Baihua Pharmaceuticals 2025 Annual Report Analysis: Operating Cash Flow Down 62.11%, Financing Cash Flow Plummets 78.20%

Operating Income: Slight Increase of 0.66%, Significant Diversification in Business Structure

In 2025, Baihua Pharmaceutical (Rights Protection) achieved an operating income of 388 million yuan, a slight increase of 0.66% compared to 386 million yuan in 2024, maintaining overall stability in scale. From the perspective of business structure, revenue from pharmaceutical research and development and consistency evaluation was 188 million yuan, down 7.78% year-on-year; clinical trial revenue was 168 million yuan, up 12.89% year-on-year; other income was 4.8194 million yuan, a substantial increase of 89.42% year-on-year. The clinical trial business has become the core driver of revenue growth, while the decline in pharmaceutical research and development revenue indicates that this sector is facing certain market pressures.

Net Profit: Slight Decrease of 1.91%, Non-recurring Net Profit Grows Against the Trend

In 2025, the net profit attributable to shareholders of the listed company was 40.6879 million yuan, a decrease of 1.91% compared to 41.4790 million yuan in 2024. However, the non-recurring net profit performed well, reaching 32.7858 million yuan, an increase of 10.57% year-on-year, indicating an improvement in the company’s core profitability, with the decline in net profit mainly affected by changes in non-recurring gains and losses.

Earnings Per Share: Basic Earnings Per Share Slightly Decline, Non-recurring Earnings Per Share Increase

In 2025, the basic earnings per share were 0.1059 yuan/share, a decline of 2.40% compared to 0.1085 yuan/share in 2024, consistent with the trend in net profit changes. The non-recurring earnings per share were 0.0853 yuan/share, an increase of 9.92% compared to 0.0776 yuan/share in 2024, reflecting that the growth in non-recurring net profit has driven the increase in non-recurring earnings per share.

Expenses: Overall Structure Optimization, Management Control Effects Evident

In 2025, the company’s total period expenses amounted to 93.8332 million yuan, a decrease of 5.73% compared to 99.5412 million yuan in 2024, reflecting certain achievements in expense control, with various expense items showing a diversified trend:

Sales Expenses: Year-on-Year Increase of 5.81%, Increased Market Expansion Efforts

Sales expenses amounted to 12.0287 million yuan, an increase of 5.81% compared to 11.3685 million yuan in 2024. The increase was mainly due to the company’s intensified market expansion and advertising expenditures, with advertising costs rising from 137,700 yuan in 2024 to 1,349,200 yuan, and business hospitality expenses increasing from 394,300 yuan to 620,300 yuan, indicating enhanced investment by the company in the market.

Management Expenses: Year-on-Year Decrease of 2.61%, Salary Reductions as the Main Reason

Management expenses were 58.4570 million yuan, a decrease of 2.61% compared to 60.0251 million yuan in 2024. This was primarily due to a reduction in personnel salary expenses, with employee compensation decreasing from 37.2614 million yuan in 2024 to 34.0167 million yuan, while costs such as intermediary agency service fees and litigation fees also saw varying degrees of decline, reflecting the company’s refined management effectiveness.

Financial Expenses: Year-on-Year Increase of 26.19%, Decrease in Interest Income as the Main Reason

Financial expenses amounted to -1.0334 million yuan (i.e., interest income exceeded interest expenses), an increase of 26.19% compared to -1.4000 million yuan in 2024, mainly due to a decrease in bank deposit interest income. In 2025, interest income was 1.1140 million yuan, down 23.97% from 1.4651 million yuan in 2024.

R&D Expenses: Year-on-Year Decrease of 17.49%, Capitalization Ratio Increases

R&D expenses were 24.3809 million yuan, a decrease of 17.49% compared to 29.5477 million yuan in 2024. However, the total R&D investment for the year reached 36.3809 million yuan, of which capitalized R&D investment was 12 million yuan, with a capitalization ratio of 32.98%. Although the capitalized investment decreased compared to 16.9945 million yuan in 2024, the reduction in expensed investment was more significant, indicating an adjustment in the company’s R&D investment structure that emphasizes the capitalization of R&D achievements.

R&D Personnel Situation: Stable Team Size, Continuous Structural Optimization

As of the end of 2025, the number of R&D personnel in the company was 541, accounting for 80.50% of the total number of employees, with the team size remaining stable. In terms of educational background, there were 3 doctoral researchers, 107 master’s degree holders, and 375 undergraduates, with those holding a bachelor’s degree or higher accounting for 89.65%, indicating a high proportion of talented individuals with advanced degrees; in terms of age structure, there were 263 individuals under 30 years old and 252 individuals aged 30-40, accounting for a total of 97.04%, indicating an overall young R&D team with ample innovative vitality.

