Core Viewpoint - The recent surge in confirmed cases of Chikungunya fever in China has led to a strong performance in the "mosquito control concept" stocks, particularly benefiting Kangzhi Pharmaceutical, which saw its stock price rise significantly despite facing serious operational challenges [2][3]. Financial Performance - Kangzhi Pharmaceutical has experienced significant volatility in its financial performance, alternating between profits and losses over recent years. In 2021, the company reported a net profit of 0.11 billion yuan, which plummeted to a loss of 1.88 billion yuan in 2022. A brief recovery occurred in 2023 with a profit of 0.12 billion yuan, but it fell back into loss in 2024, reporting a net loss of 2.16 billion yuan [3][4]. - The company's revenue for 2024 was 4.73 billion yuan, a decline of 36.07% year-on-year, marking the lowest revenue level in eight years [3][4]. Revenue Breakdown - The main revenue sources for Kangzhi Pharmaceutical include children's medicine, adult medicine, and maternal and infant health products, which together account for 93% of total revenue. However, all three product lines saw significant declines in 2024, with children's medicine revenue down 35.25%, adult medicine down 44.08%, and maternal and infant health products down 30.37% [4][6]. Cost Management Issues - The company attributed its revenue decline to inventory destocking in cold and respiratory products and a decrease in terminal sales. Despite the revenue drop, sales expenses increased by 23.39% to 2.63 billion yuan, constituting 55.56% of total revenue, indicating a misalignment between aggressive marketing strategies and cost control [6][7]. - Management expenses also remained high at 1.17 billion yuan, nearly a quarter of total revenue, exacerbating the profitability pressure during a challenging financial period [6][7]. Executive Compensation Concerns - In 2024, the average employee salary at Kangzhi Pharmaceutical decreased by 6.01% to 120,472.51 yuan, while management salaries increased, raising concerns about compensation equity during a period of financial loss [7][8]. Asset Impairment and Related Transactions - The company faced significant asset impairment losses of 59.53 million yuan in 2024, which included write-downs on inventory, fixed assets, and goodwill from past acquisitions. This impairment accounted for nearly 30% of the total loss for the year [10][11]. - Kangzhi Pharmaceutical's acquisition of Zhongshan Aihu in 2018 has become a financial burden, with the subsidiary reporting substantial losses and the company potentially facing further impairments if a delayed asset repurchase agreement is not resolved [11][12].