Core Viewpoint - The financial performance of Buchang Pharma has significantly deteriorated in 2024, with a revenue drop of 17% and a net loss of 5.5 billion yuan, marking a 274% decline in net profit compared to the previous year [2][3][4]. Financial Performance Summary - In 2024, the company's operating revenue was 11 billion yuan, down from 13.25 billion yuan in 2023, reflecting a decrease of 16.91% [3]. - The net profit attributable to shareholders was a loss of 553.8 million yuan, compared to a profit of 319 million yuan in 2023, indicating a decline of 273.62% [3][4]. - The company reported a significant impairment of goodwill amounting to 853 million yuan, primarily related to its subsidiaries Tonghua Guhong and Jilin Tiancai [5][20]. Business Operations and Challenges - The decline in revenue and profit is attributed to the removal of several products from the medical insurance catalog and increased scrutiny on certain products, leading to reduced sales [4][13]. - The company's total revenue has decreased from 160 billion yuan in 2020 to 110 billion yuan in 2024, a drop of over 30% [16]. - Sales of key products have plummeted, with some experiencing a sales decline of 50% to 85% from 2022 to 2023 [18]. Acquisition and Goodwill Issues - Buchang Pharma's acquisitions of Jilin Tiancai and Tonghua Guhong from 2012 to 2015 resulted in a total goodwill of approximately 49.97 billion yuan, which constituted 33% of the company's total assets at that time [8][9]. - The company has faced continuous goodwill impairment, totaling 45.3 billion yuan from 2021 to 2024, which is 88% of the initial goodwill [24]. Sales and Marketing Expenses - The company's sales expense ratio has consistently exceeded the industry average, with a sales expense rate of 39% in 2024, 11 percentage points higher than the industry average [27][28]. - A significant portion of sales expenses (93%) is allocated to market and academic promotion fees, raising concerns about the efficiency of spending [29][30]. Research and Development (R&D) Expenditure - Despite claims of transitioning to a product-driven and technology-oriented company, R&D expenditure has remained low, with a rate of only 2-3% over the past five years [35]. - The company has increasingly capitalized R&D expenses, with the capitalized portion rising from 26% in 2020 to 52% in 2024, suggesting potential manipulation of profit figures [37][38].

Core Viewpoint - The financial performance of Buchang Pharma has significantly deteriorated in 2024, with a revenue drop of 17% and a net loss of 5.5 billion yuan, marking a 274% decline in net profit compared to the previous year [2][3][4]. Financial Performance Summary - In 2024, the company's operating revenue was 11 billion yuan, down from 13.25 billion yuan in 2023, reflecting a decrease of 16.91% [3]. - The net profit attributable to shareholders was a loss of 553.8 million yuan, compared to a profit of 319 million yuan in 2023, indicating a decline of 273.62% [3][4]. - The company also reported a significant impairment of goodwill amounting to 853 million yuan, primarily related to its subsidiaries [5][20]. Business Operations and Challenges - The decline in revenue and profit is attributed to the removal of several products from the medical insurance catalog and increased scrutiny on certain products, leading to reduced sales [4][13]. - The company has faced continuous challenges since 2020, with total revenue decreasing from 160 billion yuan in 2020 to 110 billion yuan in 2024, a drop of over 30% [16]. Goodwill Impairment and Acquisitions - Buchang Pharma's acquisitions of Jilin Tiancai and Tonghua Guhong from 2012 to 2015 resulted in a total goodwill of approximately 50 billion yuan, which constituted 33% of the company's total assets at that time [8][9]. - The company has been forced to recognize substantial goodwill impairments, totaling 45.3 billion yuan from 2021 to 2024, which is 88% of the initial goodwill [24]. Sales and Marketing Expenses - The company's sales expense ratio has consistently exceeded the industry average, with a sales expense rate of 39% in 2024, significantly higher than the industry average of 28% [27][28]. - A large portion of the sales expenses (93%) is allocated to market and academic promotion fees, raising concerns about the efficiency of spending [29][30]. Research and Development - Despite claims of transitioning to a product-driven and technology-driven company, Buchang Pharma's R&D expenditure has remained low, with a research expense rate of only 2-3% over the past five years [35]. - The company has increasingly capitalized its R&D expenses, with the capitalized portion rising from 26% in 2020 to 52% in 2024, which may obscure the true profitability [37][38].

Core Insights - The company has experienced a decline in revenue for two consecutive years, with a reported revenue of 41.067 billion yuan in 2024, down 0.8% year-on-year [4][5] - Despite the revenue decline, net profit increased by 16.08% to 2.770 billion yuan, primarily due to non-recurring gains and a reduction in R&D expenses [10][11] - The company's reliance on short-term financial maneuvers raises concerns about its long-term growth potential [2][3] Revenue Performance - In 2022, the company achieved a peak revenue of 43.952 billion yuan, but revenue fell to 41.400 billion yuan in 2023, a decrease of 5.81% [5][6] - The core pharmaceutical business saw a revenue drop of 4.29% in 2024, with significant declines in key product categories such as anti-infection and central nervous system drugs [6][8] - The only growth area was cardiovascular products, which saw a revenue increase of 14% [7] Profitability Factors - The increase in net profit was supported by non-recurring gains of 456 million yuan, including asset disposal gains of 371 million yuan and government subsidies of 614 million yuan [10][11] - R&D expenses were reduced by 16.15%, with a significant portion of R&D spending being capitalized, leading to an increase in intangible assets to 14.468 billion yuan [11][12] - The company's net profit margin improved to 8.55%, up 1.56 percentage points, due to reduced R&D expenses [15] Debt and Financial Structure - The company experienced a significant increase in short-term borrowings, reaching 18.711 billion yuan, which raised concerns about its debt structure [15] - The proportion of short-term borrowings in total interest-bearing liabilities increased from 52.2% in 2023 to 64.7% in 2024, indicating a shift towards short-term financing [15] - Financial expenses rose by 12.82% to 1.111 billion yuan, reflecting the deteriorating debt structure [15]