Pientzehuang's third-quarter report has been released, revealing a substantial decline in net profit for two consecutive quarters. On October 22, the company's stock price fell to 180 yuan per share, marking a significant 35% decrease from its peak a year ago. In the first three quarters, the net profit, excluding non-recurring gains and losses, dropped by 30%, with the gross profit margin experiencing a decline across the board. On October 20, Pientzehuang (600436.SH) shares fell by 4.71%, leading to a market valuation decrease of over 5.5 billion yuan.
The company announced its Q3 results after the market closed on Friday, October 17, indicating that it generated operating revenue of 2.064 billion yuan in the third quarter, a year-on-year decline of 26.28%; the net profit attributable to the parent company dropped 28.82% to 687 million yuan; and the net profit excluding non-recurring gains and losses halved, falling 54.60% year-on-year to 438 million yuan.
Moreover, the company's second-quarter performance had already shown signs of weakness, with a season-on-season revenue decline of 9.79% and a 28.79% drop; net profit attributable to the parent company fell by 40.76% year-on-year and 55.74% quarter-on-quarter, while the net profit, excluding non-recurring gains and losses, decreased by 41.3% year-on-year and 55.44% quarter-on-quarter. Overall, for the first three quarters of this year, the company achieved operating revenue of 7.442 billion yuan, a 11.93% decrease year-on-year; net profit attributable to the parent company was 2.129 billion yuan, a 20.74% year-on-year decline; and the net profit excluding non-recurring gains and losses reached 1.891 billion yuan, down 30.38% year-on-year.
Pientzehuang attributed the performance changes to a decrease in pharmaceutical manufacturing sales and declining gross profit margins. The company's main business segments currently include pharmaceutical manufacturing, pharmaceutical distribution, and cosmetics. In the first three quarters of this year, each of the primary business sectors experienced a decline in both revenue and gross profit margin. In pharmaceutical manufacturing, the company primarily focuses on "Pientzehuang" products, along with a range of other products like Yin Dan Ping Gan capsules, Compound Pientzehuang lozenges, Chuan Bei Qing Fei syrup, Compound Pientzehuang ointment, and Compound Pientzehuang hemorrhoid ointment, which span various areas including liver disease, cold medications, and dermatological drugs.
For the first three quarters of this year, pharmaceutical manufacturing revenue dropped 12.93% year-on-year to 4.016 billion yuan, with a gross profit margin falling by 7.51 percentage points to 59.38%. Revenue from liver disease medications, as the company's core product category, decreased 9.41% year-on-year to 3.880 billion yuan, with the gross profit margin falling to 61.11%, a decline of 9.68 percentage points compared to the same period last year. The pharmaceutical distribution segment's revenue also fell 8.45% year-on-year to 2.887 billion yuan, and the gross profit margin decreased by 4.19 percentage points to 8.64%.
In the cosmetics sector, Pientzehuang's subsidiary Pientzehuang Cosmetics maintains multiple skincare and haircare brands, including "Pientzehuang," "Empress," and "Dr. Jin." For the first three quarters, the cosmetics segment generated revenue of 400 million yuan, a year-on-year decline of 23.82%, with a gross profit margin of 61.79%, down by 1.28 percentage points.
Haitong International's research report indicates that the company's core Pientzehuang series products are under pressure from the consumer environment and escalating costs of raw materials such as bear bile. A long-term credit rating report issued by United Rating Co. in August highlighted that the high market prices of natural musk, bear bile, and snake bile are exerting pressure on the company's cost control. Although market prices for natural bear bile have slightly receded since the beginning of 2025, they remain at elevated levels (155,000 yuan per kilogram as of July 2025).
According to the Shenyin Wanguo industry classification, Pientzehuang operates within the "Pharmaceutical Biology - Traditional Chinese Medicine II - Traditional Chinese Medicine III" sub-sector, which consists of 69 listed companies, with only three having released third-quarter reports. Data from the mid-year report shows that despite 23 companies experiencing revenue growth, and 30 companies' net profits attributable to the parent rising year-on-year, Pientzehuang stands out with declines in both revenue (down 4.81% year-on-year) and net profit (down 16.22% year-on-year). Notably, the last time Pientzehuang reported a decline in net profit in the mid-year report was back in 2014. As of the first half of 2025, the company's sales gross profit margin stood at 40.41%, ranking 52nd in the industry.
