Baiyunshan Annual Report Review: Revenue and Net Profit Both Increase in 2025, Cash Flow Faces Pressure

Ask AI · Can the new management’s billion-dollar investment reshape the future of Guangzhou Pharmaceutical?

On the evening of March 20, Guangzhou Pharmaceutical Baiyunshan released a year-end report showing double growth in revenue and profit: by 2025, revenue is expected to reach 77.656 billion yuan, a 3.55% increase; net profit attributable to shareholders is projected at 2.983 billion yuan, up 5.21%. In the context of a 1.2% decline in the revenue of the national pharmaceutical manufacturing industry above designated size in 2025, this performance is quite impressive.

Meanwhile, Baiyunshan plans to distribute a cash dividend of 4.5 yuan (including tax) per 10 shares to all shareholders, totaling 1.382 billion yuan in cash dividends for 2025 (including semi-annual), accounting for 46.32% of the net profit attributable to shareholders in the consolidated financial statements.

R&D expenses decreased by 13% last year

Possibly related to previous personnel adjustments

Behind this steady performance, several noteworthy details are hidden.

In 2025, Baiyunshan’s net profit attributable to shareholders increased by 5.21%, but R&D expenses decreased from 764 million yuan to 662 million yuan, a 13.37% decline. High R&D investment is typical in the pharmaceutical industry, and a reduction in R&D spending is uncommon among industry leaders. Baiyunshan has not provided a clear explanation for this change.

However, considering the timing, one possible factor is that 2025 was a critical year for management restructuring at Guangzhou Pharmaceutical. After the new leadership took office, various businesses were in a period of sorting and adjustment. During this transitional phase, when strategic directions were not yet fully clear, the temporary contraction in R&D investment may be related to internal budget reallocation and cautious project evaluation.

It is noteworthy that at the Guangzhou Pharmaceutical Group’s Science and Technology Innovation Conference held on December 27, 2025, the new management signaled a strong transformation. Chairman Li Xiaojun proposed to “recreate a new Guangzhou Pharmaceutical” during the 14th Five-Year Plan period, with an expected R&D expenditure of 10 to 15 billion yuan and industry investment and M&A costs of 20 to 30 billion yuan.

Sector differentiation

Profit growth in East and South China, overseas profits lead

Breaking down Baiyunshan’s performance last year, the performance in key regions is worth noting.

In the South China region, the main base, revenue increased year-over-year but gross profit margin decreased by 0.53%, meaning increased revenue but not increased profit. In East China, revenue declined by 3.98%, but gross profit margin rose by 1.87 percentage points to 26.33%. This may be because Baiyunshan in East China did not pursue scale expansion blindly but instead improved profitability through product structure adjustments or cost control. In Southwest China, the main business revenue gross profit margin also increased by 3.47 percentage points to 30.94%.

Of particular interest is the internationalization process. Last year, Baiyunshan’s revenue in Hong Kong, Macau, and overseas regions grew by 6.93% to 294 million yuan, with gross profit margin increasing by 4.49 percentage points to 12.16%, leading all regions in growth.

At the subsidiary level, two core subsidiaries contributed over 10% of revenue: Wanglaoji Health, a leader in natural beverages, with main products including Wanglaoji herbal tea, Chilingji series, Lixiaoji series, etc.; Guangzhou Pharmaceutical, a core enterprise in pharmaceutical commerce, officially listed on the New Third Board in 2025 and acquired 100% of Zhejiang Pharmaceutical Industry Co., Ltd.

Regarding flagship products, performance varied significantly: Citrate Sildenafil Tablets (Jin Ge) remain the core product for men’s health; products like Xiaoke Wan, Baoji series, Amoxicillin series, Angong Niuhuang Wan, and others saw rapid sales growth. Notably, Baoji series production increased by 62.46%, with inventory soaring by 98.15%. Baiyunshan explained this as “preparing inventory in anticipation of increased future market demand.”

