Pharmaceutical Companies' Annual Reports Unveiled, "CR" System Faces Mixed Fortune: Kunming Pharmaceuticals Hits Record Decline, Dong-E-E-Jiao Sees Double Growth in Revenue and Net Profit

AI Inquiry · How Channel Reforms Are Worsening Short-Term Pressure Amid Kunyuan Pharmaceutical Group’s 20-Year Record Performance Decline

On the evening of March 19, nine pharmaceutical companies released their 2025 annual reports. Among them are five “China Resources” affiliated companies: China Resources Shuanghe (600062.SH), Kunyuan Pharmaceutical Group (600422.SH), Tianshili (600535.SH), China Resources Jiangzhong (600750.SH), and Dong’e E Jiao (000423.SZ).

Financial news notes that most of these companies’ full-year performances were not particularly impressive. Four out of the five “China Resources” companies saw year-over-year declines in revenue, with Kunyuan Pharmaceutical’s revenue and net profit attributable to the parent decreasing by 21.74% and 46%, respectively. Only Dong’e E Jiao achieved growth in both revenue and net profit. The operational disclosures behind these results reveal common factors such as centralized procurement, healthcare cost controls, and industry channel restructuring.

The nine pharmaceutical companies that disclosed their 2025 performance on March 19, according to data from Tonghuashun iFinD.

Kunyuan Pharmaceutical’s Performance Decline Reaches 20-Year High

Looking at the most significant decline, Kunyuan Pharmaceutical’s 2025 results show operating revenue of 6.575 billion yuan, down 21.74% year-over-year; net profit attributable to shareholders of the parent company of 350 million yuan, down 46%; and net profit after deducting non-recurring gains and losses of 107 million yuan, down 74.45%. Net cash flow from operating activities decreased by 64.21% year-over-year. According to Tonghuashun iFinD data, these declines in revenue and net profit are the most severe in nearly 20 years for the company.

Kunyuan Pharmaceutical explained that the performance decline mainly stems from slower-than-expected implementation of centralized procurement for traditional Chinese medicine, deeper healthcare cost controls, pressure on existing business, and the nascent stage of new business development; additionally, fluctuations in retail terminal foot traffic, intensified competition, and industry cycle impacts have significantly affected the expansion of some premium national medicine products’ channels. Furthermore, the company is deepening channel and model reforms, investing continuously in brand building and market expansion, which further exacerbates short-term performance pressure. As a result of these factors, the company’s product sales scale and gross profit margin have declined, and cash inflows have decreased.

It appears that Kunyuan Pharmaceutical is “caught in a perfect storm”. On one hand, its channels are undergoing reform. The company’s existing sales network was relatively dispersed, with numerous distributors that are difficult to manage. Yan Wei, who served as Kunyuan Pharmaceutical’s president last year, revealed that the company is drawing on the experience of China Resources Sanjiu (000999.SZ) by integrating its scattered distributor network to establish a more centralized channel structure.

On the other hand, the retail terminal market is becoming more segmented, with traditional physical pharmacies facing challenges. Digital channels such as O2O (online-to-offline) and B2C (business-to-consumer) continue to grow rapidly, changing the channel landscape. The normalization and expansion of centralized procurement, along with the deepening of healthcare payment reforms, are also exerting long-term downward pressure on traditional Chinese medicine product prices.

Channel Restructuring Has Broad Impact, and Centralized Procurement Continues to Suppress Pharma Profits

China Resources Jiangzhong (600750.SH) also mentioned the impact of industry channel restructuring on performance. In 2025, China Resources Jiangzhong achieved revenue of 4.22 billion yuan, down 4.87% year-over-year.

However, its profitability improved, with net profit attributable to shareholders of 907 million yuan, up 15.03%; net profit after non-recurring gains and losses of 833 million yuan, up 11.22%. Quarterly performance was even more impressive, with net profit attributable to the parent increasing by 45.1% year-over-year in Q4 2025, and up 38.56% sequentially.

The company’s revenue can be divided into three main categories: OTC (over-the-counter) medicines, prescription medicines, and health consumer products and others. OTC products contribute the most, accounting for over 70%, with a gross margin of 75.14%, significantly higher than the 41% gross margin of other segments.

However, in 2025, OTC revenue declined by 8.39%, affected by changes in terminal demand and industry channel restructuring. Additionally, policy-driven drug price management and the extension of centralized procurement to OTC products have increased cost control challenges.

