Core Insights - The event marked the recognition of China Resources Pharmaceutical Group as a member of the China Anti-Cancer Association, highlighting the collaboration between the two entities in cancer prevention and treatment [2][4][6] Group 1: Event Overview - The event was themed "Empowerment through Integration" and included a visit to the innovation center of China Resources Pharmaceutical Group, showcasing its patient-centered innovations over 75 years [4][5] - Key figures from the China Anti-Cancer Association, including its president and vice presidents, attended the event, emphasizing the importance of collaboration in cancer treatment [2][6] Group 2: Strategic Initiatives - The China Anti-Cancer Association introduced 17 strategic measures under the guidance of integrated medicine, aiming to enhance cancer prevention and treatment in China [5][6] - The association's "China Cancer Integrated Diagnosis and Treatment Guidelines" established a comprehensive system for cancer care, including over 70 technical guidelines and 60 cancer type guidelines [5][6] Group 3: Industry Collaboration - China Resources Pharmaceutical Group aims to integrate resources across research, education, and application to improve patient access to innovative drugs, positioning itself as a leader in the pharmaceutical distribution sector [6][9] - The company plans to enhance collaboration with the China Anti-Cancer Association to build a new ecosystem for cancer prevention and treatment, supporting the Healthy China strategy [6][9] Group 4: Challenges and Opportunities - The Chinese pharmaceutical industry is entering a new phase driven by product innovation, but faces challenges such as shortened product life cycles and commercialization difficulties [6][9] - The company is leveraging its extensive distribution network and experience to improve patient accessibility and address the challenges in drug availability and payment [6][9]

Product Portfolio and Market Presence - China Resources Pharmaceutical Group Limited manufactures 840 products, with 439 included in the national reimbursement drug list[7]. - The company operates a national distribution network with over 220 logistics centers across 28 provinces, serving more than 270,000 clients, including over 11,000 hospitals[9]. - The retail pharmacy network includes 708 pharmacies, with 270 being DTP specialty pharmacies[9]. - The company has a strong brand portfolio, including "999" and "Dong-E-E-Jiao," covering various therapeutic areas[7]. - The company was successfully listed in Hong Kong in October 2016, enhancing its market presence[6]. - The company aims to cover a wide range of therapeutic areas, including cardiovascular, pediatrics, and dermatology[7]. - The company plans to expand its market presence in Southeast Asia, targeting a 10% market share within the next two years[21]. Financial Performance - The company reported a revenue increase of 15% year-over-year, reaching approximately CNY 10 billion for the fiscal year[19]. - User data showed a growth in active users by 25%, totaling 5 million active users by the end of the reporting period[20]. - The company provided a positive outlook, projecting a revenue growth of 20% for the next fiscal year, driven by new product launches and market expansion[21]. - CR Pharmaceutical achieved annual revenue of RMB 257.67 billion, indicating significant growth in key performance indicators[28]. - The Group recorded total revenue of RMB257,673.3 million, representing a 5.3% increase from RMB244,703.9 million in the same period last year[113]. - The Group achieved a net profit of RMB 8,403.2 million, an increase of 8.1% from RMB 7,775.0 million in 2023[117]. - Profit attributable to owners decreased by 13.1% to RMB 3,350.9 million compared to RMB 3,854.2 million in 2023[117]. Research and Development - R&D investment is consistently increased, supported by one state key laboratory and three national engineering research centers[8]. - The company has established over 90 provincial municipal-level R&D platforms and a postdoctoral research workstation[8]. - Increased investment in scientific research and innovation has led to rapid development in technological innovation and strategic cooperation with external innovation hubs[35]. - The Group had 417 ongoing drug R&D projects at the end of the Reporting Period, including 67 innovative drug projects and over 50 classic Chinese medicine prescriptions[148]. - The Group has established a multi-tier R&D platform, including one state key laboratory and over 90 provincial municipal-level R&D platforms, to accelerate innovative transformation[153]. - The R&D team consists of approximately 3,000 professionals, with 43.06% holding master's or doctoral degrees, emphasizing the importance of attracting and developing scientific talent[160]. Strategic Initiatives and Partnerships - A strategic acquisition of a local biotech firm was completed, expected to enhance the company's product pipeline and