2,867, a decrease from 3,220 at the end of 2024; the Group provides fair compensation and benefits - As of June 30, 2025, the number of employees was 2,867 (December 31, 2024: 3,220)[63] - The Group's remuneration policy is fair, referencing market conditions and individual performance, and provides medical insurance, retirement benefits, and other perks[63] Exposure to Exchange Rate Fluctuations The vast majority of the Group's operating transactions and liabilities are denominated in RMB and HKD, with bank deposits primarily in RMB, HKD, and AUD; a net exchange gain was recorded in the first half of 2025, with no foreign exchange contracts or other hedging instruments during the period - The Group's operating transactions and liabilities are primarily denominated in RMB and HKD, with bank deposits mainly in RMB, HKD, and AUD[64] - In the first half of 2025, a net exchange gain arose from changes in the exchange rates of RMB against HKD and AUD[64] - As of June 30, 2025, there were no foreign exchange contracts or other financial derivative instruments for hedging purposes[64] Contingent Liabilities As of June 30, 2025, the Group had no contingent liabilities - As of June 30, 2025, the Group had no contingent liabilities[65] Significant Investments Held, Major Acquisitions and Disposals, and Plans for Future Major Investments or Capital Assets In the first half of 2025, the Group held no significant investments, nor were there any major acquisitions or disposals, and the Board had not authorized any plans for significant investments or increases in capital assets - There were no significant investments, acquisitions, or disposals during the period[66] - As of June 30, 2025, the Board had not authorized any plans for significant investments or increases in capital assets[66] Pledge of Group Assets As of June 30, 2025, the Group had no assets pledged - As of June 30, 2025, the Group had no assets pledged[67] Other Information This section covers details regarding directors' and substantial shareholders' interests, share schemes, securities transactions, corporate governance, and audit committee activities Directors' and Chief Executive's Interests in Shares As of June 30, 2025, Mr. Li Zhenjiang held 66.12% of the company's shares through a discretionary trust, with Mr. Li Huimin and Ms. Xin Yunxia also holding minor stakes Directors' and Chief Executive's Interests in Shares | Director Name | Capacity | Number of Shares Held (shares) | Approximate Percentage of Company Shares | | :--- | :--- | :--- | :--- | | Li Zhenjiang | Founder of a discretionary trust | 546,802,990 | 66.12% | | Li Huimin | Beneficial owner | 1,020,000 | 0.12% | | Xin Yunxia | Beneficial owner | 540,000 | 0.07% | - Mr. Li Zhenjiang is deemed to have an interest in 546,802,990 shares, which are held by Full Wealth Investment Limited, a company wholly owned by the trustee of the Li Family 2004 Trust[68] Directors' Rights to Acquire Shares or Debentures Save for the share option scheme and share award scheme disclosures, neither the company, its holding company, nor any of its subsidiaries entered into any arrangements during the period that would enable directors to acquire benefits by purchasing shares or debentures - During the period, neither the company, its holding company, nor any of its subsidiaries participated in any arrangements that would enable directors to acquire benefits by purchasing shares or debentures, except for the share option scheme and share award scheme[70] Substantial Shareholders As of June 30, 2025, Full Wealth Investment Limited and BH Corporate Services Ltd were the company's substantial shareholders, each holding 546,802,990 shares, representing approximately 66.12% of the company's share capital Substantial Shareholders' Interests | Shareholder Name | Capacity | Number of Shares Held (shares) | Approximate Percentage of Company Share Capital | | :--- | :--- | :--- | :--- | | Full Wealth Investment Limited | Beneficial owner | 546,802,990 | 66.12% | | BH Corporate Services Ltd | Trustee of a discretionary trust | 546,802,990 | 66.12% | - The shareholdings of Full Wealth and BH Corporate Services Ltd overlap, as BH Corporate Services Ltd, as trustee of the Li Family 2004 Trust, owns all issued shares of Full Wealth[72] Share Option Scheme The company's share option scheme adopted on May 29, 2015, expired on May 28, 2025, with no outstanding options at the beginning or end of the period, and no options granted, exercised, cancelled, or lapsed during the period - The 2015 Share Option Scheme expired on May 28, 2025[74] - There were no outstanding options at the beginning or end of the period, nor were any share options granted, exercised, cancelled, or lapsed during the period[74] Employee Share Award Scheme The company