Shanghai Haohai Biological Technology Co., Ltd. 2025 Annual Report: Key Highlights and Investor Insights Dividend Policy and Shareholder Returns Consistent Dividend Payouts: The company maintained stable cash dividends, distributing RMB137.24 million in July 2025 as the final dividend for 2024 (32.64% payout ratio) and RMB91.49 million in October 2025 as the interim dividend for 2025 (43.35% payout ratio for H1 2025). Proposed 2025 Final Dividend: The Board proposed a final dividend of RMB0.60 (tax inclusive) per share for the year ended 31 December 2025, totaling approximately RMB135.68 million, subject to shareholder approval. Share Repurchases: The company repurchased 1,339,675 A shares (RMB73.33 million) and 3,016,900 H shares (HKD80.99 million) during the reporting period. All H shares repurchased have been cancelled, enhancing shareholder value. Dividend Policy Framework: The dividend policy incorporates a balance between investor returns and sustainable development, stipulating cash dividend ratios based on development stage and capital expenditure plans (e.g., at least 80% payout in mature stage with no major capex, 40% with major capex, 20% at growth stage with major capex). Taxation Updates: Dividend taxation varies by shareholder category (A shares, QFII, Hong Kong investors, etc.), and shareholders are advised to consult their tax advisors for the latest provisions. Financial Performance Revenue and Profit Decline: Revenue decreased to RMB2,446.3 million (from RMB2,679.7 million in 2024). Net profit for 2025 was RMB208.3 million, a significant decline from RMB376.2 million in 2024. The drop was attributed to higher selling expenses, increased R&D investment, and other expenses. Net Profit Attributable to Shareholders: RMB251.0 million, with basic earnings per share at RMB1.08 (down from RMB1.80 in 2024). Gross Profit Margin Impact: Gross profit was RMB1,711.6 million, down from RMB1,868.8 million in 2024, reflecting margin pressure. R&D and Other Expenses: R&D expenses stood at RMB197.8 million, while other expenses surged to RMB207.3 million. Bank Borrowings: As of 31 December 2025, total interest-bearing bank borrowings stood at RMB346.6 million, with RMB313.5 million due within one year. Strategic Focus and Growth Initiatives Business Segments: The Group focuses on biomedical materials in ophthalmology, medical aesthetics and wound care, orthopedics, anti-adhesion, and hemostasis. Pipeline Acceleration: Emphasis on accelerating registration, launch, and clinical progress for key pipeline products. Volume-Based Procurement: The Group is closely monitoring and aiming to benefit from China’s national and local volume-based procurement policies, which could impact future revenue and market access. Cost and Channel Optimization: Plans to leverage multi-brand, full product line, and channel advantages to adapt supply chain and sales strategies for evolving market dynamics. Share Repurchases and Incentive Schemes: The completion of share repurchases and the expiration of the 2021 Restricted A Share Incentive Scheme (November 2025) highlight ongoing measures to align management interests and support share value. Corporate Governance and ESG Governance Structure: The company has implemented robust corporate governance practices, with four special committees under the Board (Audit, Nomination, Remuneration/Appraisal, Strategy/Sustainable Development). ESG Commitment: The Group reports on its environmental, social, and governance performance and affirms no material violations of environmental or labor laws during the period. Shareholder Engagement: The company maintains active communication with shareholders, holding three shareholder meetings and 27 investor meetings (engaging 166 institutional investors) during the year. Compliance: Full compliance with the Corporate Governance Code and the Model Code for securities transactions. Key Risks and Uncertainties Core Competitiveness Risk: Rapid technological advancements in biomedical materials may threaten the Group’s competitive position if it fails to adapt quickly. Market Competition: High gross profit areas are attracting new entrants, intensifying competition and potentially eroding market share and margins. M&A and Integration Risk: The Group’s strategy includes significant M&A activity; failure to integrate acquisitions could lead to goodwill impairment and financial loss. Regulatory and Policy Risks: The Group is exposed to policy changes, especially around volume-based procurement and market access for medical products. Notable Transactions and Share Structure Use of A-Share Proceeds: The company continued investing in the International Medical R&D and Industrialization Project, with RMB113.16 million invested as of end-2025 (88.12% completion), with expected completion in June 2027. Share Capital Breakdown (as of 31 December 2025): 230,561,595 shares outstanding, of which 84.16% are A shares and 15.84% H shares. Major Shareholders: Substantial shareholdings are concentrated among founders and related parties (e.g., Mr. Jiang Wei and Ms. You Jie), while Prudence Investment Management (Hong Kong) Limited holds 5.39% of H Shares. Connected Transactions: Various connected transactions and related party transactions were conducted, with all necessary disclosures and regulatory compliance. No Material Litigation: The company reported no material litigation or arbitration during the reporting period. Accounting and Regulatory Updates IFRS Updates: The Group disclosed upcoming adoptions of IFRS 18, IFRS 19, and amendments to IFRS 9/7/10/28, IAS 21, and annual improvements, which could impact future financial statement presentation, though no significant impact is expected. Electronic Voting and Hybrid Meetings: In response to regulatory changes, the company has updated its Articles of Association to accommodate hybrid shareholder meetings and electronic voting, aligning with HKEX requirements. Potential Price-Sensitive Information Significant Profit Drop: The sharp decline in revenue and profit for 2025 versus 2024 could negatively impact investor sentiment and share price in the short term. Dividend Consistency and Share Repurchases: Despite the profit decline, strong dividend payouts and share buybacks signal management’s confidence in the company’s underlying value, which may support the share price. Volume-Based Procurement Exposure: The company’s proactive stance towards China’s volume-based procurement reforms could drive future growth or present risks, depending on policy evolution. Pipeline and R&D: Progress on key products and R&D investment remains a potential share price catalyst if new approvals or launches are achieved. Shareholding Structure: High concentration of shares among founders and insiders may influence share liquidity and price movements.