market reach[20]. - The company signed a strategic cooperation agreement with Tasly Group to collaborate on TCM innovation and development[76]. - The Group signed a strategic cooperation agreement with Pfizer to promote four high-quality drugs for lung and breast cancer, enhancing patient accessibility[89]. - The Group is focusing on three M&A projects, including the acquisition of 28% equity in Tasly Pharmaceuticals to strengthen its position in the TCM industry[139]. - The Group's acquisition of Green Cross HK Holdings will enhance the Group's core competitiveness in the blood product field, adding a wholly-owned blood product manufacturing enterprise and four plasma collection stations[141]. Operational Efficiency and Cost Management - The gross margin improved to 45%, up from 40% in the previous year, reflecting better cost management and pricing strategies[21]. - The company aims to reduce operational costs by 15% through efficiency improvements and digital transformation initiatives[20]. - Significant progress has been made in reducing costs, increasing efficiency, and improving quality in the chemical medicine business, while consolidating the foundation in blood products and biopharmaceuticals[34]. - The Group has implemented a Quality Management System (QMS) to enhance efficiency and quality, with significant projects completed in 2024[162]. Sustainability and Social Responsibility - The MSCI-ESG Rating of the company maintained an "A" level, with significant improvements in various issue scores, reflecting its commitment to sustainable development[42]. - The company is actively fulfilling social responsibilities by ensuring stable supply of healthcare materials and contributing to the "Healthy China" initiative through public welfare projects[37]. - Six subsidiaries received recognition as "National Green Factories" for 2024, reflecting the Group's commitment to sustainable development and environmental responsibility[197]. Digital Transformation and Innovation - The Group's digital transformation efforts led to a digital coverage rate of key application capabilities in pharmaceutical commercial digitization increasing to 71% during the Reporting Period[192][193]. - The Group's proprietary pharmaceutical service platform "Run Care" aims to enhance patient management and follow-up services, providing comprehensive digital disease management throughout treatment cycles[191]. - The Group's digital therapy project implemented in Jiangsu, Shandong, and Henan focuses on evidence-based interventions for disease management, showcasing its commitment to innovative healthcare solutions[189]. Market Trends and Industry Position - The pharmaceutical industry is undergoing structural adjustments, with a shift towards independent innovation and high-quality differentiation as core competitiveness[108]. - The coordinated development of medical insurance, medical services, and the pharmaceutical industry is promoting high-quality development in the sector[109]. - The Group ranks third in the overall scale of the pharmaceutical industry and second in pharmaceutical manufacturing among the top 100 companies[112].

Investment Rating - The investment rating for the company is "Buy" with a target price set for the next six months [6]. Core Views - The company's revenue for 2024 reached 257.673 billion yuan, a year-on-year increase of 4.77%, while the net profit attributable to shareholders was 3.351 billion yuan, a decrease of 13.06% due to impairment losses from joint ventures [1]. - The pharmaceutical segment showed strong performance, contributing significantly to gross profit, with revenue from the pharmaceutical business at 46.32 billion yuan, up 6.6% year-on-year [2]. - The company has made progress in state-owned enterprise reforms, enhancing operational efficiency and core competitiveness [4]. - The net profit forecast for 2025-2026 has been adjusted to 4.535 billion yuan and 4.976 billion yuan, respectively, with a recovery expected in 2025 [5]. Revenue and Profit Analysis - In 2024, the company achieved a gross profit of 40.689 billion yuan, a 6.1% increase year-on-year, with an overall gross margin of 15.8% [3]. - The three main business segments contributed to the revenue as follows: pharmaceutical (16.1%), pharmaceutical distribution (80.0%), and retail (3.9%) [2]. Business Segment Performance - The pharmaceutical segment's gross profit was 27.505 billion yuan, reflecting a 7.1% increase year-on-year, while the distribution segment's gross profit was 12.507 billion yuan, up 5.2% [2]. - The retail segment, however, saw a decline in gross profit to 0.625 billion yuan, down 14.7% year-on-year [2]. Strategic Initiatives - The company has successfully introduced strategic investors into its commercial segment, enhancing resource allocation and operational efficiency [4]. - Market-oriented recruitment and performance exit mechanisms have been strengthened, with incentive plans introduced for certain subsidiaries [4].