adopted a share award scheme on March 26, 2018, to recognize employee contributions and attract talent; as of the end of the reporting period, the trustee held 71,600,000 shares, but no shares had been awarded to eligible employees since the adoption date - The Share Award Scheme was adopted on March 26, 2018, to recognize employee contributions and to incentivize and attract talent[75] - As of the end of the reporting period, the trustee held 71,600,000 shares[75] - No shares have been awarded to eligible employees under the scheme since its adoption date[75] Purchase, Sale or Redemption of Securities 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 securities - 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 securities[76] Compliance with Corporate Governance Code The company complied with the Corporate Governance Code in Appendix C1 of the Listing Rules during the first half of 2025, except for the deviation where the Chairman and CEO roles are held by the same person, which the Board believes facilitates business strategy execution and maximizes operational efficiency, and will be reviewed periodically - The company complied with the Corporate Governance Code set out in Appendix C1 of the Listing Rules during the first half of 2025, except for the deviation from Code Provision C.2.1[77] - The deviation is that the roles of Chairman and Chief Executive Officer are combined and held by Mr. Li Zhenjiang, which the Board believes facilitates the execution of business strategies and maximizes operational efficiency[77] Compliance with Model Code The company has adopted the Model Code as its code of conduct for directors' securities transactions, and all directors confirmed compliance with the Model Code during the first half of 2025 after inquiry - The company has adopted the Model Code as its code of conduct for directors' securities transactions[79] - All Directors confirmed, after inquiry, that they have complied with the Model Code throughout the first half of 2025[79] Changes in Directors' Information Independent Non-executive Director Ms. Wang Guihua was appointed as a member of the company's Nomination Committee on June 10, 2025 - Independent Non-executive Director Ms. Wang Guihua was appointed as a member of the company's Nomination Committee on June 10, 2025[80] Audit Committee The company's Audit Committee has reviewed the accounting principles and policies adopted by the Group, as well as the unaudited condensed consolidated results for the six months ended June 30, 2025, with management and external auditors - The Audit Committee has reviewed the Group's accounting principles and policies, as well as the unaudited condensed consolidated results for the first half of 2025[82] Closure of Register of Members The company will suspend registration of shareholders from September 11 to September 12, 2025, to determine eligibility for the second interim dividend for 2025 - The register of members will be closed from September 11 to September 12, 2025, to determine eligibility for the second interim dividend[83] Review Report on Condensed Consolidated Financial Statements This section presents the independent review report on the condensed consolidated financial statements for the period Review Report on Condensed Consolidated Financial Statements Deloitte Touche Tohmatsu conducted a review of the condensed consolidated financial statements in accordance with Hong Kong Standard on Review Engagements 2410 and found no matters that would lead them to believe the statements were not prepared, in all material respects, in accordance with International Accounting Standard 34 - The auditor, Deloitte Touche Tohmatsu, has reviewed the condensed consolidated financial statements[85] - The review was conducted in accordance with Hong Kong Standard on Review Engagements 2410, and no audit opinion was expressed[86] - The auditor did not note any matters that would lead them to believe the condensed consolidated financial statements were not prepared, in all material respects, in accordance with International Accounting Standard 34[87] Condensed Consolidated Financial Statements This section presents the Group's condensed consolidated financial statements, including statements of profit or loss, financial position, changes in equity, and cash flows, along with explanatory notes Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income The Group reported revenue of RMB 1,652,698,000 and profit for the period of RMB 614,663,000 for the first half of 2025, with basic and diluted earnings per share both at RMB 0.81 Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income Summary (For the six months ended June 30, 2025) | Indicator | 2025 (RMB '000) | 2024 (RMB '000) | | :--- | :--- | :--- | | Revenue | 1,652,698 | 