Core Viewpoint - The financial report of Pianzaihuang for 2024 reveals significant challenges, with a 26.07% year-on-year decline in net profit for Q4, marking the lowest level since 2019, and a record low revenue growth of 7.25% over the past decade, reflecting broader difficulties faced by the traditional Chinese medicine industry [2][8]. Industry Situation - The primary challenge for Pianzaihuang is the rising cost of raw materials, particularly natural cow bile, which has surged from 650,000 yuan per kilogram to 1,650,000 yuan per kilogram over the past two years [3]. - The overall Chinese medicine sector is experiencing a collective downturn, with Pianzaihuang being relatively better off compared to other companies like Zhongsheng Pharmaceutical and Taiji Group, which reported drastic profit declines [7][8]. Financial Performance - Pianzaihuang's Q4 net profit was 290 million yuan, down 26.07% year-on-year, while the annual revenue growth was only 7.25%, the lowest in a decade [2][4]. - The company attempted to mitigate rising costs by increasing prices by 28.8% in 2023, but revenue and net profit growth rates fell to 15.69% and 13.04%, respectively, in the same year [4][5]. Cost Structure - Direct material costs account for over 90% of the total costs in various product categories, including liver disease and cardiovascular medications, indicating a heavy reliance on raw materials [4][7]. - The cost of direct materials for liver disease medications reached 164.48 million yuan, representing 96.52% of total costs, while cardiovascular medications saw a 56.1% increase in material costs year-on-year [4]. Market Dynamics - The price of Pianzaihuang's product has reached the upper limit of consumer acceptance, with retail prices significantly lower than the official price, indicating challenges in passing on costs to consumers [5]. - The collective "explosion" in the Chinese medicine sector is attributed to policy changes, including the expansion of centralized procurement, which has led to significant price reductions and profit declines for many companies [9][15]. Future Outlook - The Chinese medicine industry must address the impacts of centralized procurement policies, which have resulted in price drops and profit squeezes, while also focusing on innovation and diversification to mitigate risks associated with raw material costs [16][17]. - Companies like Pianzaihuang are exploring diversification strategies, but the effectiveness of these efforts remains limited, highlighting the need for a more robust approach to research and development [17][18].