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

(Source: Caixin)

Dong-E-E-Jiao and China Resources Jiangzhong have announced significant dividend distributions.

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), Kunming Pharmaceutical Group (600422.SH), Tasly (600535.SH), China Resources Jiangzhong (600750.SH), and Dong-E-E-Jiao (000423.SZ).

Caixin notes that most of these companies’ full-year performances were not particularly impressive. Of the five “China Resources” companies, four saw year-over-year declines in revenue, with Kunming Pharmaceutical Group’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 results disclosed in the annual reports reveal common factors behind these performances, such as centralized procurement, healthcare cost controls, and industry channel restructuring.

The performance of the nine pharmaceutical companies disclosed on March 19, 2025, according to data from iFinD via Tonghuashun.

Kunming Pharmaceutical Group’s performance decline hits a 20-year high

Among the companies with the most obvious decline, Kunming Pharmaceutical Group reported revenue of 6.575 billion yuan in 2025, down 21.74% year-over-year; net profit attributable to shareholders of the parent was 350 million yuan, down 46%; and net profit after deducting non-recurring gains and losses was 107 million yuan, down 74.45%. Its net cash flow from operating activities decreased by 64.21% year-over-year. According to iFinD data, these declines in revenue and net profit are the most severe in nearly 20 years for the company.

Kunming Pharmaceutical Group explained that this performance was mainly due to 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 significantly affected the expansion of some premium national drug products. The company is also deepening channel and model reforms, investing continuously in brand building and market expansion, which further short-term performance pressure. These factors led to a decline in sales volume and gross margin, reducing cash inflows.

It appears that Kunming Pharmaceutical Group is “caught in a difficult situation internally and externally.” On one hand, its distribution channels are undergoing reform. The company’s existing sales network is relatively dispersed, with numerous distributors that are difficult to manage. Former President Yan Wei revealed last year that Kunming Pharmaceutical Group is learning from 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 brick-and-mortar 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 deeper reforms in healthcare payment systems, are also exerting long-term downward pressure on traditional Chinese medicine product prices.

Channel restructuring has broad impacts, with ongoing cost controls from centralized procurement continuously squeezing corporate profits

Similarly, China Resources Jiangzhong also mentioned the impact of industry channel restructuring on performance. In 2025, China Resources Jiangzhong achieved revenue of 4.22 billion yuan, a decrease of 4.87% year-over-year.

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

Revenue by product category for China Resources Jiangzhong can be divided into three main types: OTC drugs, prescription drugs, and health consumer products and others. OTC drugs contribute the most, accounting for over 70% of revenue, with a gross margin of 75.14%, significantly higher than the 41% gross margin of other segments.

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

Among the three main business categories, the health consumer products segment showed relatively steady growth. In 2025, this segment’s revenue was 494 million yuan, up 43.19%.

Tasly, also a traditional Chinese medicine company with some pharmaceutical commercial operations, disclosed its annual report on the same day. 2025 marked its first year under China Resources Group’s control.

In 2025, Tasly achieved revenue of 8.236 billion yuan, down 3.08% year-over-year; net profit attributable to shareholders of the parent was 1.105 billion yuan, up 15.63%. However, this profit growth was mainly driven by an increase in fair value of financial assets, not core business. In fact, due to centralized procurement price reductions, gross profit declined, and net profit after deducting non-recurring gains and losses was 791 million yuan, down 23.59%.

Throughout the year, various factors caused declines in both pharmaceutical manufacturing and pharmaceutical commercial revenues.

The report shows pharmaceutical manufacturing revenue fell 2.54%, mainly due to price cuts from centralized procurement and industry downturns in Chinese medicine injections; pharmaceutical commercial segment, including chain pharmacies, saw a 10.39% decline, mainly due to policy impacts.

While Chinese medicine companies underperformed, chemical pharmaceutical firms like China Resources Shuanghe also experienced revenue declines. In 2025, Shuanghe reported revenue of 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 items was 1.568 billion yuan, up 9.5%.

Shuanghe’s traditional pillar infusion business suffered a major setback, with revenue of 2.533 billion yuan, a sharp drop of 16.85%. The company attributed this to high influenza base numbers in 2024 and intense competition in mid- and low-end markets. Meanwhile, chronic disease business revenue was 3.252 billion yuan, down 5.16%. The impact of normalized centralized procurement has put ongoing downward pressure on prices for most generic chronic disease drugs, including core products like “No. 0,” which also faced channel management challenges.

Some companies reduced R&D spending; Dong-E-E-Jiao announced a large dividend payout

Notably, several companies also cut back on key R&D investments. Shuanghe’s R&D expenditure in 2025 decreased by 5.46% year-over-year. Tasly’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 product nature. 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, proposing to pay 14.31 yuan (including tax) per 10 shares to all shareholders, totaling 921 million yuan in cash dividends, representing 100% of the company’s undistributed net profit attributable to shareholders in 2025. The controlling shareholder will also benefit; according to Tonghuashun iFinD, China Resources Group holds a 33.69% stake as the largest shareholder.

China Resources Jiangzhong’s dividend payout is also sizable, with a planned cash dividend of 559 million yuan, accounting for 61.69% of 2025 net profit attributable to the parent. After considering mid-term dividends, iFinD data shows a payout ratio of 96.71% for 2025.

On the same day, other pharmaceutical companies also disclosed annual reports, including China National Pharmaceutical Group (600511.SH), Borui Pharmaceutical (688166.SH), and Prolor Pharmaceutical (000739.SZ). While China National Pharmaceutical Group saw a slight revenue increase but a decline in net profit, Borui and Prolor experienced declines in both revenue and net profit attributable to the parent.

Regarding stock prices, on March 20, at market open, the five “China Resources” companies performed variably. China Resources Jiangzhong, Shuanghe, Dong-E-E-Jiao, and Tasly all opened higher, with Dong-E-E-Jiao up 7.12%, China Resources Jiangzhong up 6.84%, Shuanghe up 2.7%, and Tasly up 1.06%. Kunming Pharmaceutical Group opened lower, down 0.76% at the time of writing.