Among the three business categories, the health consumer products segment showed relatively steady growth, with revenue of 494 million yuan, up 43.19% in 2025.

Tianshili, also a traditional Chinese medicine company with some pharmaceutical commercial operations, disclosed its 2025 results. It was the first year under China Resources Group’s holding.

In 2025, Tianshili achieved revenue of 8.236 billion yuan, down 3.08%; net profit attributable to shareholders of 1.105 billion yuan, up 15.63%; but this profit growth was mainly driven by the increase in fair value of financial assets; in reality, price cuts from centralized procurement led to lower gross margins. Its net profit after deducting non-recurring gains and losses was 791 million yuan, down 23.59%.

During the year, due to various factors, Tianshili’s pharmaceutical manufacturing and pharmaceutical commercial revenues declined simultaneously.

The annual report shows pharmaceutical manufacturing revenue fell 2.54%, mainly due to price reductions from centralized procurement and industry downturns in Chinese medicine injections; pharmaceutical commercial chain pharmacy revenue dropped 10.39%, mainly due to policy impacts.

While Chinese medicine companies underperformed, chemical pharmaceutical company China Resources Shuanghe also saw revenue decline. In 2025, Shuanghe’s revenue was 11.001 billion yuan, down 1.88%; net profit attributable to shareholders was 1.647 billion yuan, up 1.18%; and net profit after non-recurring gains and losses was 1.568 billion yuan, up 9.5%.

The company’s traditional pillar infusion business suffered a major setback, with revenue of only 2.533 billion yuan, a sharp decline of 16.85%. The company attributed this to the high base of influenza cases in 2024 and intense competition in the mid- to low-end markets. Meanwhile, chronic disease business revenue was 3.252 billion yuan, down 5.16%. The normalization of centralized procurement has put ongoing downward pressure on most chronic disease products, which are mainly generic drugs. Core product “No. 0” also faced channel governance issues, leading to revenue declines.

Some companies reduced R&D spending, and Dong’e E Jiao announced large dividends

It is also noteworthy that many of these companies cut back on key R&D investments. China Resources Shuanghe’s R&D expenditure in 2025 decreased by 5.46%. Tianshili’s R&D spending fell by 18.64%, though R&D investment still accounted for 10.26% of revenue. China Resources Jiangzhong’s R&D investment decreased by 1.06%, representing 5.19% of revenue.

Among the five “China Resources” companies that released annual reports, the only one to achieve growth in both revenue and net profit attributable to the parent was Dong’e E Jiao, closely related to its consumer-oriented products. In 2025, Dong’e E Jiao’s revenue was 6.7 billion yuan, up 8.83%; net profit attributable to shareholders was 1.739 billion yuan, up 11.67%; and net profit after non-recurring gains and losses was 1.638 billion yuan, up 13.62%.

Dong’e E Jiao also plans a substantial dividend payout, proposing to distribute 14.31 yuan (including tax) in cash per 10 shares, totaling 921 million yuan, fully covering the company’s undistributed net profit for 2025. The controlling shareholder will also benefit, with China Resources Group holding 33.69% of shares, according to Tonghuashun iFinD.

China Resources Jiangzhong also plans a sizable dividend, proposing a cash dividend of 559 million yuan, accounting for 61.69% of 2025 net profit attributable to shareholders. After considering mid-term dividends, data shows the dividend payout ratio for Jiangzhong in 2025 reaches 96.71%.

On the same day, other companies such as China National Pharmaceutical Group (600511.SH), Boreal Medicine (688166.SH), and Prolor Pharmaceutical (000739.SZ) also disclosed their annual reports. While China National Pharmaceutical Group saw slight revenue growth but profit decline, Boreal Medicine and Prolor Pharmaceutical experienced declines in both revenue and net profit attributable to shareholders.

Regarding stock prices, on March 20, the market opened with mixed performances among the “China Resources” firms. China Resources Jiangzhong, Shuanghe, Dong’e E Jiao, and Tianshili all opened higher, with Dong’e E Jiao rising 7.12%, China Resources Jiangzhong up 6.84%, Shuanghe up 2.7%, and Tianshili up 1.06%. Kunyuan Pharmaceutical opened lower and fell 0.76% as of the report time.