Haohai Biological Technology 2025 Annual Report Analysis: Net profit excluding non-recurring gains and losses plummeted by 57.67%, with goodwill impairment exceeding 140 million yuan

In-Depth Interpretation of Core Profitability Indicators

Operating Revenue: First Year-on-Year Decline Appears; Aesthetic Medicine and Ophthalmology Businesses Under Pressure

In 2025, the company achieved operating revenue of RMB 2.473 billion, down 8.33% year on year. This marks the first time in recent years that the company’s revenue has declined on a year-on-year basis. By business segment, medical aesthetics and wound care generated revenue of RMB 1.040 billion, down 12.97% year on year; ophthalmology generated revenue of RMB 725 million, down 15.50% year on year, becoming the main drag on the revenue decline. Orthopedics and anti-adhesion and hemostasis each recorded revenue of RMB 428 million and RMB 230 million, respectively. Among them, the anti-adhesion and hemostasis business grew 57.66% year on year, mainly driven by the volume growth of the porcine fibrin protein adhesive product.

Net Profit: Large Impairment Cuts Profit in Half; Non-Recurring Gains Help Stabilize Profit

In 2025, the net profit attributable to shareholders of the listed company was RMB 251 million, down sharply by 40.30% year on year; net profit excluding non-recurring gains and losses was RMB 160 million, plunging 57.67% year on year. The core reason for the significant drop in profit is that the company recognized a large amount of asset impairment losses: it recorded goodwill impairment of RMB 141 million for Shenzhen InnoCare, and recorded impairment of RMB 25 million for the intangible asset—brand—for its U.S. subsidiary Aaren; the total impairment was approximately RMB 166 million, directly absorbing the profit for the period. However, during the year, the company obtained RMB 90.52 million in non-recurring gains and losses, including RMB 44.66 million in government subsidies and RMB 35.56 million in fair value change gains, which to some extent mitigated the decline in net profit.

Earnings Per Share: Declines in Tandem With Net Profit; Excluding Non-Recurring Items Drops Even More

In 2025, the company’s basic earnings per share was RMB 1.08 per share, down 40.00% year on year; earnings per share excluding non-recurring items was RMB 0.69 per share, down 57.67% year on year, fully matching the decline in net profit excluding non-recurring items. The decline in earnings per share directly reflects a deterioration in the company’s profitability quality. In particular, the sharp drop in the non-recurring-exclusion indicator indicates that the company’s core business profitability faces significant pressure.

Expense Control and R&D Investment Analysis

Total Expenses: Slight Increase in Scale; Structural Divergence Emerges

In 2025, the company’s total expenses (sales + administrative + R&D + finance) totaled RMB 1.281 billion, up slightly from RMB 1.224 billion last year, an increase of 4.65%. Among them, sales expenses and administrative expenses combined were RMB 1.243 billion, accounting for 97.03% of total expenses, making them the main component of expenses.

Sales Expenses: Growth Against the Trend; Market Investment Accelerates

The company’s sales expenses were RMB 815 million, up 4.35% year on year. Against the backdrop of declining revenue, sales expenses still increased, mainly because the company stepped up its market promotion efforts. Advertising expenses rose 30.42% year on year to RMB 68.47 million, and market expenses also increased 1.51% year on year to RMB 381 million, showing that the company continued to invest in brand promotion and channel expansion to respond to market competition.

Administrative Expenses: Slight Decline; Early Signs of Better Cost Management

Administrative expenses were RMB 429 million, down 3.17% year on year. The main reason is that the company optimized management processes and lowered some operating costs. Among various items, consulting and advisory fees, logistics and travel expenses, and other projects all fell to different degrees, reflecting proactive measures in expense control.

Finance Expenses: Net Gains Expand; Interest Income Makes a Standout Contribution

Finance expenses were -RMB 60.67 million, increasing net gains by RMB 11.97 million year on year. The main reason is that the company has a relatively large scale of monetary funds. Interest income grew 4.08% year on year to RMB 76.88 million, while interest expenses were only RMB 18.88 million. As a result, net interest gains expanded further, making a positive contribution to the company’s profit.

R&D Expenses: Periodic Decline; Core Projects Enter the Harvest Stage

R&D expenses were RMB 198 million, down 17.22% year on year. The decline in R&D expenses does not mean the company reduced R&D investment; rather, because multiple core R&D projects completed clinical trials one after another during the reporting period, leading to a reduction in phased spending. During the reporting period, the company obtained approvals for commercialization for several products, including a hydrophobic-modified IOL for astigmatism correction and pain-free crosslinking injectable crosslinked sodium hyaluronate gel, among others. R&D investment has entered the harvest stage.

R&D Personnel: Team Expansion; Higher Share of Highly Educated Talent

By the end of 2025, the number of R&D personnel reached 386, an increase of 36 compared with the previous year. Their proportion of the company’s total employees rose from 16.23% to 18.29%. In terms of educational background, there were 25 PhD holders and 111 Master’s degree holders, together accounting for 35.23% of total R&D personnel, further increasing from the previous year. This shows that the company continues to strengthen its talent reserve for the R&D team, laying a foundation for future technological innovation.

