YUNKANG GROUP (02325) issues a profit warning, expecting a net loss of approximately RMB 663 million to RMB 856 million for the year 2024.

YUNKANG GROUP (02325) announced that the Group is expected to incur a net loss ranging from RMB 663 million to 856 million for the year ending December 31, 2024, while a net loss of approximately RMB 101.9 million was incurred for the year ending December 31, 2023. The expected net loss is mainly attributed to the following reasons: 1. During the reporting period, the overall revenue of the Group's diagnostic testing services decreased compared to the same period last year, due to macro-environmental changes, intensified industry competition, and the Group's strategic optimization of customer and product structures. Additionally, market price reductions and high fixed costs resulted in a decrease in overall product gross profit compared to the same period last year. Faced with challenges in the objective environment, the Group timely adjusted its development strategy, focused on core customers and core products, achieved high-quality development with major customers, and rapidly grew characteristic products in infection and other sectors, laying a foundation for long-term development. 2. During the reporting period, the Group continued to enhance its operational and management capabilities, strengthen cash flow management, and maintain a positive and favorable level of net cash flow from operating activities. However, due to the extension of payment cycles by some customers, the credit impairment losses recognized in this reporting period significantly increased compared to the same period last year, ranging between RMB 495 million to 622 million. The final impairment amount will be determined after evaluation and audit performed by the evaluation agency and the company's auditor. The Group will strengthen credit control and increase collection efforts to manage accounts receivable levels reasonably. 3. During the reporting period, in order to optimize resource allocation and improve resource utilization efficiency, the Group strategically optimized laboratories with performance below expectations. Based on prudence, impairment provisions were made for related assets, leading to a decrease in the Group's profitability in the short term. 4. During the reporting period, the Group continued to increase research and development investment, constantly exploring in model innovation, product innovation, and AI digital research and development applications, constructing a high-quality product research and development system with a disease and clinical focus, enriching customer service models and product matrices, and promoting technological innovation to serve the clinical field. The proportion of research and development expenses to sales revenue further increased during the reporting period, impacting the Group's profitability. Despite facing the challenges mentioned above, the Group has achieved breakthroughs in various aspects such as product innovation, model innovation, and "AI + medical" digital transformation during the reporting period, laying a foundation for long-term high-quality development of the Group. The Group is actively optimistic that although external objective environments have put short-term pressure on the Group's performance, the Group will be in a more favorable market position with more competitive products and services to meet market demand when macro-environment improves and market adjustments are gradually completed.