Core Viewpoint - YXTT Pharmaceutical Group held an investor meeting to discuss its mid-year performance and future strategies, highlighting challenges and ongoing transformations in its business model [1][2]. Financial Performance - In the first half of 2025, YXTT reported revenue of 8.914 billion, a year-on-year decline of 4.2%. Retail revenue decreased by over 2 percentage points, while distribution and traditional Chinese medicine segments faced significant declines due to proactive business adjustments [2]. - Net profit experienced a double-digit decline influenced by tax advisory for 2023-2024 and the current operating environment, although historical tax risks have been resolved, reducing uncertainty [2]. - Cash flow remains healthy, with only the subsidiary Sichuan Bencao Tang having bank loans, while other subsidiaries have no interest-bearing debts, maintaining a healthy asset-liability ratio [2]. Business Transformation and Strategy - YXTT is advancing its store transformation, with nearly one-third of its stores adding medical attributes, and over 400 stores have been modified by the end of August 2025. The goal is to complete 1,000 store modifications by the end of 2025 [3]. - Digital transformation is being prioritized, with a dedicated department in Chengdu focusing on systematic product and service development to achieve deep digital management [3]. - The company is increasing R&D investment in traditional Chinese medicine, focusing on food-medicine homology and standardized products [3]. Future Planning and Outlook - A strategic review is planned for October-November 2025 to outline the development strategy for the next 3-5 years, with ongoing store modifications aimed at improving operational efficiency [4]. - The company is addressing the impact of medical insurance policies on prescription drug sales in Yunnan and Sichuan by exploring new regions and expanding non-drug categories [4]. - The company aims for non-drug sales to reach 40% of total sales in the next 3-5 years, with rapid progress in store modifications in provinces outside of its home region [4].

Financial Performance - Revenue for the first half of 2025 was CNY 8.914 billion, a decrease of 4.2% year-on-year, with retail revenue down by over 2 percentage points [2] - Net profit experienced a double-digit decline due to tax advisory impacts and current operating environment, but uncertainties from historical tax risks have been resolved [2] - Cash flow remains healthy, with only one subsidiary having bank loans; overall debt levels are stable [2] Store and Expense Management - As of June 2025, the number of stores decreased to 11,372, with a reduction of 126 stores in the first half [2] - New store openings have led to increased fixed costs, but the company is focused on cost control and efficiency improvements in sales and management expenses [3] Business Development Initiatives - 70% of stores are planned to transition to multi-category health stores, while 30% will become specialized pharmacies, with over 400 stores already modified by the end of August [4] - Digital transformation efforts are underway to enhance operational efficiency and management capabilities [4] - The company is increasing investment in product development for traditional Chinese medicine and health-related products [4] - The first integrated medical and health center has achieved breakeven within two years, with plans for a second center to open in the first half of 2026 [4] - Distribution and raw material businesses are being streamlined to focus on controllable and market-aligned operations [4] Future Strategy - A strategic review is scheduled for October-November 2025 to outline the development strategy for the next 3-5 years [5] - Continued efforts to enhance store efficiency and overall management quality are planned [5] Q&A Insights - Performance metrics for modified stores will include sales of non-pharmaceutical products and customer repurchase rates [6] - Prescription drug sales have significantly declined in Yunnan and Sichuan, but new regional sales strategies are being implemented to mitigate this impact [7] - Plans to complete 1,000 store modifications in 2025, with a goal of upgrading 70% of remaining stores by 2026 [8] - The company is adopting a cautious yet positive approach towards O2O business growth, with a focus on sustainable development [9] - The decline in net profit is primarily attributed to prescription drug sales and fixed costs associated with store growth [10] - Non-pharmaceutical sales are expected to increase, targeting a future share of 40% within 3-5 years [11] - Current modified stores are performing above average, with significant financial contributions expected in Q4 2025 [13] - Differences in store design and product selection between provinces are being addressed to optimize local market responses [14] - The company is exploring new collaborations in commercial insurance across nine provinces [15]