China Resources Sanjiu Medical & Pharmaceutical Co.,Ltd.'s latest semi-annual report reveals a glaring wound: while revenue grew modestly by 4.99% to 14.81 billion yuan, net profit plummeted 24.31% to 1.815 billion yuan. The second quarter alone saw net profit of 545 million yuan, nearly halved with a 47.3% year-over-year decline, marking the steepest drop in recent years. While the market was still digesting explanations about "high flu baseline effects," a sales expense bill of 3.939 billion yuan, surging 18.94% year-over-year, revealed the true source of profit hemorrhaging.
**Core Business Growth Stalls, Centralized Procurement Shadow Persists**
As the pillar contributing 54% of revenue, the CHC (Consumer Healthcare) business grew merely 2.8% to 7.994 billion yuan in the first half, showing clear signs of fatigue. The flagship product "999 Cold Remedy," despite leading the retail market with 3.75 billion yuan in sales, faces dual pressures: on one hand, flu subsidence has led to demand contraction and inventory surge to 6.523 billion yuan, while contract liabilities shrank 20% year-over-year.
On the other hand, the Damocles sword of Traditional Chinese Medicine centralized procurement remains suspended overhead—last year, Anhui Province included Cold Remedy in its procurement draft. Once policies are implemented, competitors like Guangzhou Baiyunshan and Yiling Pharmaceutical will erode market share through low-price strategies. To defend its market position, China Resources Sanjiu was forced to spend over 21.7 million yuan daily on marketing expenses, cannibalizing profit margins.
**M&A-Driven Prescription Drug Boom Plants 7 Billion Yuan Goodwill Landmine**
Contrasting with CHC's predicament, the prescription drug business saw revenue surge 100% to 4.838 billion yuan through acquisitions including Tasly Pharmaceutical. However, this celebration comes at a steep cost: by mid-year, company goodwill soared to 7.045 billion yuan, accounting for 23.4% of non-current assets, like a performance time bomb ready to explode.
The highly anticipated Tasly itself shows lackluster growth (revenue declined 1.91% in the first half). If integration falls short of expectations, massive goodwill impairment will directly impact net profit. China Resources Sanjiu's recent moves to divest stakes in Anguo Traditional Chinese Medicine and Jiuzhou Tong Pharmaceutical represent course corrections from aggressive M&A, but these million-level transactions are merely a drop in the bucket against 7 billion yuan in goodwill.
Currently, China Resources Sanjiu stands at a crossroads: CHC business faces fierce competition in existing markets, while prescription drug expansion carries heavy goodwill burdens. The uncontrolled growth in sales expenses exposes the unsustainability of its "marketing-for-growth" model. As three pressures converge—fading M&A dividends, rising policy risks, and intensifying market competition—this OTC giant may be approaching its darkest hour. The profit slide revealed in the semi-annual report might merely be the prelude to a deeper crisis.
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