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

Changjiang Business News 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 the investment in the first phase of its Indonesia production base, which includes 20 nitrile glove production lines (referred to as “Indonesia Project” or “SEA1 Project”). The total investment amount has increased 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 currently 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 the global pandemic benefits fade, Zhonghong Medical’s operating performance has been under continuous pressure since 2022, with net profit excluding non-recurring gains and losses remaining in loss. 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 by over 70%, and it is currently trading below its issue 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 successfully listed on the A-share market through a breakthrough IPO. At that time, the world was in the midst of the pandemic, and the company, mainly producing gloves and other protective products, was highly favored by capital. 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, exceeding the target by 1.444 billion yuan.

With over 1.4 billion yuan in oversubscribed 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 Province to invest 2 billion yuan in the first phase of a medical glove project, planning to build 40 dual-mode production lines with an annual capacity of 12 billion medical gloves.

In May 2022, Zhonghong Medical’s Cangxi medical-grade nitrile glove production project broke ground. At that time, the company’s official website announced that the project would invest 1.866 billion yuan and build 40 production lines according to top-tier glove 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 strategic adjustments, improve capital efficiency, and enhance overall competitiveness, it would terminate the Sichuan glove 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 the investment in the Indonesia Phase 1 nitrile glove production lines (SEA1 project) from 1.092 billion yuan to 1.477 billion yuan.

Expanding production from domestic to Southeast Asia, Zhonghong Medical aims to tap into overseas markets and hedge global trade risks. However, risks remain. Currently at the bottom of the industry cycle, with fierce market competition and the need to adapt to local operating environments in Indonesia, Zhonghong Medical faces significant challenges.

Net profit excluding non-recurring gains and losses has accumulated losses of over 550 million yuan over four years

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

Zhonghong Medical started with glove manufacturing. Its official website shows that the company was founded in 2010, specializing in R&D, production, sales, and packaging of nitrile gloves, PVC gloves, and related products. Its products are sold to over 100 countries and regions worldwide, widely used in healthcare, food, industrial fields, and more.

The global pandemic starting in 2020 created a surge in demand for protective products like gloves, and Zhonghong Medical profited greatly. In 2020 and 2021, the company achieved net profits attributable to shareholders of 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 profit and non-recurring net profit were less than 10 million yuan.

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

In 2023 and 2024, the company’s net profits attributable to shareholders were -131 million yuan and -87 million yuan, respectively, with non-recurring net losses of -216 million yuan and -143 million yuan, continuing losses.

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

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

Regarding the expected loss in 2025, Zhonghong Medical explained that industry cycles, price fluctuations in protective glove products, and the appreciation of the RMB against the USD have significantly impacted its performance. The company has also made impairment provisions for some fixed assets and inventories with signs of impairment, totaling approximately 27 million to 41 million yuan.

It is worth noting that besides gloves, Zhonghong Medical has also expanded into safety injection products through acquisitions, but with limited success. In 2025, the company 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, and market competition remains fierce. Whether Zhonghong Medical’s expansion in Indonesia can meet expectations remains uncertain. Can overseas large-scale expansion help the company break through?

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