Recently, China Resources Sanjiu Medical & Pharmaceutical Co., Ltd. released its 2025 interim report. The data shows that the company achieved operating revenue of 14.81 billion yuan, a year-on-year increase of 4.99%, but net profit attributable to shareholders of the listed company fell 24.31% year-on-year to only 1.815 billion yuan.
Looking at historical performance, this marks the first time in five years that the company's interim profit has declined year-on-year. Behind this "revenue growth without profit growth" pattern lies high sales expenses, sluggish growth in traditional businesses, and massive goodwill overhead. The former OTC leader is now facing a difficult transformation.
CHC Business Revenue Falls 18%, Traditional Growth Engine Stalls
According to company information, China Resources Sanjiu's main businesses include CHC (Consumer Health Care) business, prescription drug business, and pharmaceutical wholesale and retail business. Among these, the CHC business has long been the company's revenue mainstay, with revenue share consistently maintained at around 60%. However, in the first half of 2025, this business achieved revenue of 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%. The business's gross profit margin fell 3.06 percentage points year-on-year to 60.5%, showing significantly weakened profitability.
From a causal analysis, intensified market competition and poor marketing model effectiveness are important factors leading to the CHC business decline. Specifically, as the current OTC market has entered a stage of inventory competition and new user acquisition costs continue to rise, China Resources Sanjiu's long-relied marketing-driven model is facing severe tests.
In the first half of 2025, the company's sales expenses reached 3.939 billion yuan, up 18.94% year-on-year, with a sales expense ratio of 26.6%. Among these, commercial promotion expenses increased 96% year-on-year to 560 million yuan. However, the high sales expenses did not bring corresponding revenue growth. In the first half of 2025, the company's revenue grew 4.99% year-on-year, continuing to slow from 56% growth in the same period of 2023 and 7% in 2024.
Meanwhile, channel transformation has also impacted China Resources Sanjiu. In recent years, online pharmacies have rapidly emerged with growth rates exceeding 30%, diverting substantial offline customer traffic. From January to May 2025, China's physical pharmacy cumulative scale was 247.4 billion yuan, down 2.3% from the same period last year, directly impacting China Resources Sanjiu, which heavily relies on pharmacy networks.
In terms of market competition, according to incomplete statistics, since 2020, the National Medical Products Administration has issued at least 65 announcements for prescription-to-OTC drug conversions, involving 148 drugs (by product name). By therapeutic category, respiratory system traditional Chinese medicines, respiratory system chemical drugs, and gynecological traditional Chinese medicines lead in quantity, accounting for 35, 16, and 16 positions respectively.
As more pharmaceutical companies enter the OTC field, product homogenization is becoming increasingly serious, and the advantages of star products like 999 Cold Remedy, Sanjiu Weitai, and 999 Dermatitis Ointment are no longer obvious. This is already reflected in the company's reduced contract liabilities and substantial inventory growth. In the first half of this year, China Resources Sanjiu's contract liabilities were 1.179 billion yuan, down about 20% year-on-year, while inventory grew 30% from last year's 4.992 billion yuan to 6.523 billion yuan.
Additionally, policy uncertainty has become a sword of Damocles hanging over China Resources Sanjiu. Although Cold Remedy was ultimately not included in Anhui Province's centralized procurement directory, the trend of traditional Chinese medicine centralized procurement is clear. If core products are included in centralized procurement in the future, the company's pricing power and profitability may face further pressure.
Acquisition Aftereffects Emerge, Goodwill Accounts for 33% of Net Assets
Facing slowing growth in traditional businesses, China Resources Sanjiu chose a development path of external expansion through acquisitions. Since 2012, the company has successively completed more than 10 acquisition transactions including Aosaikang Pharmaceutical, Kunming Pharmaceutical Group, and Tasly.
In August 2024, China Resources Sanjiu acquired a 28% stake in Tasly for 6.212 billion yuan, becoming the controlling shareholder of this innovative traditional Chinese medicine leader. This transaction brought Tasly's blockbuster products with annual sales exceeding 1 billion yuan, such as Compound Danshen Dripping Pills, into the system, quickly supplementing China Resources Sanjiu's product pipeline in the innovative traditional Chinese medicine field.
The acquisition transactions brought immediate revenue growth. In the first half of 2025, China Resources Sanjiu's prescription drug business revenue reached 4.838 billion yuan, up 100.18% year-on-year, becoming the main driver of the company's revenue growth. However, acquisition "aftereffects" and goodwill risks are also gradually emerging.
As of the first half of 2025, China Resources Sanjiu's goodwill balance reached 7.045 billion yuan, accounting for 33% of the company's net assets, with goodwill impairment provisions of 495 million yuan. If acquired enterprises perform below expectations, goodwill impairment will directly reduce current net profit. Judging from Tasly's performance, in the first half of 2025, the company's revenue fell 2% year-on-year and adjusted net profit fell 13%; Kunming Pharmaceutical Group's revenue fell 11.68% year-on-year and adjusted net profit fell 5.6%. China Resources Sanjiu still faces enormous challenges in post-investment integration.
Meanwhile, high accounts receivable is also a potential risk brought by acquisitions. As of the end of June 2025, China Resources Sanjiu's notes receivable and accounts receivable reached 7.763 billion yuan, accounting for 36% of net assets, while monetary funds accounted for only 30%, with bad debt risk gradually accumulating.
Facing the dual challenges of sluggish main business growth and acquisition integration, can China Resources Sanjiu stabilize its fundamentals amid intense market competition and policy uncertainty, and digest the goodwill and accounts receivable risks brought by acquisitions? We will continue to monitor closely.
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