Guofa Co., Ltd. explains the reasons for expected losses in 2025: The subsidiary Goldman Biological's performance commitments have not been met for three consecutive years, and the revenues of the two main businesses have declined year-on-year.

After releasing the 2025 annual performance forecast of losses on January 17, Guofa Shares (SH600538) responded to the inquiry letter from the Shanghai Stock Exchange on the evening of February 23, further revealing the detailed reasons behind the company’s projected losses. The announcement shows that the company’s three main business segments have experienced significant divergence: the pharmaceutical distribution business has grown driven by centralized procurement and distribution, while the judicial IVD (in vitro diagnostics) and pharmaceutical manufacturing businesses have both declined, with revenues down 10% and 23.44% year-on-year, respectively.

More notably, the fully owned subsidiary Guangzhou Gaosheng Biotechnology Co., Ltd. (hereinafter referred to as Gaosheng Biotech), once expected to be a key growth driver, has once again become a “performance black hole.” A reporter from Daily Economic News noted that Guofa Shares explicitly stated in their reply that they plan to recognize an impairment of over 62 million yuan for Gaosheng Biotech’s goodwill in 2025. This marks the third consecutive year that Guofa Shares has made large goodwill impairments on this subsidiary, following similar actions in 2023 and 2024.

IVD and Pharmaceutical Manufacturing Drag Down Overall Performance

According to Guofa Shares’ reply announcement, the company’s three core business segments in 2025 show a “mixed picture.” Among them, the judicial IVD business and pharmaceutical manufacturing business have become the main factors dragging down overall performance.

Specifically, in 2025, Guofa Shares’ judicial IVD business is expected to achieve operating revenue of 107 million yuan, a decrease of 10% year-on-year. The company explained that this decline is mainly due to a reduction in executable orders and increased market competition. As of the end of 2024, the company’s on-hand orders in this segment totaled 47.15 million yuan, a decrease of 7.22 million yuan from the end of 2023, directly impacting 2025 revenue. Additionally, in the government bidding sector, increased market participation and intensified competition have also led to revenue declines.

The decline in the pharmaceutical manufacturing business is even more severe. Guofa Shares estimates that this segment will generate revenue of 27.14 million yuan in 2025, down 23.44% year-on-year, with gross profit margin decreasing by 14.12 percentage points. The company cited two reasons: first, the subsidiary’s pharmaceutical factory conducted comprehensive maintenance on the eye drop production line for half a year, only resuming production in June 2025, which affected output; second, the company optimized sales policies and cleaned up existing market products, resulting in a delayed market recovery process.

While revenues from these two major segments declined year-on-year, the pharmaceutical distribution business became the only bright spot. This segment is expected to achieve operating revenue of 191 million yuan in 2025, a 4.43% increase. The growth was mainly driven by centralized procurement and joint procurement businesses, as well as revenue from the麻精 series drugs.

Guofa Shares stated that by increasing the introduction of centralized procurement varieties, the distribution revenue of centralized procurement varieties increased by 56% in 2025, amounting to 17.33 million yuan.

Plan to Recognize About 62 Million Yuan Goodwill Impairment for Gaosheng Biotech

In the performance forecast of losses, Guofa Shares listed “recognition of large goodwill impairment for Gaosheng Biotech” as one of the main reasons for the loss. The reply further detailed Gaosheng Biotech’s performance situation.

Data from the reply shows that from 2020 to 2022, Gaosheng Biotech, although not fully meeting revenue forecasts, still exceeded net profit predictions. However, starting in 2023, Gaosheng Biotech’s performance plummeted, and it has failed to meet performance forecasts for three consecutive years.

In 2023, the adjusted net profit realization rate was only 26.19%, and in 2024, it further declined to 23.40%. By 2025, Gaosheng Biotech’s performance was bleak, with net profit after asset adjustments of only 545,500 yuan, compared to a forecast of 46.55 million yuan, achieving only 1.17%.

Guofa Shares explained that the decline from 2023 to 2025 was mainly due to significant reductions in customer budgets and fewer winning projects. Additionally, compared with nine other listed companies in the same industry, such as Berry Genomics (SZ000710), industry analysis shows that company performance from 2023 to 2025 has generally declined, and Gaosheng Biotech’s performance decline is consistent with industry trends.

Repeated failure to meet performance commitments has led to goodwill impairments. Guofa Shares’ management initially estimated that, for the goodwill formed from previous acquisitions of Gaosheng Biotech, an impairment of about 62 million yuan is expected in 2025. A Daily Economic News reporter noted that this is the third consecutive year Guofa Shares has recognized large goodwill impairments for Gaosheng Biotech, following impairments of 55.427 million yuan in 2023 and 60.212 million yuan in 2024.

Regarding Gaosheng Biotech’s future performance, Guofa Shares stated that comparable listed companies’ revenue expectations for 2026-2027 are all positive, with an average growth rate of 12.86% in 2027. Considering economic recovery, improved fiscal budgets, and demand, the entire forecast period after 2027 is expected to see revenue growth driven by recovery.

Daily Economic News