China Resources Sanjiu Medical & Pharmaceutical Co., Ltd. (000999.SZ) recently disclosed its Q3 2025 financial report, revealing a stark divergence between revenue and net profit. The company reported revenue of RMB 21.986 billion for the first three quarters, up 11.38% year-on-year (YoY). However, net profit attributable to shareholders plummeted 20.51% YoY to RMB 2.353 billion, signaling a "revenue growth without profit growth" scenario.
Revenue growth was driven by a 27.37% YoY surge in Q3 alone to RMB 7.176 billion, partly due to the consolidation of Tasly Pharmaceutical Group Co., Ltd.’s (600535) prescription drug business post-acquisition. Interim reports show China Resources Sanjiu’s prescription drug revenue doubled YoY to approximately RMB 4.8 billion.
The acquisition, approved in February 2025, saw China Resources Sanjiu purchase a 28% stake in Tasly for RMB 6.212 billion, making it the controlling shareholder. However, integration challenges emerged as Tasly’s Q3 revenue dipped 2.35% YoY, with adjusted net profit down 15.59%. Similarly, another subsidiary, Kunming Pharmaceutical Group, saw revenue and net profit plunge 18.08% and 39.42% YoY, respectively, due to overlapping businesses and channel conflicts.
Goodwill surged to RMB 7.045 billion by Q3 2025, including RMB 1.921 billion from Tasly and RMB 1.129 billion from Kunming Pharma. The company had already written off RMB 495 million in goodwill impairments in H1, excluding potential losses from these subsidiaries.
Meanwhile, core CHC (Consumer Health Care) revenue fell 17.89% YoY in H1, with gross margin down 3.06 percentage points to 60.5%, attributed to lower flu incidence and retail traffic shifts. Rising raw material costs (e.g., honeysuckle, isatis root) and OTC drug inclusion in centralized procurement further squeezed margins.
Operating expenses ballooned: sales expenses jumped 28.98% YoY to RMB 6.128 billion in Q1–Q3, while R&D and financial costs soared 64.07% and 253.1%, respectively. Minority interests surged 203% YoY to RMB 16.264 billion, reflecting expanded non-wholly-owned subsidiaries.
Analysts highlight risks in China Resources Sanjiu’s aggressive M&A strategy, emphasizing cultural, managerial, and operational integration hurdles. The company’s ability to synergize brands, channels, and R&D remains under scrutiny as it navigates industry headwinds.
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