Tongrentang's "big bath" in finance leads to continuous decline in net profit; brand and governance issues remain difficult to resolve | Financial Report Analysis

A century-old brand in the traditional Chinese medicine (TCM) sector, Beijing Tong Ren Tang Co., Ltd. (600085.SH) delivered a results report in its 2025 financial statements that is characterized by shrinking gains and sliding benefits, with profits nearly “wiped out” in a single quarter.

According to the company’s annual report disclosed recently, for the full year it achieved operating revenue of RMB 17.26B, a year-on-year decline of 7.21%; attributable net profit to shareholders was RMB 1.19B, down 22.07% year over year, and basic earnings per share fell by more than 20% year over year.

Tong Ren Tang, which had already earned RMB 1.18B in attributable net profit for the first three quarters, saw attributable net profit in the fourth quarter of only RMB 11.8185 million. After non-recurring items, it posted a direct loss of RMB 15.3982 million. Clear traces of “financial cleaning” are evident.

On one side is accounting prosperity: net cash flow from operating activities surged 253.87% year over year to RMB 2.69B. On the other side is the real-world predicament of falling sales volumes for core product lines, high inventory levels, and frequent occurrences of OEM/branding-for-subsidiary (OEM/white-label) irregularities, compounded by historical issues such as delays in equity integration and trademark misuse. Tong Ren Tang’s road ahead remains difficult.

Q4’s quarterly shortfall, sliding sales of core products

Tong Ren Tang’s 2025 performance trend shows clear characteristics of “high before, low after” and quarterly imbalance.

Judging from quarterly data, in the first through third quarters of 2025, the company’s attributable net profit was RMB 582 million, RMB 363 million, and RMB 232 million, respectively. While it declined quarter by quarter, it still stayed profitable. Entering the fourth quarter, attributable net profit was directly hammered down to RMB 11.8185 million. Non-recurring attributable net profit also turned negative, with a single-quarter loss of nearly RMB 15.4 million.

Tong Ren Tang cleared out previously accumulated risks in one go by concentrating large-scale provisions for asset impairment and inventory price declines.

The annual report shows that in 2025 the company recorded asset impairment losses of RMB 94.0274 million, up sharply 49.79% year over year; credit impairment losses were RMB 57.0318 million, a significant increase versus the same period last year. The total of the two impairment items consumed more than RMB 151 million in profits, becoming an important cause of the steep profit plunge in the fourth quarter.

Inventory-side pressure is one of the sources of the impairment provision. As of the end of 2025, the company’s inventories had a book value of RMB 10.62B, accounting for more than 34% of total assets, with inventory scale remaining high. Among them, inventories of core cardiovascular and cerebrovascular product categories surged 57.38% year over year, while sales fell 7.05% in parallel—resulting in a serious mismatch between production and sales.

Previously, to ensure the production of Angong Niuhuang Wan, the company stocked natural Niuhuang (bovine bezoar) and other raw materials at high prices. In 2025, as raw material prices fell sharply, it took the opportunity to provision large write-downs for the high-priced inventory. This portion of impairment directly reduced profits.

And even the seemingly impressive operating cash flow doesn’t hold up under scrutiny. In 2025, net cash flow from operating activities was RMB 2.69B, up 253.87% year over year. This was not due to improved product sell-through or stronger cash collection, but because cash paid for “purchase of goods and receipt of services” declined significantly. As the price of natural Niuhuang fell, the company proactively reduced the scale of raw material procurement, which led to an improvement in the cash flow figures on paper. In essence, this is passive growth and not sustainable.

Growth of core products also stalled. In terms of business structure, Tong Ren Tang operates in parallel with two main segments: pharmaceutical manufacturing and pharmaceutical distribution, with each accounting for nearly half of revenue. Cardiovascular and cerebrovascular products are a core product series within the pharmaceutical manufacturing segment. Although they are the largest category by revenue scale within the manufacturing business, their contribution to overall revenue has clearly weakened.

In 2025, cardiovascular and cerebrovascular products generated revenue of RMB 4.09B, down 20.46% year over year. The continued decline in sales volumes of core products represented by Angong Niuhuang Wan became the main factor dragging down overall revenue. Although at the same time products in categories for tonifying and supplementing and products in the gynecology category grew by 10.94% and 12.54% respectively, limited by their relatively small category scale, they were unable to offset the large shortfall caused by the steep drop in cardiovascular and cerebrovascular products.

This is the result of the fade-out of pandemic dividends, and it is also directly affected by the tightening of医保 (medical insurance) policies. In recent years, Angong Niuhuang Wan saw explosive growth thanks to marketing hype such as “a preventive stroke medicine” and demand for high-end gifts. But the 2024 version of the National Reimbursement Drug List clearly tightened the scope of coverage: Angong Niuhuang Wan is limited to use by emergency room or inpatient patients. For “double-natural” products containing natural musk and natural Niuhuang, the pooled funds do not provide reimbursement. As a result, in many places pharmacies paused swiping medical insurance cards for the product, suppressing channel consumption demand.

