Zhonghong Medical suffers four consecutive non-net profit losses, stock price falls below issuance, and 1.477 billion yuan overseas expansion faces difficulties in breaking through against the trend

Ask AI · Can Indonesia’s project continue to be a breakthrough amid continuous losses?

Changjiang Business Daily ●Reporter Shen Yourong

Expanding production against the trend, can Zhonghong Medical (300981.SZ) meet expectations?

On the evening of March 24, Zhonghong Medical announced that to improve production efficiency and digital intelligence levels, it will increase investment in the first phase of its Indonesia production base, adding 20 nitrile glove production lines (referred to as the “Indonesia project” or “SEA1 project”). The total investment will rise from 1.092 billion yuan to 1.477 billion yuan.

Previously, on the evening of February 26, 2025, Zhonghong Medical announced that it would terminate its earlier medical glove project in Cangxi County, Sichuan Province, and instead invest in the SEA1 project in Southeast Asia, with a total investment of 1.092 billion yuan.

Shifting investment projects from domestic to overseas is part of Zhonghong Medical’s strategic plan and a response to market changes. However, the glove market is highly competitive, with leading companies like InnoCare Medical and Blue Sail Medical also expanding in Southeast Asia. Zhonghong Medical’s overseas expansion faces challenges.

As global pandemic benefits fade, Zhonghong Medical’s operating performance has been under pressure since 2022, with net profits excluding non-recurring gains and losses continuing to lose money. By 2025, the company expects a net loss of over 100 million yuan.

In the secondary market, since its listing in 2021, Zhonghong Medical’s stock price has fallen over 70%, and it is currently trading below its IPO price.

Risks of expanding against the trend

Spending nearly 1.5 billion yuan on overseas expansion, Zhonghong Medical’s risks cannot be ignored.

The company’s expansion plan dates back to its IPO. On April 27, 2021, Zhonghong Medical went public on the A-share market amid the global pandemic. Its main products—gloves and other protective gear—were highly sought after by investors. The company initially planned to raise 580 million yuan, with 430 million yuan for the nitrile glove project and 150 million yuan for working capital. In reality, it raised 2.025 billion yuan, overshooting by 1.444 billion yuan.

With over 1.4 billion yuan in excess funds, Zhonghong Medical had new ideas. In December 2021, its controlling shareholder, Zhonghong Purin Group Co., Ltd. (“Zhonghong Group”), signed an agreement with the Cangxi County government in Sichuan, planning to invest 2 billion yuan in the first phase to build a medical glove project with 40 dual-mode production lines, producing 12 billion gloves annually.

In May 2022, the Cangxi medical-grade nitrile glove production project broke ground. At that time, Zhonghong Medical’s official website announced that the project would cost 1.866 billion yuan and would build 40 production lines according to top-tier industry standards. The Cangxi base would be the third major production site after Tangshan, Hebei, and Jiujiang, Jiangxi, with planned commissioning in December 2023.

What is the real progress of this project? It remains at the preliminary stage. On the evening of February 26, 2025, Zhonghong Medical announced that to implement its strategic adjustments, improve capital efficiency, and enhance competitiveness, it would terminate the Sichuan project and instead invest in the SEA1 project, with a total investment of 1.092 billion yuan, of which no more than 580 million yuan would come from oversubscribed funds.

On the evening of March 24, 2026, Zhonghong Medical further announced that to improve production efficiency and digital intelligence, and based on actual conditions during overseas base construction, it agreed to increase investment in the Indonesia base’s first phase, adding 20 nitrile glove lines (the SEA1 project). The total investment increased from 1.092 billion yuan to 1.477 billion yuan.

Moving production overseas from China, Zhonghong Medical aims to tap into international markets and mitigate global trade risks. However, risks in Southeast Asia still exist. Currently at the industry cycle bottom, with fierce market competition and the need to adapt to local conditions in Indonesia, Zhonghong Medical faces significant challenges.

Four years of net losses exceeding 550 million yuan

Expanding in Indonesia is Zhonghong Medical’s attempt to break through. The company faces considerable operational pressure.

Founded in 2010, Zhonghong Medical specializes in R&D, manufacturing, and sales of nitrile and PVC gloves, as well as packaging products. Its products are sold in over 100 countries and regions, widely used in healthcare, food, industrial, and other fields.

The global pandemic starting in 2020 created a surge in demand for gloves and protective gear, allowing Zhonghong Medical to earn big. In 2020 and 2021, its net profits attributable to shareholders were 2.664 billion yuan and 2.342 billion yuan, respectively, with non-recurring net profits of 2.648 billion yuan and 2.246 billion yuan. In 2019, both net profits were less than 10 million yuan.

However, as the pandemic was brought under control and demand declined, Zhonghong Medical’s performance plummeted. In 2022, revenue dropped 67.97% year-on-year to 1.573 billion yuan; net profit attributable to shareholders fell 97.14% to 67 million yuan; and non-recurring net profit turned negative, with a loss of 70 million yuan.

In 2023 and 2024, the company continued to lose money, with net profits of -131 million yuan and -87 million yuan, and non-recurring losses of -216 million yuan and -143 million yuan, respectively.

According to earnings forecasts, in 2025, Zhonghong Medical expects a net loss of 87 million to 131 million yuan, and a non-recurring loss of 125 million to 187 million yuan.

Thus, the company’s non-recurring net profit will have been negative for four consecutive years, totaling over 550 million yuan in losses.

Regarding the 2025 forecasted loss, Zhonghong Medical explained that industry cycle fluctuations, price volatility of protective gloves, and RMB appreciation against the US dollar significantly impact performance. The company also made impairment provisions on some fixed assets and inventories with signs of impairment, totaling approximately 27 million to 41 million yuan.

Notably, besides gloves, Zhonghong Medical has also expanded into safety injection products through acquisitions, but with limited success. In 2025, it plans to recognize goodwill impairment of about 58 million to 88 million yuan for its previous premium acquisition of Hengbao Health.

Currently, the global disposable glove industry has shifted from “overcapacity” to “structural tight balance,” with nitrile glove supply and demand roughly matched and slightly tight in some areas. Leading domestic companies like InnoCare Medical are also expanding in Southeast Asia, keeping market competition fierce. Whether Zhonghong Medical’s overseas expansion in Indonesia will meet expectations remains uncertain. Can large-scale overseas expansion help it break through?

In the secondary market, on its first trading day on April 27, 2021, Zhonghong Medical’s stock hit 159.80 yuan per share. As of March 25, 2026, the closing price was 13.97 yuan per share. Adjusted for splits and dividends, the stock has fallen over 70% since listing, currently trading below its IPO price of 48.59 yuan, in a state of “breaking the issue.”