Chenxin Pharmaceuticals 2025 Annual Report Analysis: Non-recurring Net Profit Plummets by 39.82%, Net Cash Flow from Investing Activities Drops by 699.35%

Deep Decline in Core Profitability Metrics, Profit Quality Under Pressure

Changes in Operating Revenue and Profit Indicators

In 2025, Chenxin Pharmaceutical achieved an operating revenue of 3.45B yuan, down 13.48% year-over-year; net profit attributable to shareholders of the listed company was 421 million yuan, down 17.22%; net profit excluding non-recurring gains and losses was 256 million yuan, a significant drop of 39.82%, becoming the most prominent decline indicator on the profit side.

From quarterly data, the fourth quarter’s profitability was especially weak, with net profit attributable to shareholders after excluding non-recurring gains and losses at -17.7258 million yuan, the only quarter with a loss throughout the year, indicating significantly increased profit pressure in the second half of the year.

Per-Share Earnings Also Decline

Basic earnings per share (EPS) of 0.93 yuan/share, down 16.96% year-over-year; non-recurring EPS of 0.57 yuan/share, down 39.36%, roughly matching the decline in net profit, reflecting the direct impact of profit decline on shareholders’ per-share earnings.

Cost Control Shows Results, R&D Investment Remains High

Significant Reduction in Sales Expenses

In 2025, sales expenses were 888.2 million yuan, down 18.81% year-over-year, mainly due to a decrease in marketing development costs from 1.03B yuan to 804 million yuan, which is the main reason for the decline in sales expenses. This indicates the company adopted a tightening strategy in marketing, possibly related to reduced return on investment under centralized procurement policies.

Continued Optimization of Administrative Expenses

Administrative expenses were 243 million yuan, down 19.50%, mainly due to reductions in office expenses, repair costs, business entertainment expenses, among others, reflecting effective internal cost management.

Slight Increase in Financial Expenses

Financial expenses were -30.12 million yuan, up 7.27% year-over-year, mainly because interest income decreased from 39.56 million yuan to 32.62 million yuan, while interest expenses only decreased from 6.95 million yuan to 1.34 million yuan. The decline in interest income is the core factor affecting financial expenses.

R&D Investment Maintains High Level

R&D expenses were 285.78 million yuan, down 16.59% year-over-year, but total R&D investment still accounted for 8.30% of operating revenue, maintaining continuous investment in innovation. The company has over 100 ongoing projects, focusing on complex injectables, sustained-release oral solid preparations, ophthalmic preparations, and advancing generic drug consistency evaluations and innovative drug R&D. An anti-drug-resistant tuberculosis Class 1 new drug has entered Phase III clinical trials, building a product pipeline for future development.

Stable R&D Team Structure, Continuous Enhancement of Innovation Capability

As of the end of 2025, the company’s R&D personnel numbered 650, accounting for 20.87% of total staff. The team is characterized by youth and high education levels: 242 R&D staff are under 30 years old (37.23%), and 217 hold master’s degrees or higher (33.38%). A stable, high-quality R&D team provides talent support for ongoing innovation and ensures steady progress of projects.

Divided Cash Flow Structure, Significant Outflow in Investment Activities

Operating Cash Flow Declines Year-over-Year

Net cash flow from operating activities was 466.7 million yuan, down 18.30% year-over-year, mainly due to decreased operating revenue. Cash received from sales of goods and services dropped from 3.43B yuan to 3.11B yuan. Cash paid for purchasing goods and accepting services also decreased slightly. Overall, operating cash inflow remained positive but contracted in scale.

Sharp Drop in Investment Cash Flow by 699.35%

Net cash flow from investing activities was -174 million yuan, a decrease of 699.35% year-over-year, mainly because payments for structured deposits, bank wealth management products, etc., reached 1.63B yuan, while cash recovered was 1.36B yuan. The scale of net outflow in investments expanded significantly, indicating increased allocation to financial assets.

Relief in Financing Cash Flow Pressure

Net cash flow from financing activities was -231.96 million yuan, up 36.39% year-over-year, mainly due to reduced debt repayment payments from 1.34B yuan to 708 million yuan, and dividend and profit distribution payments from 3.07B yuan to 1.85B yuan. The pressure on financing cash outflows eased.

Multiple Risks Require Vigilance, Operating Resilience Under Test

Industry Policy Change Risks

Ongoing tightening of pharmaceutical industry policies, expansion of centralized procurement scope, dynamic adjustments to the medical insurance catalog, and stricter regulatory standards will directly impact product pricing, market access, and sales models. Failure to adapt strategies timely may lead to price declines and loss of market share.

Environmental Compliance Risks

Pharmaceutical manufacturing is a key area of environmental regulation. If the company fails to meet the latest emission and treatment standards, it may face penalties, production restrictions, or even shutdowns for rectification. Increased environmental investments could also compress profit margins.

Market Competition Risks

Rapid industry innovation and iteration mean competitors may launch more effective, cost-efficient products, potentially diverting customer resources and market share, weakening existing competitive barriers.

Raw Material Price Fluctuation Risks

Raw material costs constitute a high proportion of production costs. Significant increases in raw material prices, if not effectively passed on, will directly squeeze profit margins and affect profitability.

Product Quality Control Risks

The manufacturing process of pharmaceuticals is complex, involving multiple steps. Any lapses could lead to quality issues, impacting the company’s reputation and sales.

Senior Management Compensation and Shareholding

Chairman and General Manager Du Zhenxin received a pre-tax remuneration of 983k yuan during the reporting period, holding no company shares; CFO and Board Secretary Xu Xinbin received 639.5k yuan, also holding no shares; Vice Presidents Hao Liushan, Cui Xiaoting, and Zhang Xianglin received 702.9k yuan, 661.5k yuan, and 662.1k yuan respectively, each holding 200k restricted shares; Vice President Ren Zelin received 694.5k yuan, holding 15k restricted shares. Compensation aligns with company performance and is linked to equity incentives to retain core management.

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