Investment Rating - The investment rating for the company is "Buy" with a target price not specified [6][5]. Core Views - The company's revenue for 2024 reached 257.673 billion yuan, a year-on-year increase of 4.77%, while the net profit attributable to shareholders was 3.351 billion yuan, a decrease of 13.06% due to impairment losses from joint ventures [1]. - Excluding the impact of one-time items, the company's net profit showed a robust growth of 13.1% year-on-year [1]. - The three main business segments—pharmaceuticals, medical distribution, and retail—demonstrated stable growth, with the pharmaceutical segment contributing significantly to gross profit [2]. Revenue Breakdown - In 2024, the revenue contributions from the three main business segments were as follows: pharmaceuticals at 16.1%, medical distribution at 80.0%, and retail at 3.9% [2]. - The pharmaceutical segment generated revenue of 46.32 billion yuan, up 6.6% year-on-year, with a gross profit of 27.505 billion yuan, reflecting a 7.1% increase [2]. - The distribution segment achieved revenue of 213.237 billion yuan, a 5.5% increase, while the retail segment reported revenue of 10.104 billion yuan, also up 5.5% [2]. Profitability and Cost Management - The company achieved a gross profit of 40.689 billion yuan in 2024, a 6.1% increase, with an overall gross margin of 15.8%, up 0.1 percentage points [3]. - The net profit margin for 2024 was 3.3%, an increase of 0.1 percentage points, while the sales expense ratio remained stable at 7.7% [3]. Strategic Developments - The company has made significant progress in state-owned enterprise reform, enhancing its core competitiveness and operational efficiency [4]. - The introduction of strategic investors into the commercial segment raised a total of 6.26 billion yuan, improving resource allocation and operational efficiency [4]. Earnings Forecast and Valuation - The net profit forecast for 2025-2026 has been adjusted to 4.535 billion yuan and 4.976 billion yuan, respectively, with a projected net profit of 5.377 billion yuan for 2027 [5].

Investment Rating - The report maintains an "Outperform" rating for China Resources Pharmaceutical [3][19] Core Insights - In FY24, the company achieved revenue of CNY 257.7 billion, representing a year-on-year growth of 5.3%, with contributions from pharmaceutical manufacturing, distribution, and retail segments at 16.1%, 80.0%, and 3.9% respectively [4][15] - The gross profit margin (GPM) was 15.8%, an increase of 0.1 percentage points year-on-year, primarily driven by improvements in the pharmaceutical manufacturing segment [4][15] - The attributable net profit for FY24 was CNY 3.35 billion, a decrease of 13.1% year-on-year, mainly due to increased minority interests following the equity restructuring of China Resources Zizhu [4][15] Revenue Breakdown - Pharmaceutical Manufacturing: Revenue reached CNY 46.3 billion, up 6.6% year-on-year, with traditional Chinese medicine, chemicals, biological drugs, and nutritional supplements showing growth rates of +12.2%, +2.8%, +3.3%, and -11.8% respectively [5][16] - Distribution: Revenue was CNY 213.2 billion, reflecting a 5.5% year-on-year increase, with a stable GPM of 5.9%. The company has strengthened channel partnerships and expanded digital healthcare services [5][17] - Retail: Revenue amounted to CNY 10.1 billion, also up 5.5% year-on-year, driven by a 17% increase in high-value drug direct-to-patient (DTP) business [6][18] Financial Forecasts - Revenue forecasts for FY25 and FY26 have been slightly adjusted to CNY 278.6 billion and CNY 299.2 billion, respectively, reflecting growth rates of 7.3% and 5.8% [8][19] - Attributable net profit forecasts for FY25 and FY26 are now CNY 4.3 billion and CNY 4.8 billion, corresponding to growth rates of 27.4% and 11.8% [8][19] - The target price is set at HKD 6.97, based on a 2025 P/E ratio of 11.0x [8][19]

Core Points - China Resources Pharmaceutical (03320) reported a net profit attributable to equity holders of 3.351 billion yuan, a decrease of 13.06% year-on-year [1] - The company achieved total revenue of 257.673 billion yuan, an increase of 5.3% year-on-year, with a gross profit of 40.689 billion yuan, up 6.13% [1] - The proposed final dividend is 0.052 yuan per share [1] Revenue Breakdown - The revenue contributions from the three main business segments for 2024 were 16.1% from pharmaceuticals, 80.0% from pharmaceutical distribution, and 3.9% from retail and others [1] - The pharmaceutical segment generated revenue of 46.324 billion yuan, a year-on-year increase of 6.6%, with a gross margin of 59.4%, up 0.3 percentage points [1] - The pharmaceutical distribution segment reported revenue of 213.237 billion yuan, a growth of 5.5%, maintaining a gross margin of 5.9% [1] Retail Business Performance - The retail segment achieved revenue of 10.104 billion yuan, a year-on-year increase of 5.5%, driven by rapid growth in high-value drug direct-to-patient (DTP) business [2] - The DTP business generated approximately 6.9 billion yuan in revenue, reflecting a growth of about 17% [2] - The gross margin for the retail business was 6.2%, down 1.4 percentage points compared to the previous year, primarily due to the increased proportion of lower-margin DTP business [2]

