China National Pharmaceutical Group's net profit increases by nearly 80% behind the scenes: store closures, reduced impairments, and frequent management changes

After the impairment provision was reduced, China National Medicines (CNAI) Group has seen a major surge in net profit. On April 1, CNAI released its 2025 results: attributable net profit of 1.14B yuan, up 76.8% year on year. Behind the impressive net profit performance is a decrease of 686 million yuan in impairment provisions for goodwill and intangible assets. In 2024, impairment provisions were as high as 970 million yuan, which caused net profit that year to plunge by nearly 60%. With that factor stripped out, the true quality of CNAI’s profitability still needs to be verified.

By business segment, the retail segment has been the main factor weighing down overall performance over the past two years. In 2025, revenue from this segment fell by 6.16%, and although net profit increased, it was still a loss of 217 million yuan. To “stop the bleeding,” China Resources Pharmacy has cumulatively closed more than 2,000 stores over the past two years, reducing the total store count from 10,516 to 8,221. At the same time, management is also making intensive adjustments. From large-scale store closures to frequent executive changes, CNAI appears to be undergoing an in-depth restructuring.

With the narrowing of impairment, net profit rebound

CNAI’s 2025 annual report shows that during the reporting period, the company achieved operating revenue of 73.42B yuan, down 1.29% year on year; attributable net profit was 1.14B yuan, up 76.8% year on year; and non-GAAP net profit after deducting non-recurring items was 1.1B yuan, up 88.53%.

CNAI’s 2025 net profit saw a substantial rebound, on the one hand due to reduced asset impairment losses. In 2024, multiple factors, including changes in industry policies and intensifying market competition, stacked up to affect CNAI’s retail segment, leading to a decline in performance and resulting in a significant gap between the operating performance of the acquired asset groups and expectations. The company recorded impairment provisions of 970 million yuan for goodwill and intangible assets formed from the allocation of the acquisition consideration (brand usage rights and sales network), which reduced attributable net profit for the year by 561 million yuan and resulted in only 642 million yuan, a year-on-year decline of 59.83%. In 2025, however, the impairment provisions for goodwill and intangible assets decreased by 686 million yuan year on year, directly driving the sharp jump in CNAI’s net profit.

From the revenue structure perspective, CNAI’s main businesses are divided into two major segments: pharmaceutical distribution and pharmaceutical retail. Of these, pharmaceutical distribution serves as the cornerstone of the overall business, accounting for more than 70% of CNAI’s revenue. In 2025, operating revenue was 53.32B yuan, up 0.64% year on year; net profit was 949 million yuan, up 2.94%, showing steady performance.

The real problem lies in the retail segment, namely China Resources Pharmacy. Since 2024, the retail business of CNAI has shown a clear deterioration in net profit. Revenue fell 8.41% year on year, and attributable net profit dropped by as much as 388.83%, to a loss of 1.07B yuan, directly dragging down the company’s overall performance.

In 2025, the retail segment stabilized somewhat, achieving operating revenue of 20.98B yuan, down 6.16% year on year; net profit narrowed losses by 80.36% year on year, but it still recorded a loss of 217 million yuan.

Deng Yong, a professor and doctoral supervisor at Beijing University of Chinese Medicine in the field of health and healthcare law, said that CNAI’s year-on-year revenue decline reflects pressure on growth in its distribution and retail core businesses. The improvement in profitability is more the result of easing historical burdens and cost-cutting/control, representing “bleeding-stoppage-style remediation,” rather than strong endogenous growth. A substantial improvement in non-GAAP net profit suggests that low-efficiency stores have been liquidated and cost control has begun to show results. However, the sustainability of profitability still depends on subsequent improvements in efficiency per store, product category mix, and the genuine recovery of the distribution business.

Regarding issues related to changes in performance, a reporter from Beijing Business sent an interview inquiry letter to CNAI. As of the time of publication, no response had been received.

Large-scale store closures and personnel adjustments

Another layer behind the improvement in net profit is the decline in rigid cost expenses such as labor and rent driven by store adjustments. CNAI’s annual report shows that in 2025, the company added 61 company-operated stores, closed 1,140 company-operated stores, added 65 franchised stores, and closed 334 franchised stores.

A reporter from Beijing Business noted that at the end of 2023, the total number of China Resources Pharmacy stores exceeded 10,000, reaching 10,516. In 2024, CNAI began large-scale store closures, and by the end of that year, the store count was 9,569. As of December 31, 2025, the number of China Resources Pharmacy stores had dropped to only 8,221, including 6,691 company-operated stores and 1,530 franchised stores. In just two years, more than 2,000 stores were closed.

In its annual report, CNAI said it focused on optimizing its store network layout. In 2025, China Resources Pharmacy accelerated “bleeding-stoppage” measures by closing loss-making stores, initially completing the concentrated closure work for loss-making stores.

Deng Yong said that the chain pharmacy industry is in a deep adjustment period shifting from scale expansion to improving the quality of existing stores. The industry faces pressures such as excess supply of stores, diversion between online and offline channels, and a rigid rise in rent and labor costs. The old model of “profitable upon opening” has been hard to sustain. Low-efficiency stores have suffered large-scale losses, and the industry has entered a stage of proactive clearing.

Meanwhile, management is also making intensive changes. On March 18, CNAI announced that Deputy General Manager Wang Chu left his position due to a work reassignment. Huang Minchun, Chi Guoguang, and Wang Hubiao, from China National Medicines Holding Guangzhou, stepped in to fill the roles, while Wang Chu had just taken up his position in 2025. More importantly, this is already the second deputy general manager to leave early within the past half year. In November 2025, Chen Changbing, who was responsible for strategy and M&A, left early, with the original term scheduled to run until 2027. Over the past year, CNAI’s senior management team has undergone multiple changes.

Deng Yong emphasized that CNAI takes a pragmatic approach by closing loss-making stores and optimizing its network layout to achieve cost reduction and efficiency improvement. The idea of driving operational integration and management efficiency through organizational adjustments is practical and consistent with industry trends. Short-term store closures and personnel changes bring pain, but the essence is a strategic course correction to deflate excess and improve quality. In the future, the core of competition among chain pharmacies will shift to single-store profitability, supply-chain efficiency, and professional service capability. The leading companies that complete structural optimization will have more competitive strength to weather across cycles.

Source: Beijing Business News