New Stock Preview | Annual income of 800 million with 90% relying on a bottle of paint, Hanfang Pharmaceutical faces a "cliff test" in Hong Kong stocks.

With an annual income of 800 million yuan from a bottle of paint, Shandong Hanfang Pharmaceutical (hereinafter referred to as Hanfang Pharmaceutical) is knocking on the door of the Hong Kong stock market, with CMB International serving as the exclusive sponsor. On February 25th, this "hidden champion" in the field of skin and mucosal diseases submitted its prospectus, revealing the veil of its dominance in the niche market through its exclusive product "Compound Huangbai Liquid Paint." Profit puzzle under high gross margin: Financial analysis and growth bottleneck of Hanfang Pharmaceutical Observations show that during the reporting period, Hanfang Pharmaceutical exhibited typical financial characteristics of a large single-product driven company, with "high gross profit, heavy marketing, and strong dependence." Despite maintaining strong profitability on paper, the company faces potential challenges to its operational quality due to the marginal slowdown in revenue growth and the trend of rigid cost structure. Financial data shows that Hanfang Pharmaceutical's revenue decreased from 1.053 billion yuan in 2023 to 992 million yuan in 2024, a year-on-year decrease of around 12%. Although it reached 803 million yuan in the first nine months of 2025 (ending September 30), a slight increase compared to the 779 million yuan in the same period of 2024, it is unlikely to return to the high levels of 2023 when excluding the cyclical impact. Of particular concern is the performance on the profit side. The company's profit decreased from 237 million yuan in 2023 to 199 million yuan in 2024, a decrease of about 16%, exceeding the revenue decline. In the first nine months of 2025, despite revenue growth, net profit decreased from 154 million yuan in the same period of 2024 to 145 million yuan, a year-on-year decrease of about 5.8%. This contrast of "increased revenue but not increased profit" reveals a weakening in the company's profit-making ability. Additionally, as a traditional Chinese medicine company with exclusive products, Hanfang Pharmaceutical has demonstrated strong bargaining power upstream. Its sales costs have steadily decreased from 165 million yuan in 2023 to 126 million yuan in the first nine months of 2025, maintaining stable gross profit even amidst revenue fluctuationsgross profit reached 677 million yuan in the first nine months of 2025, with a gross profit margin as high as 84.4%, further increasing from the 83.1% in 2024, reflecting the strong pricing power and cost transmission ability of its core products. However, high gross profit has not fully translated into high net profit, mainly due to the rigid cost absorption. For example, in the first nine months of 2025, the company's sales and marketing expenses amounted to 420 million yuan, accounting for 52.4% of revenue, significantly higher than the 48.9% in the same period of 2024. This suggests that against the backdrop of weak revenue growth, the company had to increase marketing expenditures to maintain market share, thereby weakening the operating leverage effect. Meanwhile, general and administrative expenses increased by 38.9% year-on-year, further squeezing profit margins. In terms of financial risk, the controlled research and development (R&D) investment by the company is worth noting. In the first nine months of 2025, R&D expenses amounted to 41.55 million yuan, accounting for only 5.2% of revenue, in sharp contrast to the 52% of sales expenses. As a pharmaceutical company relying on a single product (Compound Huangbai Liquid Paint) with policy protection, the low R&D transformation capability might become a hidden constraint for its future expansion into a second growth curve. In summary, Hanfang Pharmaceutical's financial statements exhibit typical characteristics of a "conservative" traditional Chinese medicine company: with high gross profit and stable cash flow, but also facing challenges of stagnant growth, high expenses, and weak R&D capabilities in transition. With the capital assistance of the Hong Kong IPO, how the company transitions from being a "single-product dominant" player to achieving "multi-dimensional growth" will be crucial in reshaping its valuation logic. Based on the data provided in the second chart (income structure breakdown) and additional business background information, I deeply analyzed the business development logic of Hanfang Pharmaceutical: "Single-product Breakthrough Battle" under Policy Dividend and Pricing Dilemma Public information shows that the core business feature of Hanfang Pharmaceutical is extreme business concentration. In the first nine months of 2025, the core product "Compound Huangbai Liquid Paint" contributed 800 million yuan in revenue, accounting for a high share of 99.7% of total revenue. Compared to 99.8% in 2023 and 2024, this proportion has consistently remained above 99.5% in the past three years, almost qualifying as a "single-product company." The formation of this business structure has its historical inevitability: as a nationally protected second-level traditional Chinese medicine, Compound Huangbai Liquid Paint is currently the only prescription-based compound traditional Chinese medicine paint approved in China, with policy barriers naturally creating a competitive moat. From a business perspective, Hanfang Pharmaceutical has chosen a strategic approach of "putting all eggs in the most robust basket"instead of diversifying resources to expand peripheral products, they have focused on maximizing the value of the core product. Worth exploring is that although the absolute revenue amount in the first nine months of 2025 (803 million yuan) has surpassed the 779 million yuan in the same period of 2024, showing a weak recovery trend, the full-year revenue in 2024 (992 million yuan) decreased significantly from 2023 (1.053 billion yuan). The explanation given in the prospectus directly points to the core issue: "the highest selling price of Compound Huangbai Liquid Paint to hospitals has decreased." This phenomenon reveals the structural contradictions faced by exclusive traditional Chinese medicine products in the commercialization process: As a prescription drug, the final pricing of Compound Huangbai Liquid Paint is directly influenced by medical insurance payment policies. When regulatory authorities restrict the terminal selling price at hospitals, the pressure is transmitted backward along the supply chain to the manufacturerHanfang Pharmaceutical has to reduce the ex-factory price to distributors to maintain the profit space for the entire channel. Despite having an exclusive product advantage, when facing a pricing system dominated by a single payer (medical insurance), a company's pricing power is not unlimited. This explains why the gross profit margin can be as high as 84%, yet total revenue fluctuates. In conclusion, Hanfang Pharmaceutical's business logic can be summarized as follows: leveraging traditional Chinese medicine protection policies as a defensive barrier, relying on a single high-gross-profit product as a core asset, and seeking profit maximization within the framework of hospital terminals and medical insurance payments. This logic provides strong short-term defensive capabilitiesif the "unique approved" policy status remains intact, the company's fundamental stability is difficult to shake. However, in the medium to long term, its business development faces three major challenges: First, the pricing ceiling has been reached: if the trend of lowering hospital terminal selling prices continues, revenue growth will increasingly depend on "volume to compensate for price," requiring continued enhancement of channel penetration capabilities. Second, the risk of a single-product lifecycle: policy protection is not indefinite, and if the relay between old and new product varieties is not completed within this period, the company will face a significant "cliff effect." Third, the implementation capability of internationalization strategy: the prospectus mentions "global expansion," yet under the current business structure, it remains at the vision levelhow a single product can adapt to overseas regulations and medication habits is a question that requires substantial breakthroughs. In summary, Hanfang Pharmaceutical is a typical "policy dividend-driven" enterprise, with its business moat stemming from administrative barriers rather than pure market competition. With the push of Hong Kong capital, how the company leverages the cash flow from its core product to support R&D and achieve the transition from "single-product dominance" to "multi-dimensional growth" will be the key determinant of whether its business logic can realize a value leap.