On April 24th, Ruikang Pharmaceutical (002589) released its 2024 annual report. The report shows that the company's operating revenue in 2024 was 7.966 billion yuan, a year-on-year decrease of 0.85%; The net profit attributable to the parent company was 20.6216 million yuan, a year-on-year increase of 1.50%; The net profit after deducting non attributable expenses was -128 million yuan, a year-on-year increase of 38.84%.

It is worth noting that Ruikang Pharmaceutical has been losing non recurring net profit for four consecutive years, and its operating income has been declining for five consecutive years. From 2019 to 2023, the company's operating revenue was 35.259 billion yuan, 27.204 billion yuan, 21.06 billion yuan, 12.311 billion yuan, and 8.034 billion yuan, respectively; The net profits were -928 million yuan, 260 million yuan, 130 million yuan, -183 million yuan, and 20 million yuan respectively; The net profit after deducting non recurring expenses is 1.136 billion yuan, 0.83 billion yuan, -2.31 billion yuan, -9.27 billion yuan, and -2.10 billion yuan, respectively.

The company has continuously deepened its strategic transformation in the past year, building a dual wheel drive model of "distribution business+traditional Chinese medicine innovation". While maintaining steady growth in pharmaceutical circulation, medical devices, and IVD business, it focuses on promoting the layout of the entire traditional Chinese medicine industry chain. The annual report shows that in 2024, the company strategically abandoned some low gross profit and long term pharmaceutical and medical products and customers due to its focus on high gross profit and short term products and customers, resulting in a slight decrease in the overall operating revenue of the company. Although policy directions such as fee control and price reduction, as well as medical insurance reform, have put some pressure on industry growth and profit margins, during this reporting period, the company's business structure has been improved, guarantee risks have been reduced, business quality has been further enhanced, and core competitiveness has been further strengthened.

Shandong Province remains the main source of revenue for Ruikang Pharmaceutical, accounting for over 90% of the total revenue. In 2024, the company's drug revenue accounted for 75.16% and equipment revenue accounted for 22.59%.

Ruikang Pharmaceutical's accounts receivable at the end of 2024 amounted to approximately 3.865 billion yuan, accounting for 24.14% of total assets, an increase of 1.62% compared to the same period last year. The company stated that its main downstream customers are public hospitals above designated size. Currently, most customers have strong financial strength, good credit, and guaranteed fund recovery. However, the DRG/DIP payment reform drives the optimization of hospital drug structure, affecting the terminal share of agent varieties. Coupled with the transparent supervision of medical insurance funds, the collection cycle of medical institutions is prolonged. If the company cannot maintain effective management of inventory and accounts receivable, it may face the risk of insufficient cash flow due to slow capital turnover speed.

Ruikang Pharmaceutical stated that in 2025, as the national volume based procurement continues to expand to high margin varieties such as traditional Chinese medicine injections, the differentiated rules of provincial alliance procurement will increase the complexity of cross regional operations. Against this backdrop, the company is facing risks such as the adjustment of unified bidding and procurement policies under the new medical reform situation, as well as the reform of pricing mechanisms and the adjustment of hospital medication structures.

Ruikang Pharmaceutical has been continuously expanding in recent years, and the high premiums and continuous losses of related targets have raised market doubts about the rationality of transactions.