Meanwhile, Tong Ren Tang has long emphasized marketing over R&D, and its product matrix has aged significantly. In 2025, R&D spending as a proportion of operating revenue was only 2.27%. R&D efforts focused on process improvements and post-listing re-evaluations of traditional products such as Compound Xiao Huo Luo Wan and Yu Feng Ning Xin Di Wan. Its layout in areas such as innovative TCM and new products in the healthy-elderly/health-related space remains sparse.

Even as performance declined, Tong Ren Tang still chose high cash dividends to reassure investors. The annual report shows the company plans to base the distribution on the total share capital of 1.37B shares, paying RMB 5 per 10 shares (including tax). Total cash dividends will be RMB 686 million, accounting for 57.66% of attributable net profit.

A threefold dilemma that drains value from a century-old brand

Beyond performance, this golden brand with more than 350 years of history is being continuously consumed by trademark misuse, OEM/white-label chaos, and disorderly competition from peers, steadily shrinking the brand’s intrinsic value.

Unclear ownership and use of trademark rights has already become a stubborn governance issue for Tong Ren Tang. The “Tong Ren Tang” trademark’s sole holder is the Tong Ren Tang Group, while multiple entities—including Tong Ren Tang Co., Ltd. (600085.SH), Tong Ren Tang Technology (1666.HK), Tong Ren Tang GuoYao (3613.HK), Tong Ren Tang Health/Health & Wellness (proposed for a Hong Kong listing), and Tong Ren Tang Health (and related entities)—all hold trademark usage rights.

At the same time, entities such as Nanjing Tong Ren Tang and Tianjin Tong Ren Tang also obtained the right to use the “Tong Ren Tang” brand name through historical lineage. The three parties have different ultimate controllers and different capital attributes. In the market, “Tong Ren Tang family” products are mixed and messy, making it hard for consumers to tell what’s what.

This “profit leaking in multiple holes” model dilutes brand value and profit space. Multiple entities fight their own battles and independently conduct production, sales, and brand promotion. Not only can they not form synergy, they also easily trigger internal peer competition.

To resolve disputes over brand usage, in December 2024 Tong Ren Tang Group acquired 60% of the equity of Tianjin Tong Ren Tang and promised to straighten out peer-competition issues within five years. In November 2025, the equity acquisition was formally approved. The ultimate controller of Tianjin Tong Ren Tang changed from private capital to Beijing state-owned assets and China Cinda, and trademark lawsuits in both Beijing and Tianjin finally came to a temporary close after many years.

This integration only addressed external brand conflicts and did not change the fundamental problems at the listed-company level—namely restrictions on trademark usage and weak group-level brand control.

The group finds it difficult to apply unified quality control across all trademark licensees, further planting hidden risks for the OEM/white-label chaos.

In December 2025, Shanghai Consumer Protection Commission (消保委) conducted inspection and exposure. A product labeled “Beijing Tong Ren Tang 99% high-purity Antarctic krill oil” claimed that the lecithin content was 43%, but tests found it to be 0%. The product is authorized for OEM/white-label production by a company under Tong Ren Tang Health. Its factory ex-works price is only RMB 3.7, while the terminal retail price reaches RMB 60—an over 16x premium. In its interview session, the Shanghai Consumer Protection Commission asked the distributors of the implicated product about specific details regarding their sales situation, but the other side could answer none of the questions.

In fact, quality problems with Tong Ren Tang OEM/white-label products are not uncommon. In 2016, the company was named by regulators six times for quality issues involving products such as Bai Bai Cao, Jia Wei Zuo Jin Wan, and Shu Di Huang. In 2018, Tong Ren Tang Bee Industry, a subsidiary under the group, was exposed for using expired honey, leading to the company being stripped of the “China Quality Award,” and it was fined and had penalties of RMB 14.2 million imposed. With every quality incident, responsibilities are passed around among the group, the listed company, and subsidiaries, for a long time consuming consumer trust.

Whether Tong Ren Tang can turn performance around in 2026 depends on whether management can truly drive reforms. From an industry perspective, the traditional Chinese medicine sector is in a critical stage where policy dividends are being released and the industry landscape is being reshaped. Policies such as the “Implementation Plan for High-Quality Development of the TCM Pharmaceutical Industry” have been rolled out one after another, accelerating the transformation of the entire industry toward standardization, regulation, and innovation. Opportunities and challenges coexist. Only by adhering to quality-first, innovation-driven, and standardized governance—strengthening coordination along the industrial chain and building the brand—can the company seize initiative in the new round of industry change and achieve stable and sustainable development. (Article by: Company Observer; Author: Cao Qian; Editor: Cao Shengyuan)