Jin Rong Jie·2025-08-12 02:37Core Viewpoint - Charoen Pokphand International reported strong growth in its biochemistry business for the first half of 2025, with revenues nearly doubling to $323 million and net profit attributable to shareholders reaching $17 million, a significant increase from $2 million in the same period last year. However, the gross margin declined to 12.9%, indicating profitability pressures due to business restructuring [1][4]. Group 1: Biochemistry Business Performance - The biochemistry segment experienced remarkable growth, with revenues soaring from $108 million in the first half of 2024 to $323 million in 2025, representing an increase of nearly 200%. This growth was primarily driven by strategic expansion in the animal health pharmaceutical sector, which saw its revenue share rise from 67% to 84% year-on-year [3]. - The product mix has shifted significantly, with animal health pharmaceuticals becoming the main revenue source, while traditional products like chloramphenicol saw their revenue share decrease from 33% to 16%. This transition reflects the company's responsiveness to market demand by expanding its product range to cover more veterinary drug categories [3]. - The diversification of the customer base, which includes farms, pharmaceutical companies, trading companies, and feed processing plants, has provided a more stable revenue foundation and mitigated risks associated with reliance on single customers or industries [3]. Group 2: Profitability Challenges - Despite the substantial revenue growth, Charoen Pokphand International is facing pressure from declining gross margins. The overall gross margin fell from 16.7% in the previous year to 12.9% in the first half of 2025, primarily due to changes in the product mix. The average profit margin for animal health pharmaceuticals is significantly lower than that of chloramphenicol products [4]. - Financial data indicates that the gross margin for the first quarter of 2025 was only 12.71%, down from 15.90% for the entire year of 2024 and 19.41% in 2023, showing a continuous downward trend. This trend suggests that while the company pursues scale expansion, its profitability is under structural pressure [4]. - The management needs to balance business growth with profitability. Although the animal health pharmaceutical segment has generated significant revenue growth, enhancing the profitability of this business, particularly by increasing the proportion of self-manufactured products, will be a key challenge for future development [4]. Group 3: Industrial Business Performance - The industrial business of Charoen Pokphand International shows a mixed performance. In the machinery sector, ECIMetro, as a Caterpillar dealer in Western China, benefited from a recovery in the excavator market, with overall excavator market sales increasing by approximately 23% in the first half of 2025. The sales of excavators, generators, and parts grew by 37.7% year-on-year [5]. - However, small and medium-sized excavators continue to face intense competition from domestic brands, leading to a decline in overall profit margins. Nonetheless, the profit attributable to joint ventures improved from $100,000 in the first half of 2024 to $1.4 million in the first half of 2025, indicating some profitability improvement [6]. - The automotive parts business performed poorly. Despite benefiting from a rise in automobile and motorcycle sales—approximately 11% and 12% growth respectively in the first half of 2025—intense market competition led to declines in both sales and profit margins for automotive parts. The profit from joint ventures decreased from $1.2 million in the first half of 2024 to $800,000 in the first half of 2025, reflecting operational pressures in this segment [6].