Financial Performance - For the fiscal year ending December 31, 2024, total revenue reached RMB 257,673,256 thousand, an increase of 5.3% compared to RMB 244,703,884 thousand in 2023[2] - Gross profit for the same period was RMB 40,688,869 thousand, up from RMB 38,337,486 thousand, reflecting a growth of 6.1%[2] - Net profit attributable to the company's equity holders was RMB 3,854,247 thousand, compared to RMB 3,350,857 thousand in the previous year, representing a 15% increase[3] - The company reported a basic earnings per share of RMB 0.61, up from RMB 0.53 in the previous year, indicating a growth of 15.1%[3] - Total comprehensive income for the year was RMB 8,354,572 thousand, compared to RMB 7,718,306 thousand, marking an increase of 8.3%[4] - Other income for the year was RMB 1,801,527 thousand, slightly up from RMB 1,771,446 thousand, showing a growth of 1.7%[2] - The company incurred selling and distribution expenses of RMB 19,809,905 thousand, an increase from RMB 18,909,898 thousand, reflecting a rise of 4.7%[2] - Administrative expenses rose to RMB 6,727,404 thousand from RMB 6,328,166 thousand, indicating a growth of 6.3%[2] - The company’s financing income increased to RMB 681,103 thousand from RMB 587,686 thousand, representing a growth of 15.9%[2] Assets and Liabilities - Total non-current assets increased to RMB 71,914,741 thousand in 2024 from RMB 68,202,466 thousand in 2023, representing a growth of approximately 3.98%[5] - Current assets rose to RMB 185,807,012 thousand in 2024, compared to RMB 178,529,266 thousand in 2023, indicating an increase of about 4.26%[5] - Total liabilities decreased slightly to RMB 132,221,924 thousand in 2024 from RMB 134,232,755 thousand in 2023, a reduction of approximately 1.50%[5] - The net asset value increased to RMB 98,087,278 thousand in 2024, up from RMB 92,974,814 thousand in 2023, reflecting a growth of around 5.50%[8] - The company's total equity rose to RMB 98,087,278 thousand in 2024, compared to RMB 92,974,814 thousand in 2023, marking an increase of approximately 5.50%[8] - Cash and cash equivalents decreased to RMB 16,424,739 thousand in 2024 from RMB 24,650,670 thousand in 2023, a decline of about 33.33%[5] - Trade and other receivables increased to RMB 93,929,934 thousand in 2024 from RMB 79,188,302 thousand in 2023, representing a growth of approximately 18.66%[5] - The company's total current liabilities increased to RMB 80,742,110 thousand in 2024 from RMB 79,075,321 thousand in 2023, an increase of about 2.10%[8] - The total non-current liabilities rose to RMB 27,451,118 thousand in 2024 from RMB 19,562,727 thousand in 2023, indicating an increase of approximately 40.38%[8] - The company's total assets increased to RMB 125,538,396 thousand in 2024 from RMB 112,537,541 thousand in 2023, reflecting a growth of about 11.56%[8] Revenue Segmentation - For the fiscal year ending December 31, 2024, the company reported revenue from pharmaceutical product sales of RMB 257,538,411, an increase from RMB 244,569,688 in the previous year, reflecting a growth of approximately 5.9%[16] - The company’s total revenue from all sources is not reliant on any single customer, with no more than 10% of total revenue derived from any one customer[16] - For the fiscal year ending December 31, 2024, total external sales reached RMB 257,673,256 thousand, with the manufacturing segment contributing RMB 41,419,953 thousand, the distribution segment RMB 206,075,547 thousand, and the retail segment RMB 10,104,175 thousand[24] - The total revenue for the fiscal year ending December 31, 2023, was RMB 244,703,884 thousand, with external sales from the manufacturing segment at RMB 39,190,495 thousand and the distribution segment at RMB 195,858,229 thousand[25] - The pharmaceutical business generated segment revenue of RMB 46,323.7 million, reflecting a growth of 6.6%, with a gross margin of 59.4%, up 0.3 percentage points year-on-year[53] Future Outlook and Strategy - The company expects continued growth in revenue and profitability driven by market expansion and new product development initiatives[2] - The company plans to continue expanding its distribution and retail segments to enhance market presence and improve overall profitability[21] - The