Zhongheng Group 2025 Annual Report Analysis: Revenue down 16.92%, net loss of 357 million, operating cash flow turned from positive to negative

In-Depth Interpretation of Core Performance Indicators

Operating Revenue: Ongoing Decline, Main Business Under Pressure

In 2025, the company achieved operating revenue of RMB 1.749 billion, a year-on-year decrease of RMB 356 million, representing a decline of 16.92%. By business segment, pharmaceutical segment revenue was RMB 1.431 billion, still the core source of revenue but also declined year over year; food segment revenue was RMB 180 million, basically flat; real estate segment revenue was RMB 40 million; and home care chemical segment revenue was RMB 51 million. None of these segments formed effective growth support. By region, South China—serving as the core market—generated revenue of RMB 497 million, declining markedly year over year. Revenues in other regions also declined to varying degrees, reflecting that the company has faced obstacles in expanding its markets nationwide, and its main-business growth momentum has been weak.

Net Profit: Continued Losses, Loss Magnitude Narrowing

In 2025, the net profit attributable to owners of the parent company was -RMB 357 million, narrowing slightly compared with the previous year’s -RMB 377 million loss, but it has been loss-making for two consecutive years. The net profit after deducting non-recurring gains and losses was -RMB 307 million, also within the loss range, indicating that the company’s profitability of its main operating business has not achieved substantive improvement; the losses are mainly due to poor operations in its core business.

Earnings Per Share: Continuing Loss Trend

Basic earnings per share were -0.1144 yuan per share; earnings per share after deducting non-recurring items were -0.0984 yuan per share, both slightly worse than the prior year’s -0.1119 yuan per share and -0.0981 yuan per share, consistent with the trend of net profit changes. This reflects that the earnings capacity per share continues to decline, resulting in negative shareholder returns.

Expense Management: Big Cut in Sales Expenses, Ongoing Increase in R&D Investment

Overall Expense Situation

In 2025, total selling, general, and administrative expenses (period expenses) were RMB 9.103 billion, down 12.87% year over year. This was mainly due to a significant reduction in selling expenses, which offset the impact of the revenue decline to some extent. However, the total expense level still remained relatively high, heavily eroding profits.

Selling Expenses: Marketing Optimization Shows Clear Results

Selling expenses were RMB 492 million, down 26.20% year over year, with a decline far exceeding that of revenue. Among them, market development and promotion expenses decreased from RMB 479 million to RMB 309 million, which is the core reason for the decline in selling expenses. This reflects that the company optimized and adjusted its marketing strategy, cutting low-efficiency marketing and promotion spending. Meanwhile, rigid expenses such as staff compensation remained basically flat, and initial results from expense management began to show.

Administrative Expenses: Slight Decrease, Stable Structure

Administrative expenses were RMB 343 million, down 1.87% year over year, with a relatively small decline. Rigid expenditures such as staff compensation, depreciation, and amortization still accounted for the major portion. Some projects such as intermediary agency and consulting fees, and property management fees saw adjustments to varying degrees. Overall, the expense structure remained relatively stable, and there is still room for more refined expense controls going forward.

Financial Expenses: Net Amount Negative, Interest Income Makes a Big Contribution

Financial expenses were -RMB 40 million, compared with -RMB 41 million in the prior year, basically unchanged. The company’s interest income was RMB 103 million, far exceeding interest expenses of RMB 64 million, mainly because the company held a relatively high scale of monetary funds. Interest income provided some contribution to profit.

R&D Expenses: Ongoing Investment, Innovation Layout

R&D expenses were RMB 125 million, up 6.60% year over year. The total R&D investment as a percentage of operating revenue reached 9.60%, higher than the industry average. Among them, capitalized R&D investment was RMB 43 million, with a capitalization ratio of 25.39%. The company continues to lay out initiatives in areas such as innovative traditional Chinese medicine drugs and innovative chemical drugs. R&D projects are advancing steadily, providing momentum reserves for future development.

R&D Team: Stable Scale, Optimized Structure

The company had 329 R&D personnel, accounting for 11.57% of the total workforce. The scale of the R&D team remained stable. In terms of educational background, there were 3 doctoral candidates, 41 master’s degree holders, and 260 bachelor’s degree holders; the proportion of employees with bachelor’s degree or above exceeded 92%, indicating a relatively high overall educational level within the R&D team. In terms of age structure, there were 184 employees aged 30–40, accounting for 55.93%, which is the core strength of the R&D team. The team’s age distribution is reasonable, and its innovation vitality is strong.