2,086,695 | | Cost of Sales | (459,092) | (514,511) | | Gross Profit | 1,193,606 | 1,572,184 | | Other Income | 162,059 | 168,985 | | Investment Income | 218,290 | 121,173 | | Other Gains and Losses | 29,418 | 14,206 | | Reversal (Provision) for Impairment Loss on Financial Assets, Net | 1,835 | (4,286) | | Selling and Distribution Costs | (647,836) | (817,369) | | Administrative Expenses | (126,452) | (145,212) | | Research and Development Costs | (50,378) | (44,746) | | Finance Costs | (5,864) | (2,852) | | Profit Before Tax | 774,678 | 862,083 | | Taxation | (160,015) | (235,604) | | Profit and Total Comprehensive Income for the Period | 614,663 | 626,479 | | Basic Earnings Per Share | RMB 0.81 | RMB 0.83 | | Diluted Earnings Per Share | RMB 0.81 | RMB 0.83 | Condensed Consolidated Statement of Financial Position As of June 30, 2025, the Group's total assets less current liabilities were RMB 7,959,575,000, and net assets were RMB 7,809,623,000; non-current assets primarily comprised property, plant and equipment and goodwill, while current assets were dominated by bank balances and cash Condensed Consolidated Statement of Financial Position Summary (As of June 30, 2025) | Indicator | June 30, 2025 (RMB '000) | December 31, 2024 (RMB '000) | | :--- | :--- | :--- | | Non-current Assets | | | | Property, Plant and Equipment | 1,225,148 | 1,219,402 | | Intangible Assets | 18,906 | 23,323 | | Goodwill | 165,956 | 165,956 | | Deferred Tax Assets | 24,727 | 34,326 | | Current Assets | | | | Inventories | 722,369 | 813,190 | | Trade Receivables | 915,803 | 908,115 | | Trade Receivables Secured by Bank Bills | 276,312 | 293,762 | | Prepayments, Deposits and Other Receivables | 77,197 | 93,283 | | Financial Assets at Fair Value Through Profit or Loss | 100,419 | 350,020 | | Bank Balances and Cash | 6,860,819 | 6,140,153 | | Current Liabilities | | | | Trade Payables | 373,676 | 367,046 | | Trade Payables Secured by Bank Bills | 4,000 | 35,918 | | Other Payables and Accruals | 1,555,916 | 1,508,955 | | Bank Borrowings | 300,000 | 330,000 | | Net Current Assets | 6,524,838 | 6,148,527 | | Net Assets | 7,809,623 | 7,466,904 | Condensed Consolidated Statement of Changes in Equity As of June 30, 2025, the Group's total equity was RMB 7,809,623,000, with profit and total comprehensive income for the period at RMB 614,663,000 and dividends paid at RMB 271,944,000 Condensed Consolidated Statement of Changes in Equity Summary (For the six months ended June 30, 2025) | Indicator | 2025 (RMB '000) | 2024 (RMB '000) | | :--- | :--- | :--- | | Total Equity at Beginning of Period | 7,466,904 | 7,034,768 | | Profit and Total Comprehensive Income for the Period | 614,663 | 626,479 | | Dividends Paid | (271,944) | (324,822) | | Total Equity at End of Period | 7,809,623 | 7,336,425 | Condensed Consolidated Statement of Cash Flows In the first half of 2025, the Group's net cash from operating activities was RMB 566,319,000, net cash from investing activities was RMB 414,957,000, net cash used in financing activities was RMB 283,573,000, and cash and cash equivalents at period-end totaled RMB 6,860,819,000 Condensed Consolidated Statement of Cash Flows Summary (For the six months ended June 30, 2025) | Indicator | 2025 (RMB '000) | 2024 (RMB '000) | | :--- | :--- | :--- | | Net Cash from Operating Activities | 566,319 | 564,116 | | Net Cash from Investing Activities | 414,957 | 79,591 | | Net Cash Used in Financing Activities | (283,573) | (301,741) | | Net Increase in Cash and Cash Equivalents | 697,703 | 341,966 | | Cash and Cash Equivalents at End of Period | 6,860,819 | 6,234,974 | Notes to the Condensed Consolidated Financial Statements This section provides detailed notes to the condensed consolidated financial statements, explaining the basis of preparation, significant accounting policies, revenue and segment information, investment income, taxation, and other financial disclosures General Information The condensed consolidated financial statements are prepared in accordance with International Accounting Standard 34 and the Listing Rules, presented in RMB - The condensed consolidated financial statements are prepared in accordance with International Accounting Standard 34 and the applicable disclosure requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[99] - The financial statements are presented in the company's functional currency, RMB[100] Significant Accounting Policies The condensed consolidated financial statements are prepared on a historical cost basis, with accounting policies and methods of computation consistent with the 2024 annual consolidated financial statements; amendments to IFRS accounting standards were first applied this period but had no significant impact - The condensed consolidated financial statements are