Slowing growth, bottoming profits Youcare Pharmaceutical Group (688658.SH) goes to Hong Kong for "life extension"?

The Hong Kong stock pharmaceutical sector is about to welcome a "old friend" in a delicate situation. In early January 2026, Youcare Pharmaceutical Group, a chemical pharmaceutical company listed on the Sci-Tech Innovation Board (688658.SH), has officially submitted its H-share listing application to the Hong Kong Stock Exchange. This marks the substantial stage of its long-planned "A+H" dual platform listing strategy. The board of directors had approved the relevant proposal in early December 2025 and outlined the general framework of the listing plan. With the support of institutions such as CITIC SEC, its goal is not only to establish an international financing platform. For Youcare Pharmaceutical Group, which is currently in a phase of restructuring its core product pricing system and experiencing declining performance, this Hong Kong IPO holds more practical significanceit is seen as a crucial "blood transfusion" for "research and development innovation" and "supplementary operational funds". However, in the eyes of investors, behind this "A+H" story, there is a more urgent need for the company to overcome current challenges. Fundamentals: Slowing growth, bottoming profits, and lingering shadows The fundamentals of Youcare Pharmaceutical Group paint a clear picture of the comprehensive challenges faced by a traditional generic drug company in the midst of transformation pains. The "slowing" and "bottoming out" of its performance is a clear signal. The company's revenue has continuously declined for three years, from 45.42 billion yuan in 2022 to 37.81 billion yuan in 2024. The decline in profitability has been even more dramatic, with net profit attributable to shareholders plummeting from 3.35 billion yuan in 2022 to 1.24 billion yuan in 2024, shrinking by over 60% in three years. As of the first quarter of 2025, the situation has not improved, with the company even recording a net loss of 49.27 million yuan. The core reason driving all of this is the "dual-price" storm encountered by its star product, the "Ginkgo Biloba Leaf Extract Injection". Under the scrutiny of the National Medical Insurance Bureau, the national net price of this product was forced to be drastically reduced by approximately 53%, directly leading to a quarterly loss of 86.01 million yuan in the fourth quarter of 2024. This product, which once contributed nearly 60% of the company's revenue with a gross profit margin of over 90%, saw its price system collapse, causing a devastating blow to the company's performance. A deeper "hard blow" lies in its fragile business structure and external pressures. Overreliance on a single product: The revenue share of the "Ginkgo Biloba Leaf Extract Injection" has long been high, making its risk resistance very weak. After the price cut, not only did the revenue sharply decrease, but it also exposed the company's vulnerability in product pipeline layout. Slow progress in "imitation and innovation" transformation: Over 90% of the company's revenue used to rely on generic drugs, and in the path to transitioning to innovative drugs, the results have been limited. Currently, only one new drug of one category is on the market, and progress on multiple research pipelines has not met expectations, leading to delays in several research and development projects funded by fundraising. High sales expenses and compliance concerns: From 2021 to 2024, the company accumulated a total of 7.37 billion yuan in sales expenses, with market promotion expenses accounting for 97%. The significant promotion expenditure, and whether it is related to the sales model that sparked the "dual-price" storm, has always been a question in the minds of investors and has brought continuous compliance scrutiny pressure to the company. Control shareholder's equity stability risk: The controlling shareholder Ye Weishi's family through the controlling shareholder "Fuyang Jingyue Yongshun" holds a portion of the company's shares that were involved in a dispute and have been subject to judicial auctions, which were later left unsold. This directly raised concerns in the market about the stability of the company's control rights, posing additional investment risks. Anchoring investment perspective: Difficult pricing between turnaround and continued risks For anchor investors participating in international strategic placements, evaluating Youcare Pharmaceutical Group requires a cautious balance between the "possibility of a turnaround" and the "apparent sustainability risks." Potential appeal: A "low point" with clear reasons Super negative oversold logic: The market generally believes that the core product price drop caused by the "dual-price" event is the main reason for the sharp drop in the company's performance. With the price adjustment completed, this major negative factor may have been temporarily eliminated. For some investors, this may mean that the company's stock price and valuation are at historical lows. Clear fundraising purposes and transformation commitments: The company has stated clearly that the funds raised through H-share will be used for research and innovation and to supplement operational funds. If successful in listing and raising funds, this will directly alleviate its financial pressure and inject vitality into its stagnant research pipeline, forming a clear story foundation of "life-saving transfusion and transformation seeking". Valuation anchoring of the "A+H" structure and liquidity improvement: The company has a clear market value in the A-share Sci-Tech Innovation Board (the current stock price has fallen below the issue