Having retreated 35%, the stock has seen over 280 million yuan in block trades in the past year. Following the release of the Q3 report, Pientzehuang’s stock price experienced a consecutive three-day drop, reaching a low of 180 yuan per share on October 22, significantly down from its high of 278.48 yuan per share (post-reinstatement) on October 8 last year. Meanwhile, over the same period, the Shanghai Composite Index increased by approximately 17%, while the traditional Chinese medicine production sector saw a drop of about 4.8%. In the past year, Pientzehuang recorded 36 block trades, primarily concentrated from November 2024 to February 2025, with monthly transactions amounting to 12.27 million yuan, 30.39 million yuan, 104 million yuan, and 136 million yuan, respectively. A block trade on August 29 totaled 2.147 million yuan.
Among the brokers involved in these block trades, the CITIC Securities Shenzhen Futian Jintian Road brokerage has consistently appeared on both the buy and sell sides, buying 11 times and selling 7 times over the past year. Of the 36 block trades, 7 were executed by the same brokerage for both buying and selling, with 4 of those trades carried out by CITIC Securities Shenzhen Futian Jintian Road. The largest transaction occurred on February 6 this year, with Guotai Junan’s Shenzhen Haicang City Haide 3rd Road brokerage buying and selling a total of 28.998 million yuan.
Apart from the significant pressure on performance and stock price declines, there have been frequent changes in the company's board of directors and senior management this year. In September, the company’s director and chief financial officer, Yang Haipeng, resigned due to work adjustments. There have been changes in various positions, including board members, company secretaries, and vice presidents throughout the year.
Once valued close to 300 billion yuan, making it known as the “Traditional Chinese Medicine Leader,” Pientzehuang's market capitalization has now dropped below 110 billion yuan as of October 22, although it still holds a leading position in the traditional Chinese medicine industry.
Despite pressures on performance and stock declines, Pientzehuang has actively increased investments in the big health industry chain since 2024, establishing five fund companies and committing over 1 billion yuan. Recently, on September 29, Pientzehuang announced that its wholly-owned subsidiary would act as a limited partner investing 200 million yuan in the Zhongjin Healthcare Fund, representing 20% of the fund's target fundraising size. The fund aims to invest in areas related to healthcare, including traditional Chinese medicine, biopharmaceuticals, medical devices, medical services, and daily chemical products. In August, Pientzehuang also intended to invest 200 million yuan in the Gaoxin Runxin Fund, also 20% of its target size, which focuses broadly on healthcare investments. In April, they planned a similar investment in the Zhaoying Huikang Fund.
The funds established by Pientzehuang, Yuanshan Big Health and Yingke Health Fund, were both registered in 2024 with total sizes of 1 billion yuan each, with Pientzehuang investing 200 million yuan and 290 million yuan, respectively. These funds primarily invest in traditional Chinese medicine, biopharmaceuticals, medical devices, and healthcare-related areas. Investment targets from these endeavors show that Yuanshan Big Health now ranks among the top ten shareholders of Fujian Cosunter Pharmaceutical Co., Ltd. (300436.SZ) with a stake of 5.02%. The revenue for Fujian Cosunter fell 4.27% year-on-year to 209 million yuan in the first half of 2025, while the net profit attributable to its parent company dropped 85.05% to -66.6881 million yuan.
On the investment side, Pientzehuang’s semi-annual report indicates holdings of stocks in China Resources Double-Crane Pharmaceutical Co., Ltd. (600062.SH), Liaoning Cheng Da Co., Ltd. (600739.SH), Industrial Securities Co., Ltd. (601377.SH), and Industrial Bank Co., Ltd. (601166.SH). In terms of investment returns from 2022 to the first half of 2025, Pientzehuang reported profits of 75.2095 million yuan, 126 million yuan, 146 million yuan, and 78.921 million yuan respectively. However, the net profit attributable to the parent company dropped approximately 280 million yuan year-on-year in the first half of 2025, with 298 million yuan less in net profit excluding non-recurring gains and losses. In contrast to the decline in main operations, gains from investments appear insufficient to cover the performance gap.
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