prepared on a historical cost basis, with accounting policies consistent with the 2024 annual consolidated financial statements[101] - Amendments to IFRS accounting standards (IAS 21 (Amendment) Lack of Exchangeability) were first applied this period but had no significant impact on the financial position and performance[102] Revenue and Segment Information The Group operates a single segment business involving the research, development, manufacturing, and trading of traditional Chinese medicine products, primarily selling to external customers in China (including Hong Kong) - The Group operates a single operating segment engaged in the research, development, manufacturing, and trading of traditional Chinese medicine products[103] - Key products include injections, soft capsules, granules, traditional Chinese medicine formula granules, and others, primarily sold to external customers in China (including Hong Kong)[104] Investment Income Investment income primarily includes interest on bank deposits, interest on structured deposits, and income from financial product investments, with a significant increase in financial product investment income Investment Income Composition (For the six months ended June 30, 2025) | Category | 2025 (RMB '000) | 2024 (RMB '000) | | :--- | :--- | :--- | | Interest on Bank Deposits | 117,876 | 109,937 | | Interest on Structured Deposits | 1,945 | 6,619 | | Income from Financial Product Investments | 98,469 | 4,617 | | Total | 218,290 | 121,173 | - Income from financial product investments significantly increased from RMB 4,617 thousand in the same period of 2024 to RMB 98,469 thousand[105] Taxation Taxation includes PRC enterprise income tax, under-provision in prior years, and withholding tax on distributed profits of PRC subsidiaries; the decrease in effective tax rate is mainly due to reduced withholding tax Taxation Composition (For the six months ended June 30, 2025) | Category | 2025 (RMB '000) | 2024 (RMB '000) | | :--- | :--- | :--- | | PRC Enterprise Income Tax | 97,329 | 144,053 | | Under-provision in Prior Years | 5,763 | 7,979 | | Withholding Tax on Distributed Profits of PRC Subsidiaries | 70,287 | 81,752 | | Deferred Tax | (13,364) | 1,820 | | Total | 160,015 | 235,604 | - Certain subsidiaries operating in western China and recognized as high-tech enterprises enjoy a preferential enterprise income tax rate of 15%[107] - The direct holding companies of PRC subsidiaries enjoy a withholding tax rate of 5%[107] Profit for the Period (Notes) Profit for the period is stated after deducting (crediting) amortization of intangible assets, depreciation of property, plant and equipment, enterprise development funds, net exchange gains, and gain on disposal of property, plant and equipment Profit for the Period Adjustment Items (For the six months ended June 30, 2025) | Item | 2025 (RMB '000) | 2024 (RMB '000) | | :--- | :--- | :--- | | Amortization of Intangible Assets | 4,424 | 5,044 | | Depreciation of Property, Plant and Equipment | 69,511 | 75,634 | | Enterprise Development Funds (credited to other income) | (156,300) | (162,297) | | Net Exchange Gains (credited to other gains and losses) | (32,843) | (19,118) | | (Gain) Loss on Disposal of Property, Plant and Equipment | (7,619) | 255 | - Enterprise development funds include unconditional grants of RMB 147,797,000 and deferred income related to research activities and development projects of RMB 8,503,000[109] Dividends (Notes) Dividends of RMB 271,944,000 (2025 first interim dividend) were recognized in the first half of 2025, and a second interim dividend of RMB 0.11 per share for 2025 was declared after the reporting period Dividends Recognized and Declared (For the six months ended June 30, 2025) | Category | 2025 (RMB '000) | 2024 (RMB '000) | | :--- | :--- | :--- | | Dividends Recognized as Distributed During the Period | 271,944 | 324,822 | | Dividends Declared After the Reporting Period | 83,094 | 83,094 | - The second interim dividend for 2025 of RMB 0.11 per share, totaling RMB 83,094,000, is payable on September 26, 2025[112] Earnings Per Share Basic and diluted earnings per share for the first half of 2025 were both RMB 0.81, calculated based on profit attributable to owners of the company and the weighted average number of ordinary shares outstanding (less shares held under the share award scheme) Earnings Per Share Calculation Data (For the six months ended June 30, 2025) | Indicator | 2025 (RMB '000) | 2024 (RMB '000) | | :--- | :--- | :--- | | Profit Attributable to Owners of the Company for the Period | 614,663 | 626,479 | | Weighted Average Number of Ordinary Shares Outstanding (less shares held under share award scheme) | 755,400,000 | 755,400,000 | - Basic and diluted earnings per share were both RMB 