China Resources Sanjiu Medical & Pharmaceutical Co., Ltd. encountered a "revenue growth without profit growth" dilemma in its first performance test following the acquisition. On August 15, China Resources Sanjiu released its first half-year report after completing the acquisition of a 28% stake in Tianshili. The financial report showed that China Resources Sanjiu achieved operating revenue of 14.81 billion yuan in the first half, up 4.99% year-on-year, but net profit attributable to shareholders of the listed company fell to 1.815 billion yuan, down 24.31% year-on-year, with non-recurring items excluded net profit declining even more significantly by 26.46%.
It was noted that China Resources Sanjiu's traditional pillar CHC (Consumer Health Care) business generated revenue of 7.994 billion yuan in the first half, down 17.89% year-on-year, with its revenue share dropping from 69.02% in the same period last year to 53.98%. Meanwhile, integration and related investments following the Tianshili acquisition have also become important factors affecting profits. In the first half of 2025, China Resources Sanjiu's net cash outflow from investment activities reached 5.527 billion yuan, R&D investment surged 68.99% year-on-year to 662 million yuan, and commercial promotion expenses doubled directly.
**CHC Business Revenue Falls 17.89% Year-on-Year**
China Resources Sanjiu has long held an important position in the OTC (over-the-counter) market, with its "999" brand deeply rooted in consumers' minds. Star products such as Ganmaoling, Sanjiu Weitai, and Piyiping have long been regulars in household medicine cabinets, contributing stable revenue to China Resources Sanjiu. However, judging from the first half of this year's data, the CHC business performance was unsatisfactory.
China Resources Sanjiu's latest half-year report broke the pattern of four consecutive years of positive interim profit growth. The financial report showed that China Resources Sanjiu achieved operating revenue of 14.81 billion yuan in the first half, up 4.99% year-on-year, but net profit attributable to shareholders of the listed company was 1.815 billion yuan, down 24.31% year-on-year. This marks the first interim net profit decline for China Resources Sanjiu since 2021.
Looking at specific business segments, the CHC business, which once contributed nearly 70% of revenue, performed poorly. The financial report showed that in the first half of 2025, China Resources Sanjiu's CHC business revenue was 7.994 billion yuan, down 17.89% year-on-year, with its revenue share dropping from 69.02% in the same period last year to 53.98%, and gross margin falling 3.06 percentage points year-on-year to 60.5%.
Pharmaceutical industry analyst Zhu Mingjun explained that competition in the OTC market has become increasingly fierce in recent years. As more and more pharmaceutical companies enter this field, the variety of products on the market has become increasingly rich, and consumers have more and more choices. Under these circumstances, even industry leaders like China Resources Sanjiu must face considerable challenges. Some emerging brands have quickly captured market share through innovative marketing methods and product strategies, bringing significant competitive pressure to traditional brands.
Changes in the market environment and periodic adjustments in retail channels have also intensified pressure on the CHC business. China Resources Sanjiu mentioned in its financial report that affected by factors such as declining pharmacy foot traffic, the industry is experiencing periodic adjustments in its long-term development process. Relevant data shows that the cumulative scale of China's physical pharmacies from January to May 2025 was 247.4 billion yuan, down 2.3% compared to the same period last year. The CHC business is highly dependent on pharmacy networks, but terminal market contraction has hindered business development, with traditional offline retail channels under obvious pressure.
**Goodwill Reaches 7.045 Billion Yuan**
As the traditional Chinese medicine platform under China Resources Group, China Resources Sanjiu's expansion strategy has been acquisition-driven. Since 2012, China Resources Sanjiu has successfully completed more than 10 acquisition transactions including Aosaikang Pharmaceutical, Kunming Pharmaceutical Group, and Tianshili. This strategy has not only helped China Resources Sanjiu expand its business territory but also enriched its product line. However, short-term acquisition growing pains have also put obvious pressure on China Resources Sanjiu's profit side.
In March this year, China Resources Sanjiu completed the acquisition of a 28% stake in Tianshili, making Tianshili its controlling subsidiary. Integration and related investments following the Tianshili acquisition have also become important factors affecting China Resources Sanjiu's profits. From financial data, China Resources Sanjiu's net cash outflow from investment activities in the first half was 5.527 billion yuan, mainly due to subsidiary acquisitions; R&D investment was 662 million yuan, up significantly by 68.99% year-on-year, and selling expenses also increased substantially, up 18.94% year-on-year to 3.939 billion yuan, with commercial promotion expenses doubling directly.
In addition to bringing significant pressure to China Resources Sanjiu's short-term profits, the market is more concerned about the high goodwill brought by the Tianshili acquisition.
Taking Kunming Pharmaceutical Group as an example, after being acquired by China Resources Sanjiu, Kunming Pharmaceutical Group's operating condition has remained virtually stagnant. In the first quarter of 2025, Kunming Pharmaceutical Group's revenue was 1.608 billion yuan, down 16.53% year-on-year; net profit attributable to parent company was 90.48 million yuan, down 31.06%. China Resources Sanjiu's goodwill book value from acquiring Kunming Pharmaceutical Group reached 1.129 billion yuan as of the first half of 2025.
The acquisition of Tianshili added 1.921 billion yuan in new goodwill for China Resources Sanjiu. In the first half of 2025, China Resources Sanjiu's goodwill ending balance was as high as 7.045 billion yuan, with goodwill impairment provisions of 495 million yuan. If Tianshili's future performance falls short of expectations or market conditions deteriorate, goodwill impairment risks will further impact China Resources Sanjiu's profits.
In Zhu Mingjun's view, although China Resources Sanjiu has completed the acquisition of Tianshili, the integration effect still needs time to verify. How to achieve deep integration of both parties in business, management, culture and other aspects, and fully realize synergistic effects, is key to China Resources Sanjiu's future development. At the same time, accelerating the R&D and launch process of new products and cultivating new profit growth points to compensate for losses from CHC business decline is also crucial.
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