Cash Flow: Significant Decline in Operating Cash Flow, Sharp Reduction in Financing Cash Flow

In 2025, the company’s net increase in cash and cash equivalents was 13.7788 million yuan, a significant decrease from 69.9775 million yuan in 2024, with three major cash flows showing evident diversification:

Operating Cash Flow: Year-on-Year Decrease of 62.11%, Collection Pressure Highlighted

The net cash flow from operating activities was 30.4186 million yuan, down 62.11% compared to 80.2886 million yuan in 2024. The main reason was the increased accounts receivable due to delays in payments from pharmaceutical R&D partners, with cash receipts from sales of goods and provision of services decreasing from 391 million yuan in 2024 to 338 million yuan, a year-on-year decrease of 13.48%, indicating a significant decline in the company’s ability to recover operating cash flow, resulting in certain pressures on the cash flow chain.

Investment Cash Flow: Year-on-Year Improvement of 13.01%, Reduced Equipment Investment

The net cash flow from investing activities was -19.2045 million yuan, an improvement of 13.01% compared to -22.0762 million yuan in 2024, mainly due to cash payments for the purchase and construction of fixed assets, intangible assets, and other long-term assets decreasing from 24.6065 million yuan in 2024 to 17.9951 million yuan. Equipment investment expenditures decreased, while cash recovered from investments reached 885 million yuan, a significant increase from 535 million yuan in 2024, alleviating some pressure on investment cash flow.

Financing Cash Flow: Year-on-Year Sharp Decrease of 78.20%, Reduced Equity Incentive Exercises

The net cash flow from financing activities was 2.5647 million yuan, a decrease of 78.20% compared to 11.7652 million yuan in 2024, mainly due to a reduction in funds received from employees exercising stock option incentive plans in 2021. In 2025, the cash received from exercising options was 2.5647 million yuan, while in 2024 it was 11.7652 million yuan, indicating a significant reduction in the scale of funds raised through equity incentives.

Potential Risks: Multiple Challenges Coexist, Need to Be Alert to Operational Pressure

2. Risk of Intensified Market Competition: The pharmaceutical CRO industry is highly competitive, with leading companies accelerating expansion based on scale, technology, and customer advantages. The decline in revenue from the company’s pharmaceutical R&D sector indicates that it is facing increasing market competition pressure. If it cannot continuously enhance its technical service capabilities, it may further impact its market share and profitability.
3. Accounts Receivable Collection Risk: By the end of 2025, the balance of accounts receivable reached 125 million yuan, a year-on-year increase of 54.06%, mainly due to increased amounts of projects achieving collection rights in pharmaceutical R&D and clinical business, with some payments having longer aging. If the clients’ operational conditions worsen or credit issues arise, it may lead to an increased risk of bad debts, exacerbating the company’s cash flow pressure.
4. Litigation Dispute Risks: The company’s subsidiaries are involved in multiple litigation disputes, such as Huawai Pharmaceutical and Lihua Biological being applied for property preservation, with some bank account funds frozen. Although some cases have reached settlements, there are still potential compensation risks that may affect the company’s cash flow and reputation.
5. Risk of R&D Investment Falling Short of Expectations: Although the company’s total R&D investment has maintained a certain scale, the year-on-year decrease in R&D expenses may affect the company’s core competitiveness and long-term development potential if R&D projects do not progress as expected or fail to timely launch technically compliant services that meet market demand.

Executive Compensation: Core Management Compensation Varies, Overall Compliance and Reasonableness

In 2025, the total compensation for the company’s directors and senior executives was 6.4953 million yuan, a decrease from 6.8223 million yuan in 2024. Among them:

• Chairman Zheng Caihong: The total pre-tax remuneration received from the company during the reporting period was 979,300 yuan, mainly composed of fixed and performance-based compensation linked to the company’s operational performance assessment results.
• General Manager Huang Hui: The total pre-tax remuneration was 1.2360 million yuan, reflecting the compensation level aligned with the company’s business scale and operational responsibilities as a core operational manager.
• Vice Presidents Xia Yan and Lü Zhengtian: Xia Yan’s pre-tax remuneration was 1.0299 million yuan, while Lü Zhengtian’s was 758,400 yuan, with the compensation differences reflecting the varying responsibilities and contributions of different positions.
• Chief Financial Officer Cai Ziyun: The pre-tax remuneration was 529,200 yuan, consistent with the company’s financial control responsibilities and industry compensation levels.

Overall, the company’s executive compensation system is closely tied to operational performance and job responsibilities, in line with the company’s compensation management system and industry practices. Additionally, the company binds the interests of core management through equity incentives to promote long-term development.

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Editor: Xiaolang Quick Report