Cash Flow: All Three Major Cash Flows Under Pressure, Tightening Working Capital Chain

Operating Cash Flow: Turns From Positive to Negative, Deteriorating “Cash-Generating” Ability

Net cash flow from operating activities was -RMB 19 million, compared with RMB 477 million last year, a year-on-year decline of 103.96%, turning from net inflow to net outflow. The main reason is that the year-on-year decrease in sales of core products as well as in medical/pharmaceutical distribution and agency businesses reduced cash received from selling goods from RMB 3.027 billion to RMB 2.502 billion. At the same time, cash paid for purchases of goods still remained at RMB 1.451 billion, leading to a sharp reduction in operating cash inflows and a severe deterioration in the company’s ability to generate cash from operations.

Investing Cash Flow: Net Amount Turns Negative, Investments Narrow

Net cash flow from investing activities was -RMB 66 million, compared with RMB 949 million last year, a year-on-year decline of 107.00%. In the same period last year, large cash inflows were brought by the recovery of entrusted loans’ principal and interest, asset disposal proceeds, and redemption of wealth management products; however, there were no such businesses in the current period. Meanwhile, payments for the purchase and construction of fixed assets, intangible assets, and others totaled RMB 101 million, and investment payments were RMB 271 million. As investing cash outflows increased, the net amount turned negative.

Financing Cash Flow: Expanded Net Outflow, Rising Debt Repayment Pressure

Net cash flow from financing activities was -RMB 564 million, compared with -RMB 220 million last year, with the scale of net outflow increasing. In the current period, cash paid to repay debts was RMB 2.0981 billion, up significantly from RMB 1.308 billion in the prior year. At the same time, cash received from borrowings was RMB 1.887 billion, though slightly higher than last year, it was still insufficient to cover debt repayment payments. As a result, the company’s debt repayment pressure increased, and net outflow from financing activities expanded.

Risk Warning: Multiple Challenges Overlap, Profit Recovery Uncertain

Industry Policy Risks

The pharmaceutical industry is deeply affected by policies such as centralized procurement (volume-based procurement) and医保 cost controls. The company’s core product, Xue Tong (Freeze-Dried) injection powder (注射用血栓通（冻干）), faces pricing pressure. If policies are tightened further in the future, product prices and sales volumes may be hit by both factors simultaneously, affecting the company’s revenue and profits.

Market Competition Risks

Competition in traditional Chinese medicine and chemical drug markets is intense. The company’s core products face competition from many similar products, which may squeeze market share. At the same time, businesses such as food and home care chemicals also face fierce market competition, making new product promotion and market expansion more difficult.

R&D Failure Risks

The company has many in-house R&D projects and significant R&D investments, but pharmaceutical R&D has high risks and high uncertainty. If an R&D project fails or the progress falls short of expectations, it will lead to losses on prior investments and also make it unable to form a new profit growth driver, thereby affecting the company’s long-term development.

Capital Chain Risks

The company’s operating cash flow has turned from positive to negative, and both investing and financing cash flows are net outflows. Monetary funds decreased from RMB 4.055 billion to RMB 3.406 billion, indicating reduced capital reserves. If operating conditions do not improve subsequently, the company may face risks of a tight capital chain.

Executive Compensation: Pay for Core Management Stable

During the reporting period, the company’s main executives’ compensation is as follows:

• Chairman Yang Jinhai: Total pre-tax remuneration received from the company during the reporting period was RMB 0; his compensation is mainly paid by shareholder units.
• Finance负责人 Ge Hui: Total pre-tax remuneration was RMB 994,000.
• Deputy General Manager Wang Tianjiao: Total pre-tax remuneration was RMB 1.0257 million.
• Deputy General Manager Chen Ming: Total pre-tax remuneration was RMB 1.1379 million.
• Deputy General Manager Peng Weimin: Total pre-tax remuneration was RMB 1.0104 million.
• Deputy General Manager Wang Xiangyong: Total pre-tax remuneration was RMB 973,200.

Compensation for the core management team remains relatively stable, and mechanisms linking pay to the company’s operating performance have been gradually improved, which helps to incentivize management to improve the company’s operating conditions.

Click to view the full text of the announcement>>

Statement: There are risks in the market; investment requires caution. This article is automatically published by an AI large model based on third-party databases and does not represent Sina Finance’s views. Any information appearing in this article is only for reference and does not constitute personal investment advice. If there are discrepancies, please refer to the actual announcement. If you have any questions, please contact biz@staff.sina.com.cn.

A wealth of information and precise analysis—available on the Sina Finance app

Responsible editor: Xiaolang Express