price), providing a reference anchor for the H-share issuance pricing. Normally, the H-share issuance may have a certain discount compared to the A-share, which may provide international investors with a certain margin of safety. Additionally, the dual-platform listing will help improve the long-term liquidity of the company's stocks. Main risks: Uncertainty outweighs certainty Very low visibility of profit recovery: The impact of the core product price drop is long-term, and the lost high-margin cannot be easily regained. Before the innovative drug business can scale up, the uncertainties surrounding when the overall profitability of the company can recover and to what extent remain high. The loss in the first quarter of 2025 indicates that the transformation pains are far from over. High historical costs and governance concerns: The significant sales expenses and the pattern behind them not only erode historical profits but may also place constraints on future sales strategies. Coupled with the shareholder equity auction event, the company's internal governance and compliance image may be heavily discounted in the minds of international institutional investors, requiring a higher risk premium in valuation. Intense industry competition and transformation pressure: Under the dual pressures of standardized procurement of generic drugs and the "cannibalization" of innovative drugs, the company faces severe challenges within the entire industry. Whether its transformation speed can keep up with industry changes is a major question mark. Therefore, the interest of anchor investors will heavily depend on a highly attractive issuance price. This price must be low enough to compensate investors for the uncertainties in the company's performance, governance risks, and the prolonged transformation waiting period. The composition of cornerstone investors will be the first indicator of whether international long-term funds are buying into this. Probability analysis of IPO subscription: High-risk speculative game For Hong Kong IPO retail investors, Youcare Pharmaceutical Group is a typical high-risk, high-volatility target, and not a prudent choice. Prediction of subscription heat: "A+H pharmaceutical stocks" and "oversold rebound" may attract some speculative funds. However, the recent negative news surrounding the company, significant performance decline, and appearance of losses will severely constrain retail investors' subscription enthusiasm. It is expected that the public subscription may receive some applications, but the likelihood of excessive oversubscription frenzy is low, and the chances of allocation rate may not be too low. Listing performance and core variables: The initial performance after listing will be entirely a game of "emotion and value". Short-term stock prices may be extremely sensitive to any news about improvement in performance comparisons or progress in new drug research and development. Retail investors must realize that this is a company in a low point of performance and facing transformation pains. If the issuance price does not adequately reflect its current challenges and risks, there is a high probability that the stock price will face significant pressure after listing. Key observation points: Apart from the issuance price itself, two crucial signals before and after listing are essential: the background and subscription ratio of cornerstone investors, representing the confidence of professional institutions; and whether the subsequent quarterly financial reports released by the company show signs of narrowing losses or stabilizing revenues. User experience reference: (This does not constitute any investment advice, investment is risky and requires caution) For such "turnaround in adversity" type of IPO, it is imperative to maintain the highest level of vigilance. Suggestions: Firstly, delve into the "risk factors" in the prospectus and recent financial reports, personally understand the specific reasons for the decline in performance, changes in the revenue share of core products, and assumptions of future profit forecasts, and do not make impulsive decisions based solely on "low stock prices". Secondly, adhere to the principle of "deep discount", compare the H-share issue price with the current A-share price (including historical valuation ranges), and participate in highly speculative activities only when the issue price significantly offers a discount compared to the A-share and this discount is sufficient to cover extra risks. Thirdly, face the reality of the industry and company, and ask yourself if you are willing to wait for a possible transformation period that could last for several years. If you cannot comprehend the complex business and financial risks, the most rational choice is not to participate. It is entirely feasible to wait until after the listing, verify the performance only after several continuous quarters of financial reports to see if the performance is truly bottoming out and on the path to recovery and the transformation has made substantial progress before considering participation. Youcare Pharmaceutical Group's Hong Kong journey seems more like a critical financing self-rescue under the mud of performance and transformation pressures. Will the capital market give this candid dilemma and fund-seeking application a chance for a "life-saving" or will it provide a harsh valuation answer due to its multiple risks? This not only concerns the company's short-term funding chain but will also test how much patience and confidence the market still has for traditional pharmaceutical companies in a low point. This article is sourced from the "DeCaiJing" WeChat Official Account, GMTEight Editor: Li Fo.