Lushui Observation | Xinhua Pharmaceutical 2025 Annual Report: Revenue Growth Without Profit Increase, The Transformation of an Established Pharmaceutical Company Underway

By Zhou Tao

Under the dual pressures of transformation and upgrading in the pharmaceutical industry and fierce market competition, Shandong Xinhua Pharmaceutical Co., Ltd. (A-share code: 000756, H-share code: 00719, hereinafter “Xinhua Pharmaceutical”) has turned in a 2025 performance report full of contradictions and challenges. For the full year, the company achieved operating revenue of RMB 8.755 billion, up 3.41% year over year, but its net profit attributable to shareholders fell sharply by 38.32% to RMB 290 million.

Image source: Jietu.com

“Profit loses momentum” despite a slight increase in revenue

According to Xinhua Pharmaceutical’s annual report, in 2025 Xinhua Pharmaceutical’s revenue maintained modest growth, but its profit performance suffered a major setback. The company’s net profit attributable to shareholders was RMB 290 million, down 38.32% year over year; its net profit attributable to shareholders after deducting non-recurring items was RMB 268 million, down 40.10% year over year; and basic earnings per share were RMB 0.42, down 39.13% year over year.

It is worth noting that this is the second consecutive year that Xinhua Pharmaceutical has been in a situation of “increasing revenue but not increasing profit.” According to the annual report, in 2024 Xinhua Pharmaceutical recorded operating revenue of RMB 8.466 billion, up 4.51% year over year; net profit attributable to shareholders was RMB 470 million, down 5.33% year over year; and profit after excluding non-recurring items was RMB 448 million, down 2.93% year over year.

Looking at performance by quarter, the pressure from declining results runs through the entire year. In particular, in the third and fourth quarters, net profit attributable to shareholders was only slightly above RMB 33 million each quarter, which stands in sharp contrast to the profit level in the first half when the quarterly figure exceeded RMB 100 million.

By product, Xinhua Pharmaceutical’s revenue from pharmaceutical intermediates and other products was RMB 2.124 billion, up 28.07% year over year, becoming the core driver of revenue growth; however, revenue from antipyretic and analgesic APIs was RMB 2.646 billion, down 3.30% year over year; and revenue from dosage form products was RMB 3.986 billion, down slightly by 2.13% year over year—both of the two major core segments were weak. The decline in profitability is directly reflected in gross margin: the company’s overall gross margin decreased by 5.33 percentage points year over year to 18.78%.

It is also noteworthy that while profit declined, the company’s net cash flow from operating activities increased significantly by 45.19% year over year to RMB 534 million, which was mainly due to improved operating efficiency brought by strengthening accounts receivable and inventory management. The board proposed an annual cash dividend of RMB 0.15 per share (including tax), down from RMB 0.25 per share in 2024. The reduction basically matches the scale of the profit decline.

Image source: Jietu.com

The structure is changing, but challenges remain

In terms of revenue structure, the company’s efforts to transform have started to show signs. Revenue from traditional chemical APIs and dosage form businesses both declined slightly year over year, while pharmaceutical intermediates and other businesses surged, with revenue jumping 28.07% and their share of revenue rising to 24.26%. This shows the company’s progress in extending the industrial chain and pursuing diversified operations.

However, the difficulties faced by the pillar businesses are even more prominent. Although the share of revenue from dosage form business is as high as 45.52%, due to the normalization of centralized procurement of national drug products and the intensifying market competition, both its revenue and gross margin are under pressure.

In its report, Xinhua Pharmaceutical stated that in order to consolidate market share, the prices of some products were lowered. But new momentum is being cultivated: international dosage form business sales revenue increased 19.86% year over year, including a sharp surge of 176.13% in self-operated dosage form exports; the e-commerce business and the sales of veterinary medicine dosage forms also achieved double-digit growth.

As the company’s traditional strength segment, the APIs business saw revenue decline slightly by 3.30%, but its gross margin increased by 1.10 percentage points against the trend, indicating a certain ability in cost control and advantages from integrated development along the industrial chain. Domestic market share of antipyretic and analgesic products represented by ibuprofen and aspirin continued to expand, and export volumes of some specialty APIs increased significantly.

In regional markets, domestic market sales revenue increased 7.15% year over year, becoming the main support for revenue growth; meanwhile, revenue in the Americas and Europe decreased by 19.09% and 10.72%, respectively, highlighting volatility and challenges in overseas markets.

The company continues to invest in R&D. In 2025, R&D expenditure accounted for 4.34% of operating revenue. The most attention-grabbing is progress in its innovative drug pipeline: OAB-14 for the treatment of Alzheimer’s disease has entered Phase II clinical trials; LXH-2301 for the treatment of gout is preparing to initiate Phase III clinical trials; and LXH-1211 for the treatment of pulmonary arterial hypertension has obtained the Phase I clinical trial approval document.

The report points out that Xinhua Pharmaceutical has clearly set the key focus for its 2026 work as “grasp the main contradictions and stabilize the foundation for development” and “cultivate new growth drivers.” The APIs business will focus on cost breakthroughs at the core, reduce costs by relying on technological upgrades and digital transformation; it will even “incorporate cost reduction into the innovation mechanism.” This indicates that in a context where prices are difficult to increase, digging into efficiency internally has become the key to the profit-protection battle.

At the same time, the company plans to accelerate the construction and ramp-up of key projects to reach full production and full performance, develop emerging markets such as Japan and India, and, relying on e-commerce platforms, move into the health and wellness industry. It will actively explore opportunities for mergers and acquisitions and restructuring to build a new growth curve. The annual report also mentions that Xinhua Pharmaceutical will accelerate reaching full production and full performance of key projects such as the Merck project (Phase II).

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