Core Viewpoint - Kunming Pharmaceutical Group is undergoing a reform phase, focusing on the silver-haired health sector while facing internal and external pressures, with a goal to accumulate conditions for long-term development [1][2] Financial Performance - For the first half of 2025, the company reported revenue of 3.351 billion yuan and a net profit attributable to shareholders of 198 million yuan, with a non-recurring net profit of 151 million yuan [1] Business Strategy - The company is accelerating strategic collaboration in chronic disease management, integrating resources and teams between Huaren Shenghuo and the 777 division, leading to a recovery in sales of its Xuesaitong oral series and injectable Xuesaitong (freeze-dried) in Q2 [1] - In the premium traditional Chinese medicine sector, the company is focusing on the "Kun Traditional Medicine 1381" initiative, emphasizing core products like Shenling Baizhu Powder and Shugan Granules to enhance market penetration [1] R&D and Innovation - The company is committed to the "healthy aging" strategy, focusing on plant-based and natural medicines, and has established a comprehensive R&D system covering innovative drugs, generic drugs, and secondary development drugs [2] - The Yunnan Province Sanqi Research Institute has been approved as a new type of R&D institution for 2024, aiming to overcome technical barriers in the Sanqi industry and support core products [2] Global Expansion - In the first half of the year, the company submitted 90 overseas registration applications and received approval for 7 product numbers, with its Xuesaitong preparations gaining market access in 15 countries [2] - The company has secured its first global fund procurement order for Dihydroartemisinin Piperaquine Tablets and held promotional events for the 777 Xuesaitong series in the US, Germany, and Vietnam [2] Future Outlook - The company aims to leverage the support from Huaren Sanjiu and its newly constructed business model to deepen its focus on chronic diseases and aging, striving for steady development amid emerging opportunities [2]

Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected price increase of over 15% in the next 6-12 months [11]. Core Insights - The company reported a revenue of 8.40 billion RMB for 2024, a slight decrease of 0.34% year-on-year, while the net profit attributable to shareholders increased by 19.86% to 648 million RMB [1]. - The company is undergoing comprehensive reforms and enhancing its operational systems, which are expected to lead to improved efficiency and sales growth for core products [2]. - The integration with China Resources Sanjiu is showing positive results, with core products anticipated to enter a growth phase due to stable procurement contracts and effective channel management [3]. Summary by Sections Performance Review - In 2024, the company achieved a total revenue of 8.40 billion RMB, reflecting a year-on-year decline of 0.34%. The net profit attributable to shareholders was 648 million RMB, marking a year-on-year increase of 19.86% [1]. - The adjusted net profit for Q4 2024 was approximately 130 million RMB, significantly improving from 25 million RMB in Q4 2023 [1]. Operational Analysis - The company is implementing a 4C operational system to enhance organizational efficiency and talent management, aiming for a more integrated structure [2]. - The company has successfully renewed procurement contracts for its core products, with expectations for increased market penetration and sales volume [2]. - Key products such as Shenling Baizhu Powder and Shugan Wan have shown a combined revenue growth of 20%, with one product surpassing 100 million RMB in revenue [2]. Profit Forecast, Valuation, and Rating - The company is projected to achieve net profits of 740 million RMB, 893 million RMB, and 1.07 billion RMB for the years 2025, 2026, and 2027, respectively, with growth rates of 14%, 21%, and 20% [3]. - The earnings per share (EPS) are expected to be 0.98 RMB, 1.18 RMB, and 1.42 RMB for the same years, with corresponding price-to-earnings (P/E) ratios of 18, 15, and 13 [3].

Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected price increase of over 15% in the next 6-12 months [11]. Core Insights - The company reported a revenue of 8.40 billion RMB for 2024, a slight decrease of 0.34% year-on-year, while the net profit attributable to shareholders increased by 19.86% to 648 million RMB [1]. - The company is undergoing comprehensive reforms and enhancing its operational systems, aiming for a more efficient and integrated organization [2]. - The company’s core products are expected to see increased sales due to stable contract renewals in national traditional Chinese medicine procurement [2]. - The company’s net profit forecasts for 2025-2027 are 740 million RMB, 893 million RMB, and 1.07 billion RMB, reflecting year-on-year growth rates of 14%, 21%, and 20% respectively [3]. Summary by Sections Performance Review - In Q4 2024, the company achieved a non-deductible net profit of approximately 130 million RMB, a significant improvement from 25 million RMB in Q4 2023 [1]. - The company’s revenue growth rate is projected to be 9.07% in 2025, with a steady increase in net profit margins [6]. Operational Analysis - The company is focusing on channel reforms and enhancing distributor management, which is expected to support the growth of core product sales [2]. - The integration of Huaren Shenghuo is anticipated to strengthen the company’s market position and product offerings [2]. Profit Forecast and Valuation - The earnings per share (EPS) for 2025-2027 are projected to be 0.98 RMB, 1.18 RMB, and 1.42 RMB, with corresponding price-to-earnings (P/E) ratios of 18, 15, and 13 [3]. - The company is expected to enter a new growth phase in 2025, driven by the successful implementation of its channel reforms and the anticipated increase in sales volume of core products [3].