Can growth driven by non-recurring gains be sustained?

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Author | beyond Editor | Xiao Bai

In 2025, WALVAX (300142.SZ, the company) achieved an operating income of 2.42 billion yuan, a year-on-year decrease of 14.3%.

However, the net profit attributable to shareholders was 180 million yuan, a year-on-year increase of 25%. Revenue decreased, but profits increased, which is an "anomalous" phenomenon due to non-recurring gains.

(Source: Company 2025 Annual Report)

In simple terms, non-recurring gains and losses refer to income or expenses unrelated to the company's main business, such as one-time government subsidies or gains and losses from stock price fluctuations. In 2025, WALVAX's net non-recurring gains and losses were approximately 82.29 million yuan, compared to only about 34.65 million yuan in 2024, an increase of nearly 50 million yuan.

This amount mainly came from two sources:

Government subsidies increased from 36.16 million yuan in 2024 to 72.51 million yuan in 2025, roughly doubling;

Changes in the fair value of financial assets, where the company's stocks and other assets plummeted in 2024, resulting in nearly 100 million yuan in book losses; in 2025, the prices of these assets rebounded, bringing about approximately 29.68 million yuan in positive gains.

If we exclude these two "unexpected" factors and only look at the money the company earned from selling vaccines (net profit excluding non-recurring items), it was 9.5 million yuan in 2025, a decrease of 12% compared to 10.8 million yuan in 2024.

In Q1 2026, the company's revenue declined by 4% year-on-year to 440 million yuan; the net profit attributable to the parent was 110 million yuan, and the net profit excluding non-recurring items was 113 million yuan, representing year-on-year increases of 4082% and 1089%, indicating a recovery in profitability under a low base effect.

Significant growth in overseas markets, while domestic market continues to decline

In 2025, WALVAX's domestic business revenue was CNY 1.896 billion, a year-on-year decrease of approximately 16%; while overseas business revenue was CNY 522 million, of which product overseas sales revenue was CNY 517 million, a year-on-year increase of approximately 37%, with the proportion of total revenue rising from about 20% in 2024 to 21.6%.

(Source: Company 2025 Annual Report)

In terms of overseas markets, as of 2025, the company's vaccines have been exported to 26 countries and regions, including emerging markets in Southeast Asia, Africa, and Latin America.

The company has launched technology transfer projects in Egypt, Malaysia, and other locations, upgrading from simply "selling products" to "technology going abroad," which makes it easier to gain local market trust, especially since the company's meningococcal vaccine and pneumonia vaccine products meet the immunization program needs of many developing countries.

Regarding domestic business, revenue continues to decline, but the rate of decline has narrowed. The company stabilized its sales base by including the bivalent HPV vaccine in the national immunization program procurement while strengthening cost control.

In 2025, non-recurring gains and losses accounted for approximately 46.3% of net profit attributable to the parent company. In other words, for every CNY 1 of net profit earned by the company, about CNY 0.46 comes from non-operating factors such as government subsidies and fluctuations in financial asset prices.

This high ratio indicates that the sustainability of current profits needs attention. If the scale of government subsidies decreases in 2026 or if financial asset prices fall again, net profit may be significantly affected.

Thinner profits, slimmer costs

From the perspective of profitability indicators, the company's profitability has shown a downward trend over the past three years: gross margin decreased from 85.5% in 2023 to 74.6% in 2025; net margin fell from 10.2% in 2023 to 7.4% in 2025.

The decline in gross margin means that for every CNY 1 of product sold, the remaining amount after deducting direct costs is decreasing. The decline in net margin indicates that the efficiency of making money is decreasing after considering all expenses.

(Source: Market Value Wind APP)

In terms of cost expenses, the company has been reducing expenses over the past three years, mainly by cutting R&D expenses. In 2025, the company's R&D expenses were CNY 290 million, a decrease of 62% from CNY 776 million in 2023 For a vaccine company, a reduction in R&D investment may affect the future product pipeline.

By the end of 2025, the company's debt-to-asset ratio is 21%. The debt-to-asset ratio of publicly listed companies in the pharmaceutical industry typically ranges from 40% to 60%, indicating that the company's debt level is significantly below the industry average.

However, in Q1 2026, the company's debt ratio rapidly increased to 30%, while its interest-bearing debt ratio also rose to 12%, warranting further tracking of the increase in debt ratio.

From the perspective of cash flow, in 2025, the company's net cash flow from operating activities was 490 million yuan, a decrease of 53% from 1.04 billion yuan in 2024. This indicates a weakening ability of the company to generate cash from its main business.

At the same time, the company's net cash flow from investing activities was -320 million yuan, significantly narrowing from -1.27 billion yuan in 2024, indicating a reduction in external investments and capital expenditures. However, the free cash flow was -420 million yuan, meaning that after meeting necessary capital expenditures, the company did not generate cash available for discretionary use.

In 2025, the decrease in operating cash flow, contraction in investments, and negative free cash flow indicate that the company's self-sustaining ability needs to be strengthened. This also explains the increase in the company's debt level in Q1 2026, which should be attributed to reliance on external funding to maintain normal operations.

Overall, Watson Bio's financial situation in 2025 still shows signs of pressure: operating revenue continues to decline, competition in the domestic market is fierce; the profitability of the main business is weakening; net cash flow from operating activities has halved year-on-year, and free cash flow is negative; R&D expenses have been significantly reduced, which may affect future product reserves.

For ordinary investors, rather than focusing solely on the growth figures of net profit, it is better to pay attention to several more forward-looking changes:

Whether operating revenue can stabilize and rebound, especially if high growth in overseas markets can be sustained;

The trend of non-recurring net profit, which better reflects the true status of the main business than net profit attributable to shareholders;

Whether cash flow from operating activities improves;

The subsequent arrangements for R&D investment, whether they are temporary adjustments or long-term reductions.

Changes in these indicators can provide a better judgment of the company's true operational trends than a single net profit figure Disclaimer: This report (article) is based on the public company attributes of listed companies and the information disclosed by listed companies in accordance with their legal obligations (including but not limited to temporary announcements, periodic reports, and official interactive platforms) as the core basis for independent third-party research; Market Value Dynamics strives for the content and views contained in the report (article) to be objective and fair, but does not guarantee their accuracy, completeness, timeliness, etc.; the information or opinions expressed in this report (article) do not constitute any investment advice, and Market Value Dynamics assumes no responsibility for any actions taken based on the use of this report.

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