company is focusing on research and development in the pharmaceutical sector to drive future growth and innovation[21] - The company is actively embracing digitalization and green development, enhancing operational resilience and quality growth amid significant industry pressure[48] - The company is focusing on optimizing its industrial layout and increasing resource integration in core areas such as traditional Chinese medicine and biopharmaceuticals[58] - The company aims to optimize regional resource allocation and deepen cooperation in key areas such as the Yangtze River Delta and Greater Bay Area to maximize overall benefits[90] Research and Development - Total R&D expenditure during the reporting period was RMB 2.437 billion, focusing on enhancing innovation capabilities through independent R&D and external collaboration[62] - The group has 417 ongoing research projects, including 67 innovative drugs and over 50 classic traditional Chinese medicine formulas[62] - The group has increased its patent portfolio by 129 new invention patents during the reporting period, strengthening its intellectual property management system[64] - The group is focusing on high-growth and high-potential segments, enhancing its innovation capabilities in traditional Chinese medicine, chemical drugs, and biological products[65] - The group has established a national key laboratory and multiple national engineering research centers to accelerate innovation and transformation[65] Corporate Governance and Compliance - The financial statements are prepared in accordance with Hong Kong Financial Reporting Standards, ensuring compliance with local regulations[11] - The company has not adopted any new accounting standards or interpretations that would significantly impact its financial performance for the current reporting period[15] - The company’s accounting policies are subject to ongoing review, and any changes will be reflected in the financial statements as necessary[13] - The company has adhered to the corporate governance code and will continue to review its governance practices[109] - Continuous improvement in corporate governance is being pursued to ensure effective operation and protection of shareholder rights[84] Employee and Operational Metrics - The group employs approximately 72,700 employees as of December 31, 2024, a slight decrease from 72,986 employees in 2023[101] - The R&D team consists of approximately 3,000 personnel, with 43.06% holding master's or doctoral degrees[67] - The company’s employee benefits expenses increased to 9,628,669 thousand yuan in 2024 from 9,181,351 thousand yuan in 2023, indicating rising labor costs[28] - The company’s retirement benefit plan contributions increased to 1,099,463 thousand yuan in 2024 from 978,094 thousand yuan in 2023, highlighting a commitment to employee welfare[28] Dividend and Shareholder Information - The company plans to distribute a final dividend of RMB 0.052 per share for the year ending December 31, 2024, down from RMB 0.154 per share in 2023[35] - The total amount for the proposed final dividend is RMB 327,000,000, compared to RMB 968,000,000 in the previous year[35] - The final dividend will be paid in Hong Kong dollars at HKD 0.056 per share, with an exchange rate of RMB 1.0 to HKD 1.08308[103] - Shareholders can choose to receive the dividend in RMB, but must submit the currency choice form by June 24, 2025[104] Market and Economic Context - The overall economic environment in China showed a GDP growth of 5% in 2024, with a total GDP reaching RMB 134.9 trillion, supporting the company’s market outlook[44] - The pharmaceutical industry in China reported a revenue of RMB 25,298.5 billion in 2024, remaining stable compared to 2023, showcasing strong resilience in the sector[45]

Product Portfolio and Market Position - China Resources Pharmaceutical Group Limited manufactures 792 products, with 430 included in the national reimbursement drug list[4] - The product portfolio covers therapeutic areas including cardiovascular, gastroenterology, pediatrics, and dermatology[4] - The company has developed into one of the top 5 pharmaceutical manufacturers and top 3 distributors by revenue in China[3] - The Group's brand value was RMB97.006 billion, ranking in the top 50 of the "2024 Brand Value List of Chinese Listed Companies" and improving brand values by approximately RMB10.8 billion[50] - The Group launched the new brand "777" focusing on health management and disease prevention, aiming to promote TCM culture internationally[50] Distribution and Logistics - The company operates a national distribution network with over 220 logistics centers across 28 provinces, serving more than 210,000 clients[6] - The company has a comprehensive