Fusen Pharmaceutical (1652.HK) Q3 2024 Earnings Report

Fusen Pharmaceutical reported QQ3 2024 revenue of 64.85 million CNY, still maintaining a robust gross margin of 43.76%, but the quarter delivered a significant bottom-line loss driven by high operating expenses and substantial non-operating costs. Operating income registered a loss of 15.49 million CNY and EBITDA was negative at 6.82 million CNY, while net income collapsed to a loss of 75.92 million CNY. Net income deleveraged despite positive operating cash flow, underscoring a heavy expense load and potential one-time or non-operational headwinds affecting the quarter.

On the balance sheet, Fusen carries meaningful leverage with total debt of 383.69 million CNY and net debt of 362.64 million CNY. Liquidity is tight, with a current ratio of 0.60 and a cash balance of 21.06 million CNY, indicating limited cushion for near-term financing needs. Yet, the company generated positive operating cash flow of 69.9965 million CNY and free cash flow of 62.513 million CNY in QQ3 2024, driven by working capital dynamics (notably improvements in accounts receivable and other working capital items) and non-cash items that offset the net income decline.

The current results signal a near-term profitability challenge, but the strong ongoing operating cash generation suggests that management’s focus on working capital efficiency and cost discipline could yield a turning point if the company can stabilize non-operating costs and optimize the expense base. Absent a formal forward guidance in the disclosed materials, the investment thesis hinges on execution in cost control, portfolio optimization, and potential portfolio expansion in the PRC’s healthcare market amid pricing and competitive dynamics in generics and traditional Chinese medicines.