Cansino Biologics Inc.'s recent announcement of using capital reserves to offset losses has drawn significant market attention. The company plans to utilize approximately 1.45 billion yuan from its surplus reserve and capital reserve to wipe out its accumulated undistributed losses of -1.45 billion yuan in one move. While this maneuver is seen as paving the way for future dividends, it has also raised investor concerns about "accounting window dressing" and "major shareholder profiteering."
Although the company reported a net profit of about 27.92 million yuan in Q3, marking a turnaround from losses, its non-GAAP net profit remained negative, casting doubt on operational quality. With intensifying vaccine market competition and a singular product portfolio, whether Cansino can truly escape its loss-making predicament remains uncertain.
1. **Capital Reserve Controversy: Dividend Precondition Sparks Debate** The 1.45 billion yuan capital reserve used by Cansino includes roughly 1.332 billion yuan from share premium during its IPO. Zeroing out undistributed losses meets the prerequisite for cash dividends. However, critics argue that capital reserves—intended for business development and risk mitigation—are being repurposed to "cover historical losses," potentially benefiting major shareholders disproportionately. This move appears abrupt given the company’s single cash dividend record.
2. **Operational Weaknesses: Negative Non-GAAP Profit Persists** Despite Q3’s net profit turnaround, Cansino’s non-GAAP net loss for the first three quarters stood at -82.856 million yuan, indicating core operations remain strained. Profit growth heavily relied on non-recurring gains like government subsidies (up 233.63% YoY to 91.6 million yuan), overshadowing net profit. Meanwhile, a 41% surge in sales expenses (40% of revenue) highlights steep marketing costs.
3. **Single-Product Reliance and Market Pressures** Cansino’s revenue hinges on its meningitis vaccine "Menhycia," which drove a 22.13% revenue increase despite a thin product pipeline. Post-COVID vaccine downturn, two consecutive annual losses reveal overdependence on one product. Rising competition and potential R&D/commercialization delays could further destabilize performance, as acknowledged in its interim report.
**Conclusion** While Cansino’s reserve maneuver clears dividend hurdles and may buoy short-term sentiment, fundamental issues—persistent non-GAAP losses, product concentration, and high costs—remain unresolved. Investors eyeing dividends should weigh these operational risks against sustainability concerns.
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