product supply and wide distribution network directly serving hospitals and medical institutions[6] - The Group's pharmaceutical distribution network covers 28 provinces, serving over 210,000 clients, including more than 10,000 secondary and tertiary hospitals[82] - The Group's distribution business operated more than 220 logistics centers, capable of storing and distributing temperature-controlled drugs nationwide[92] Financial Performance - The Group recorded total revenue of RMB128,597.6 million, a 4.7% increase from RMB122,818.4 million in the same period last year[28] - Gross profit reached RMB20,933.5 million, up 5.9% from RMB19,760.6 million in the first half of 2023, with a gross profit margin of 16.3%[30] - Net profit was RMB5,540.6 million, representing a 10.2% increase from RMB5,029.1 million in the first half of 2023[31] - Profit attributable to owners of the Company decreased by 2.9% to RMB2,604.8 million compared to RMB2,681.7 million in the first half of 2023[31] - Basic earnings per share were RMB0.41, down from RMB0.43 in the first half of 2023[31] Research and Development - R&D investment is consistently increased, with one national key laboratory and over 70 provincial R&D platforms established[5] - The company is actively engaged in research and development of new products and technologies to drive future growth[10] - The Group has over 350 ongoing R&D projects for new products, including nearly 100 new drug projects[57] - The Group has established a TCM innovative R&D platform supported by national research facilities, enhancing research on innovative Chinese medicines[61] - The Group is accelerating innovative transformation with a focus on high-growth and high-potential areas in drug development[57] Strategic Initiatives and Future Plans - The company aims to expand into health management and chronic disease management products to meet diverse healthcare needs[4] - The company plans to extend its business into health management and chronic disease management in the future[4] - The company aims to leverage its strong market position to explore potential mergers and acquisitions in the pharmaceutical sector[10] - The Group is committed to building a world-class pharmaceutical enterprise with comprehensive competitiveness through technological innovation and regional development[115] - The Group aims to enhance plasma collection capabilities and advance the development of new technologies and products in the blood products business[117] Corporate Governance and Compliance - The company is committed to maintaining high standards of corporate governance as outlined in its Articles of Association[12] - The Company will continue to review and monitor its corporate governance practices to ensure compliance with the CG Code[134] - All Directors have confirmed compliance with the Model Code regarding securities transactions during the reporting period[134] - The Company has adopted the Model Code as its own code of conduct regarding Directors' securities transactions[134] Market Trends and Economic Outlook - In the first half of 2024, China's GDP grew by 5.0% year-on-year, indicating a steady economic recovery[19] - The pharmaceutical manufacturing industry reported operating revenue of RMB1,235.27 billion, a year-on-year decrease of 0.9%, with the decline rate narrowing[20] - The healthcare sector continues to maintain a stable and high-quality development trend, crucial for public health and well-being[20] - The pharmaceutical industry is currently transitioning from old growth drivers to new ones, optimizing stock structure and expanding innovative pharmaceutical equipment markets[20] Sustainability and Social Responsibility - The interim report highlights a strategic focus on sustainability and responsible business practices in its operations[10] - The Group's rooftop distributed photovoltaic power generation projects achieved an installed capacity of 4.3 MW, providing over 4.63 million kWh of clean electricity annually and reducing carbon emissions by approximately 4,560 tonnes[105] - The Group maintained an MSCI ESG rating of A, reflecting its commitment to sustainable development[105] - The Group's sustainable development report for 2023 was rated as excellent A+ by Golden Bee Think Tank[105] Mergers and Acquisitions - The Group is actively pursuing commercial insurance payments to facilitate medication services for insured patients, enhancing its service offerings[102] - In Q1 2024, the Group increased its shareholding in Respirent Pharmaceuticals Co., Ltd., enhancing expertise in the respiratory field and facilitating new product development[107] - In July 2024, the Group conditionally agreed to acquire 100% interest in Green Cross HK Holdings Limited for strategic cooperation in blood products, vaccines, and gene therapy, enhancing upstream plasma collection capabilities[107] - The acquisition and strategic cooperation with Tasly Pharmaceuticals will enhance supply chain competitiveness and contribute to the development of new models in the TCM sector[110]