Cash Flow and Capital Operations Analysis

Overall Cash Flow: Net Inflow Turns to Net Outflow; Financing Activities See a Large Net Cash Outflow

In 2025, the net increase in cash and cash equivalents was RMB 115 million, a significant decrease from RMB 544 million in the previous year. Among them, net cash flow from operating activities was RMB 491 million, net cash flow from investing activities was RMB 201 million, and net cash flow from financing activities was -RMB 581 million. The large net cash outflow from financing activities became the main factor dragging down overall cash flow.

Cash Flow From Operating Activities: Net Amount Declines; Collection Pressure Becomes More Evident

Net cash flow generated from operating activities was RMB 491 million, down 24.30% year on year. The main reason is that revenue declined, leading to lower cash received from sales of goods. At the same time, the company increased its inventory stocking efforts, resulting in higher cash paid for purchasing goods. In addition, the ending balance of accounts receivable was RMB 271 million, down from RMB 316 million at the beginning of the period, but it is still necessary to monitor subsequent cash collection.

Cash Flow From Investing Activities: Net Amount Narrows; Investment Pace Slows

Net cash flow from investing activities was RMB 201 million, down 28.95% year on year. During the reporting period, cash received from recovering investments was RMB 1.447 billion, down from RMB 1.650 billion in the previous year. Cash paid for building fixed assets, intangible assets, and other long-term assets was RMB 187 million, down significantly from RMB 363 million in the previous year, indicating that the company’s investment pace slowed and it placed more emphasis on efficient use of funds.

Cash Flow From Financing Activities: Large Net Outflow; Primarily Dividends and Debt Repayment

Net cash flow from financing activities was -RMB 581 million, with the net outflow scale further expanding compared with -RMB 390 million in the previous year. It was mainly used to repay maturing bank borrowings of RMB 287 million and to distribute dividends to shareholders of RMB 228 million. Meanwhile, the company did not conduct equity financing during the reporting period, which led to a major reduction in cash inflows from financing activities.

Risk Factor Breakdown

Core Competitive Strength Risk: Technology Iteration and R&D Failure Risk

The company operates in the field of bio-medical materials, where technology upgrades and iterations are fast. If, in the future, there is breakthrough new technology or new products and the company fails to adjust its technology roadmap in a timely manner, its technology level could fall behind. At the same time, R&D cycles for bio-medical materials are long and technical difficulty is high. If R&D projects fail to produce results or market acceptance does not meet expectations, it will adversely affect the company’s core competitive strength and profitability level.

Operational Risks: Product Quality and Market Competition Risk

Pharmaceutical product quality and safety are crucial. If the company’s products have quality issues or adverse reactions, it will face risks of compensation, recalls, and administrative penalties, which would impact the company’s reputation and performance. In addition, the markets for the company’s major business areas have broad prospects and attract new entrants, making competition increasingly intense. This may lead to a decline in the company’s market share and gross margin, affecting profitability. Meanwhile, if goodwill formed from the company’s previous acquisitions faces poor integration outcomes or unfavorable operations at the acquired companies in the future, the company will face goodwill impairment risk.

Industry Risk: Policy Adjustment Risk

As the reform of the medical and health system continues to deepen, policies such as volume-based procurement and adjustments to the medical insurance catalog are continuously introduced. If the company fails to adjust its responses in a timely manner, it may lead to increased compliance costs and decreased product demand, adversely affecting its financial position and operating performance.

Macroeconomic Environment Risk: Slowing Industry Growth and Internationalization Risk

If the overall growth rate of the bio-pharmaceutical industry slows down, or if industry-wide quality and safety incidents occur, demand growth for the company’s products will slow. In addition, changes in laws and regulations, political and economic environments, or increased international tensions in countries/regions where overseas businesses operate may affect the normal development of overseas operations, due to the company’s internationalization strategy layout.

Compensation of Executives (Board, Supervisors, and Senior Management)

Chairman Compensation: Decreases Tied to Company Performance

During the reporting period, the total pre-tax compensation received by Chairman Hou Yongtai from the company was RMB 2.6268 million, down 13.18% from RMB 3.0256 million in the previous year. This decline is broadly consistent with the decline in the company’s net profit, reflecting the mechanism that executive compensation is linked to performance.

General Manager Compensation: Adjusted Along With Performance

During the reporting period, the total pre-tax compensation received by General Manager Wu Jianying was RMB 2.6708 million, down 11.10% from RMB 3.0045 million in the previous year. Similarly, it was adjusted in line with the company’s performance decline.

Deputy General Manager Compensation: Divergence; Lower Pay for Departed Personnel

Deputy General Managers Zhang Jundong and Wang Wenbin had total pre-tax compensation of RMB 0.9338 million and RMB 0.9270 million, respectively, during the reporting period, basically unchanged from the previous year. For departed Deputy General Manager Ren Caixia, she only received compensation of RMB 0.420 million during the reporting period, mainly because she resigned in January 2025, and compensation was paid based on her actual term of service.

Chief Financial Officer Compensation: Stable

During the reporting period, the total pre-tax compensation received by Chief Financial Officer Tang Minjie was RMB 1.6743 million, up slightly by 1.28% from RMB 1.6532 million in the previous year, maintaining relative stability.

Overall, the compensation of the company’s executives shows a certain positive correlation with company performance. Compensation for core management is adjusted as performance declines, reflecting the reasonableness of the compensation mechanism.

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Responsible editor: Xiaolang Express