Medical insurance catalog adjustments implemented

Forcing R&D to focus on clinical value

In December 2025, the National Healthcare Security Administration and the Ministry of Human Resources and Social Security jointly issued the “National Basic Medical Insurance, Work Injury Insurance, and Maternity Insurance Drug List (2025),” effective from January 1, 2026. The new catalog continues to emphasize innovative drugs, pediatric medicines, and clarifies rules for negotiations and centralized procurement of selected medicines under medical insurance payment standards.

In response, Baiyunshan stated in its financial report that it will “comprehensively review the connection between its products and the new medical insurance catalog, focus more on clinical demand-oriented R&D innovation, optimize R&D pipelines, and actively promote innovative drugs with clinical value to be included in the medical insurance through negotiations, thereby improving product accessibility and core competitiveness.”

In 2025, Baiyunshan’s net cash flow from operating activities changed from a net inflow of 3.442 billion yuan in the previous year to a net outflow of 232 million yuan, a 106.75% decrease. The company explained that “receivables from subsidiaries decreased, while procurement and payment amounts increased.” Meanwhile, cash flow from financing activities shifted from a net outflow of 1.006 billion yuan in 2024 to a net inflow of 489 million yuan, a 148.63% increase.

This change in cash flow structure reflects increased pressure on receivables and a greater reliance on external financing. As a result, the new management has prioritized innovation and transformation more urgently.

At the December 2025 science and technology innovation conference, Guangzhou Pharmaceutical Group General Manager Chen Jiehui stated: “Guangzhou Pharmaceutical has reached a stage where transformation and innovation are necessary. Besides striving for innovation and moving forward bravely, there is no other choice or retreat.”

Transformation initiatives

Dual-track approach: internationalization and capital operations

In terms of transformation, Baiyunshan accelerated its internationalization last year and increased capital operations.

On the international front, Baiyunshan’s pharmaceutical products continued expanding overseas. In 2025, Xiao Chaihu Granules successfully obtained registration certificates in Macau; Angong Niuhuang Wan received registration in Vietnam; products like Zishen Yutai Wan are also being fast-tracked for overseas registration. In natural beverages, Wanglaoji international cans were launched in Germany, Australia, Singapore, Malaysia, and other markets. Additionally, the pharmaceutical commerce sector leveraged multiple import-export platforms to explore innovative drug access, support overseas expansion of innovative drugs and companies, and develop cross-border retail.

In capital operations, Baiyunshan established the Guangzhou Pharmaceutical Phase II Fund, Lihua Fund, and Guangkai Fund in 2025, and increased M&A activities: the Phase II Fund acquired 11.04% of Nanjing Pharmaceutical; Guangzhou Pharmaceutical acquired 100% of Zhejiang Medical Industry Co., Ltd.; Baiyunshan Hanfang completed mixed-ownership reform; Baiyunshan Bio increased capital by 300 million yuan; Guangzhou Pharmaceutical’s stock was listed on the New Third Board.

A company executive revealed plans to bring 2-3 innovative drugs to market within five years; aim for a 25-30% share of the domestic nuclear medicine market within ten years; establish an AI pharmaceutical joint laboratory; and fill gaps in animal health and medical devices through M&A and joint ventures.

Through these layouts, Guangzhou Pharmaceutical’s transformation blueprint is gradually taking shape.

In February 2026, Li Xiaojun, Party Secretary and Chairman of Guangzhou Pharmaceutical Group, explained his understanding of “recreating a new Guangzhou Pharmaceutical” in an interview with Nandu Bay Finance: “First, operational performance must keep doubling. Second, continuous scientific R&D is key.” He mentioned ongoing discussions with top European and American universities, “using international research institutions to verify the efficacy of traditional Chinese medicine. Internationalization of scientific research will definitely be an important way for us to recreate a new Guangzhou Pharmaceutical.”

Recognizing the high investment, high risk, and long cycle of pharmaceutical R&D, Li Xiaojun suggested at the 2026 Guangdong Provincial Two Sessions establishing a systemic fault-tolerance mechanism for the entire biopharmaceutical industry chain, with risk buffers tailored to different stages of enterprise development. “By establishing a fault-tolerance mechanism, removing innovation barriers, we can effectively motivate pharmaceutical companies to explore and try actively.”

Reporting by: Nandu Bay Finance Reporter Huang Chibo