Impairment reduction drives China National Pharmaceutical Group's net profit rebound

(Source: Beijing Business Daily)

After recognizing impairment to be reduced, Guoyi Pharmaceuticals Alliance saw a sharp surge in net profit. On April 1, Guoyi Pharmaceuticals Alliance released its 2025 results: attributable net profit was RMB 1.14B, up 76.8% year over year. Under the impressive net profit performance, there was a reduction of RMB 686 million in impairment provisions for goodwill and intangible assets. In 2024, impairment provisions were as high as RMB 970 million, which caused net profit that year to plunge by nearly 60%. Without factoring in this issue, the true quality of Guoyi Pharmaceuticals Alliance’s profitability still needs to be verified. By business segment, the retail segment has been the main factor dragging down overall performance over the past two years. In 2025, that segment’s revenue fell 6.16%, and although net profit increased, it remained loss-making, at RMB 217 million in losses. To “stop the bleeding,” Daguo Pharmacy cumulatively closed more than 2,000 stores over the past two years, with the total store count shrinking from 10,516 to 8,221. Meanwhile, management is also adjusting intensively. From large-scale store closures to frequent executive changes, Guoyi Pharmaceuticals Alliance seems to be undergoing a deep restructuring.

Net profit surged by nearly 80%

Guoyi Pharmaceuticals Alliance’s 2025 annual report shows that, during the reporting period, the company achieved operating revenue of RMB 73.42B, down 1.29% year over year; attributable net profit reached RMB 1.14B, up 76.8% year over year; and net profit after excluding non-recurring items was RMB 1.1B, up 88.53%.

In 2025, Guoyi Pharmaceuticals Alliance’s net profit rebounded sharply. On the one hand, this came from a decrease in asset impairment losses. In 2024, Guoyi Pharmaceuticals Alliance’s retail segment was affected by multiple factors such as changes in industry policies and intensifying market competition, leading to a decline in performance. This resulted in a large gap between the operating performance of acquired asset groups and expectations. The company recognized impairment provisions of RMB 970 million for goodwill and intangible assets formed from the allocation of acquisition consideration (brand usage rights and sales network), which reduced attributable net profit for that year by RMB 561 million, leaving only RMB 642 million, down 59.83% year over year. In 2025, however, impairment provisions for assets such as goodwill and intangible assets decreased by RMB 686 million year over year, directly driving Guoyi Pharmaceuticals Alliance’s net profit to surge.

From the perspective of revenue structure, Guoyi Pharmaceuticals Alliance’s main businesses are divided into two major segments: pharmaceutical distribution and pharmaceutical retail. Among them, pharmaceutical distribution, serving as the foundation of the overall business, accounts for more than 70% of Guoyi Pharmaceuticals Alliance’s revenue. In 2025, it achieved operating revenue of RMB 53.32B, up 0.64% year over year; and net profit was RMB 949 million, up 2.94%, with performance remaining steady.

The real problem lies in the retail segment—specifically, Daguo Pharmacy. Since 2024, the retail business’s net profit for Guoyi Pharmaceuticals Alliance has shown a clear downward slide. Operating revenue decreased 8.41% year over year, and attributable net profit fell even more sharply by 388.83%, to a loss of RMB 1.07B, directly dragging down the company’s overall performance.

In 2025, the retail segment stabilized somewhat. Operating revenue was RMB 20.98B, down 6.16% year over year; net profit narrowed losses by 80.36% year over year, but it still recorded losses of RMB 217 million.

Deng Yong, a professor and doctoral supervisor of health and medical law at Beijing University of Chinese Medicine, pointed out that Guoyi Pharmaceuticals Alliance’s revenue declining year over year reflects that growth pressure is weighing on both the distribution and retail core businesses. The improvement in profitability is more a result of shedding historical burdens and reducing costs and controlling expenses. It is a “bleeding-stemming” kind of repair rather than strong endogenous growth. A large improvement in net profit excluding non-recurring items indicates that low-efficiency stores have begun to exit and cost control has shown early results, but the sustainability of profitability still depends on the subsequent recovery of efficiency at individual stores, the mix of product categories, and the genuine rebound of the distribution business.

Regarding issues related to changes in performance, a reporter from Beijing Business Daily sent an interview request to Guoyi Pharmaceuticals Alliance, but as of the time of publication, no response had been received.

Large-scale store closures and personnel adjustments

Another reason for the improvement in net profit is the decline in rigid cost expenses such as labor and rent brought about by store adjustments. Guoyi Pharmaceuticals Alliance’s annual report shows that in 2025, the company added 61 directly operated stores and closed 1,140 directly operated stores. It also added 65 franchised stores and closed 334 franchised stores.

A Beijing Business Daily reporter noted that at the end of 2023, Daguo Pharmacy’s total store count exceeded ten thousand, at 10,516. In 2024, Guoyi Pharmaceuticals Alliance began large-scale store closures, and by the end of that year, the store count was 9,569. As of December 31, 2025, Daguo Pharmacy’s total store count was only 8,221, including 6,691 directly operated stores and 1,530 franchised stores. In just two years, more than 2,000 stores were closed.

In its annual report, Guoyi Pharmaceuticals Alliance stated that the company is focusing on optimizing store placement. In 2025, Daguo Pharmacy accelerated “bleeding-stemming” by closing loss-making stores, and initially completed concentrated closure work for loss-making stores.

Deng Yong said that the chain pharmacy industry is currently in a deep adjustment period shifting from scale expansion to improving the quality of existing inventory. The industry faces pressures such as an oversupply of store offerings, diversion between online and offline channels, and rigid increases in rent and labor costs. In the past, the model of “opening stores equals profitability” can no longer be sustained. Low-efficiency stores have suffered large-scale losses, and the industry has entered a stage of proactive stock clean-out.

At the same time, management is also adjusting intensively. On March 18, Guoyi Pharmaceuticals Alliance announced that Deputy General Manager Wang Chu left his position due to a work reassignment. Huang Minchun, Chi Guoguang, and Wang Hubiao, from Sinopharm Holdings Guangzhou, filled in, while Wang Chu had just been newly appointed in 2025. More importantly, this is the second deputy general manager to leave early within nearly half a year. In November 2025, Chen Changbing, responsible for strategy and mergers and acquisitions, also left early, with the originally planned term ending in 2027. Over the past year, Guoyi Pharmaceuticals Alliance’s top management team has undergone multiple changes.

Deng Yong emphasized that Guoyi Pharmaceuticals Alliance implements cost reduction and efficiency improvement by closing loss-making stores and optimizing network layout. The approach of promoting operational integration and management efficiency through organizational adjustments is practical and aligns with industry trends. Store closures and personnel changes in the short term bring pain, but fundamentally it is a strategic correction to deflate the bubble and improve quality. In the future, the core of competition among chain pharmacies will shift to profitability at individual stores, supply chain efficiency, and capabilities in professional services. Once structural optimization is completed, leading companies will have more competitive strength to weather cycles.

Beijing Business Daily reporter Wang Yinhao, Song Yuying

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