0.81[89] Property, Plant and Equipment (Notes) In the first half of 2025, the Group added RMB 59,126,000 in construction in progress and acquired other property, plant and equipment totaling RMB 19,063,000; right-of-use assets of RMB 574,000 were recognized during the period - RMB 59,126,000 was added to construction in progress, and other property, plant and equipment totaling RMB 19,063,000 was acquired[114] - Property, plant and equipment with a carrying amount of RMB 3,505,000 was disposed of, resulting in a gain on disposal of RMB 7,619,000[114] - Right-of-use assets of RMB 574,000 and lease liabilities of RMB 574,000 were recognized during the period[114] Goodwill (Notes) As of June 30, 2025, the carrying amount of the Group's goodwill was RMB 165,956,000, allocated to a single cash-generating unit primarily engaged in the research, development, manufacturing, and trading of pharmaceutical products - The carrying amount of goodwill was RMB 165,956,000, allocated to a single cash-generating unit primarily engaged in the research, development, manufacturing, and trading of pharmaceutical products[115] Trade Receivables / Trade Receivables Secured by Bank Bills (Notes) As of June 30, 2025, total trade receivables amounted to RMB 950,242,000, and total trade receivables secured by bank bills amounted to RMB 278,883,000 Trade Receivables and Trade Receivables Secured by Bank Bills (As of June 30, 2025) | Category | June 30, 2025 (RMB '000) | December 31, 2024 (RMB '000) | | :--- | :--- | :--- | | Trade Receivables (net of provision) | 915,803 | 908,115 | | Trade Receivables Secured by Bank Bills (net of provision) | 276,312 | 293,762 | | Total | 1,192,115 | 1,201,877 | Ageing Analysis of Trade Receivables and Trade Receivables Secured by Bank Bills (As of June 30, 2025) | Ageing | June 30, 2025 (RMB '000) | December 31, 2024 (RMB '000) | | :--- | :--- | :--- | | Within 6 months | 819,560 | 853,487 | | Over 6 months but within 1 year | 207,169 | 202,754 | | Over 1 year but within 2 years | 125,534 | 119,971 | | Over 2 years | 39,852 | 25,665 | | Total | 1,192,115 | 1,201,877 | Reversal (Provision) for Impairment Loss on Financial Assets under Expected Credit Loss Model, Net In the first half of 2025, there was a reversal of impairment loss on trade receivables of RMB 2,706,000 and a provision for impairment loss on trade receivables secured by bank bills of RMB 871,000 Reversal (Provision) for Impairment Loss on Financial Assets, Net (For the six months ended June 30, 2025) | Category | 2025 (RMB '000) | 2024 (RMB '000) | | :--- | :--- | :--- | | Reversal of Impairment Loss on Trade Receivables | (2,706) | 4,788 | | Provision for Impairment Loss on Trade Receivables Secured by Bank Bills | 871 | (502) | | Net | (1,835) | 4,286 | Trade Payables / Trade Payables Secured by Bank Bills (Notes) As of June 30, 2025, total trade payables amounted to RMB 373,676,000, and trade payables secured by bank bills amounted to RMB 4,000,000 Trade Payables and Trade Payables Secured by Bank Bills (As of June 30, 2025) | Category | June 30, 2025 (RMB '000) | December 31, 2024 (RMB '000) | | :--- | :--- | :--- | | Trade Payables | 373,676 | 367,046 | | Trade Payables Secured by Bank Bills | 4,000 | 35,918 | | Total | 377,676 | 402,964 | Ageing Analysis of Trade Payables (As of June 30, 2025) | Ageing | June 30, 2025 (RMB '000) | December 31, 2024 (RMB '000) | | :--- | :--- | :--- | | Within 6 months | 291,304 | 367,950 | | Over 6 months but within 1 year | 74,878 | 25,369 | | Over 1 year but within 2 years | 8,925 | 7,500 | | Over 2 years but within 3 years | 952 | 620 | | Over 3 years | 1,617 | 1,525 | | Total | 377,676 | 402,964 | Bank Borrowings (Notes) In the first half of 2025, the Group obtained new bank loans of RMB 328,477,000 and repaid RMB 330,000,000; new loans are interest-bearing at preferential rates and repayable within one to two years - In the first half of 2025, new bank loans of RMB 300,000,000 and RMB 28,477,000 were obtained, and bank loans of RMB 330,000,000 were repaid[123] - New loans bear interest at 200 basis points and 61 basis points below the prime lending rate, respectively, and are repayable within one and two years[123] Share Capital (Notes) As of June 30, 2025, the company's authorized, issued, and fully paid share capital remained unchanged, with 827,000,000 shares issued at a par value of HKD 0.10 each Share Capital Information (As of June 30, 2025) | Category | Number of Shares ('000) | Amount | | :--- | :--- | :--- | | Authorized Share Capital (par value HKD 0.10 per share) | 5,000,000 | HKD 500,000 | | Issued and Fully Paid Share Capital (par value HKD 0.10 per share) | 827,000 | HKD 82,700 | | Presented in Financial Statements as (RMB '000) | | 87,662 | - The company's authorized, issued, and fully paid s