Tongrentang 2025 Annual Report Analysis: Operating Cash Flow Surges by 253.87%, Net Profit Declines by 22.07% Year-over-Year

Core Profitability Indicators: Revenue and Profit Drop Together, Profitability Under Pressure

Operating Revenue: Down 7.21% Year over Year

In 2025, Tongrentang achieved operating revenue of RMB 17.256 billion, a 7.21% year-over-year decline from RMB 18.597 billion in 2024. By business segment, pharmaceutical manufacturing revenue was RMB 10.718 billion, down 10.03% year over year; pharmaceutical distribution revenue was RMB 10.478 billion, down 6.70% year over year. Both of the two core segments saw revenue contraction to varying degrees, reflecting the pressure of intensifying industry competition and soft market demand.

Net Profit and Non-recurring Profit: Down More Than 22%

• Net profit attributable to shareholders of listed companies was RMB 1.189 billion, down 22.07% from RMB 1.526 billion in 2024;
• Non-recurring profit (non-GAAP) was RMB 1.147 billion, down 22.57% from RMB 1.482 billion in 2024. The double-digit decline in profitability indicators shows that the company’s profitability in its main business has weakened. The contribution share of non-recurring gains and losses to net profit has increased. In 2025, the total non-recurring gains and losses were RMB 421 million, accounting for 35.40% of net profit.

Earnings Per Share: Synchronized Decline

• Basic earnings per share were RMB 0.867 per share, down 22.10% from RMB 1.113 per share in 2024;
• Non-recurring earnings per share were RMB 0.837 per share, down 22.50% from RMB 1.08 per share in 2024. The magnitude of the decline in earnings per share is basically consistent with that of net profit, and moves in line with the company’s profitability level.

Expense Management: R&D Investment Grows Against the Trend, Sales and Administrative Expenses Both Decline

In 2025, the company’s total period expenses were RMB 5.185 billion, a slight increase of 0.85% from RMB 5.141 billion in 2024. The expense structure showed differentiated changes:

Worth noting is that the R&D expenses growing against the trend reflects the company’s emphasis on innovation and internationalization. In 2025, several of the company’s products obtained overseas registration approvals, laying a foundation for expanding into international markets.

R&D Team: Stable Scale, Optimized Structure

In 2025, the company had 518 R&D personnel, accounting for 3.00% of the company’s total headcount. In terms of educational background, there were 18 PhD candidates and 104 master’s students, totaling 23.55% of the total R&D personnel. There were 396 undergraduates and below, accounting for 76.45%. Among the R&D team, there were 266 people aged 30–40, accounting for 51.35%, becoming the core force of R&D. Younger age structure helps enhance R&D innovation vitality.

Cash Flow: Operating Cash Flow Skyrockets, Net Investment and Financing Amounts Both Decline

In 2025, the company’s cash flow showed a differentiated trend:

The substantial improvement in operating cash flow mainly benefited from cost control and inventory optimization, while the expansion of net cash outflow in financing cash flow reflects that the company’s debt repayment pressure has increased somewhat.

Executive Compensation: Compensation Adjustments for the Core Management Team

• Chairman Zhang Chaohua reported total pre-tax remuneration of RMB 1.6652 million during the reporting period;
• General Manager Chen Jiafu reported total pre-tax remuneration of RMB 0.5619 million during the reporting period;
• Deputy General Managers Wang Tian, Feng Li, and Dong Lingyun reported total pre-tax remuneration of RMB 0.9412 million, RMB 0.9615 million, and RMB 0.6273 million, respectively;
• CFO Pan Baoxia reported total pre-tax remuneration of RMB 0.3295 million during the reporting period. Some changes in executive compensation are related to the company’s annual performance and personnel adjustments. Overall compensation levels are basically aligned with the industry and the company’s scale.

Risk Warning: Three Major Core Risks Need to Be Watched

Industry Policy Risk

Regulation in the traditional Chinese medicine (TCM) industry is tightening. Standards across the entire chain—from planting, production to distribution—may directly increase R&D costs, affect product pricing, and market access, thereby impacting profitability and competitiveness. Although the company responds through compliance management and participation in standard-setting, there remains uncertainty from potential policy changes.

Risk of Raw Materials and Quality Standards

Supply and price fluctuations in Chinese medicinal materials occur frequently. Meanwhile, regulations such as the “Chinese Pharmacopoeia” raise requirements for quality management across the full lifecycle of drugs, presenting challenges to the company’s cost control and quality system. The company responds through procurement reform, supplier monitoring, and other measures, but risks from raw material price fluctuations and quality compliance pressure will still exist long term.

Market Risk

Macroeconomic adjustments lead to a slowdown in growth of pharmaceutical consumption. Expanding overseas markets faces uncertainties such as geopolitical factors. The company responds by optimizing product mix and deepening marketing reform, but pressure on end-demand and risks in overseas markets still need continued attention.

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Responsible editor: Xiaolang Kuaibao