Investment Rating - Maintains an "Outperform" rating with a target price adjusted to HKD 6.94 [5][14] Core Views - The company achieved sales of CNY 128.6 billion in 1H24, representing a 4.7% year-over-year (y-y) growth [3][9] - The pharmaceutical manufacturing, distribution, and retail segments contributed 16.5%, 79.6%, and 3.8% to total revenue, respectively [3][9] - Gross profit margin (GPM) improved to 16.3% (+0.2 ppts y-y), driven by higher margins in the pharmaceutical manufacturing segment [3][9] - Net profit reached CNY 5.5 billion (+10.2% y-y), while attributable net profit was CNY 2.6 billion (-2.9% y-y) [3][9] - The company has over 350 projects under research, including approximately 100 new drug projects [3][9] Business Segment Analysis Pharmaceutical Manufacturing - Sales reached CNY 23.8 billion (+5.8% y-y) in 1H24 [3][10] - Traditional Chinese medicine (TCM) sales grew by 12.0% y-y, contributing 50.3% of the segment's revenue [3][10] - The segment's GPM improved to 60.1% (+1.2 ppts y-y) due to product mix changes and process efficiency enhancements [3][10] - The company produced 792 drugs, with 430 included in the National Reimbursement Drug List and 203 in the basic drug list [3][10] Distribution - Sales were CNY 105.9 billion (+4.9% y-y), with medical device distribution contributing CNY 16.7 billion (+3.1% y-y) [3][11] - The segment's GPM slightly declined to 5.9% (-0.2 ppts y-y) [3][11] - The distribution network covers 28 provinces, serving approximately 210,000 clients, including over 10,000 second- and third-tier hospitals [3][11] - The company operates more than 220 logistics centers with nationwide temperature-controlled storage and distribution capabilities [3][11] Retail - Sales grew by 9.3% y-y to CNY 4.9 billion, driven by the high-value drug direct-to-patient (DTP) business, which grew by 19% y-y [3][12] - The segment's GPM decreased to 6.5% (-1.4 ppts y-y) due to the increased proportion of lower-margin DTP business [3][12] - The company operates 760 self-owned retail pharmacies, including 275 DTP pharmacies (162 dual-channel pharmacies) [3][12] Financial Forecasts - Revenue forecasts for 2024/2025/2026 were slightly revised to CNY 263.6 billion, CNY 291.1 billion, and CNY 320.7 billion, respectively [5][13] - Attributable net profit forecasts for 2024/2025/2026 were adjusted to CNY 4.1 billion, CNY 4.5 billion, and CNY 5.0 billion, respectively [5][13] - The adjustments reflect challenges in the pharmaceutical distribution industry and the impact of equity restructuring on attributable net profit [5][13] Valuation - The target price was revised to HKD 6.94, based on a 9.5X PE for 2024, down from HKD 8.12 (previously based on 11X PER) [5][14] - The valuation reflects uncertainties in the distribution industry, including extended reimbursement cycles for medical insurance funds [5][14]

Financial Performance - The company reported revenue of RMB 4,128.6 million for the six months ending June 30, 2024, compared to RMB 3,122.8 million in the same period last year, representing a year-over-year increase of approximately 32.2%[2]. - Gross profit for the same period was RMB 2,093.3 million, up from RMB 1,976.1 million, indicating a growth of about 5.9%[2]. - The net profit attributable to shareholders was RMB 2,681.7 million, compared to RMB 2,604.8 million in the previous year, reflecting an increase of approximately 2.9%[3]. - Earnings per share increased to RMB 0.43 from RMB 0.41, marking a growth of about 4.9%[3]. - The company reported a total operating expenses of RMB 9,378.4 million, slightly higher than RMB 9,240.9 million from the previous year, which is an increase of approximately 1.5%[2]. - Total comprehensive income for the six months ended June 30, 2024, was CNY 5,565,773,000, representing an increase from CNY 4,965,882,000 in the same period last year[5]. - The overall revenue for the period was CNY 5,540,556,000, compared to CNY 5,029,149,000 in the previous year, indicating a growth of approximately 10.1%[5]. - The company reported a total of RMB 91,979,587 thousand in trade and other receivables, up from RMB 79,188,302 thousand, indicating a growth of about 16.5%[7]. - The total liabilities increased to RMB 169,241,092 thousand from RMB 153,795,482 thousand, reflecting a rise of approximately 9.9%[8]. - The net profit for the first half of 2024 reached RMB 5,540.6 million, a growth of 10.2% compared to RMB 5,029.1 million in the same period of 2023[59]. Future Outlook and Strategy - The company plans to expand its market presence and invest in new product development to drive future growth[2]. - Future guidance indicates a positive outlook with expected revenue growth of 15-20% for the next fiscal year[2]. - The company is focusing on enhancing its research and development capabilities to innovate new technologies and products[2]. - Strategic acquisitions are being considered to bolster market position and expand product offerings[2]. - The company plans to continue its market expansion efforts and invest in new technologies to drive future growth[5]. - The company is actively exploring new development models in the industry chain value chain and enhancing collaboration across various sectors[56]. - The group is committed to deepening state-owned enterprise reform, optimizing resource allocation, and implementing market-oriented incentive mechanisms to stimulate internal vitality and achieve high-quality development[115]. - The group aims to become a trusted leader in the pharmaceutical health industry, focusing on innovation-driven development and promoting transformation across various fields including traditional Chinese medicine and biopharmaceuticals[116]. Research and Development - The company is committed to maintaining its competitive edge through ongoing research and development initiatives[5]. - The total research and development expenses for the first half of 2024 were RMB 939,014 thousand, up from RMB 838,093 thousand in the previous year, marking an increase of about 12%[30]. - The group has over 350 new product projects under research, including nearly 100 new drug projects[72]. - The company is enhancing its R&D capabilities by focusing on high-growth, high-potential segments, including traditional Chinese medicine, chemical drugs, and biological drugs[73]. - The company has increased R&D investment in traditional Chinese medicine, currently developing over 40 classic formulas, with two successfully approved during the reporting period[79]. Market Performance - The pharmaceutical business achieved revenue of RMB 23,793.2 million, a year-on-year increase of 5.8%[60]. - The pharmaceutical distribution business achieved revenue of RMB 105,882.4 million, representing a year-on-year growth of 4.9%, with a gross margin of 5.9%, a slight decrease of 0.2 percentage points compared to the same period last year[91]. - The online sales revenue of the pharmaceutical segment increased by nearly 30% year-on-year, with several product categories ranking first on major online platforms during the "618" shopping festival[90]. - The company expanded its distribution network to cover 28 provinces in China, with over 210,000 customers, including more than 10,000 secondary and tertiary hospitals[93]. Corporate Governance - The company is committed to maintaining high standards of corporate governance to protect shareholder interests and enhance corporate value[134]. - The company will continue to review and monitor its corporate governance practices to ensure compliance with the corporate governance code[136]. - All directors confirmed compliance with the standards of conduct regarding securities trading during the reporting period[137]. Acquisitions and Investments - The group is actively pursuing external mergers and acquisitions, including a conditional acquisition of 100% equity in Green Cross HK Holdings Limited, enhancing its capabilities in blood product production[110]. - The group plans to acquire a 28% stake in Tian Shi Li Pharmaceutical Group for RMB 6.2 billion, aiming to strengthen its market competitiveness in the pharmaceutical sector[110]. - The acquisition of 100% equity in China Resources Zizhu Pharmaceutical by China Resources Double Crane will enhance the group's marketing channels, product layout, and international business, improving overall competitiveness in the pharmaceutical sector[113]. Financial Position - As of June 30, 2024, total assets amounted to RMB 197,570,204 thousand, an increase from RMB 178,529,266 thousand as of December 31, 2023, representing a growth of approximately 10.3%[7]. - The company's cash and cash equivalents stood at RMB 22,292,045 thousand, down from RMB 24,650,670 thousand, a decrease of about 9.6%[7]. - The net debt to equity ratio as of June 30, 2024, was 54.1%, an increase from 42.2% as of December 31, 2023[121]. Dividend Declaration - The company declared an interim dividend of HKD 0.0908 per share, totaling RMB 521 million for the six months ending June 30, 2024, compared to no dividend for the same period in 2023[37]. - The board declared an interim dividend of RMB 0.083 per share for the six months ended June 30, 2024, compared to no dividend for the same period in 2023[130].