Eagle Eye Warning: Watson Bio's Operating Revenue Declines

Sina Finance Listed Company Research Institute | Financial Report Hawk-Eye Early Warning

On March 27, Watson Biologics released its 2025 annual report.

The report shows that the company’s full-year 2025 operating revenue was 2.418 billion yuan, down 14.29% year over year; net profit attributable to shareholders was 178 million yuan, up 25.03% year over year; non-recurring items net profit attributable to shareholders was 95.45 million yuan, down 11.94% year over year; and basic earnings per share were 0.1111 yuan per share.

Since the company went public in October 2010, it has issued cash dividends 12 times, with cumulative cash dividends already implemented totaling 403 million yuan. The announcement shows that the company plans to distribute a cash dividend of 1.25 yuan for every 10 shares to all shareholders (including tax).

The hawk-eye early warning system for listed company financial reports conducts intelligent quantitative analysis of Watson Biologics’ 2025 annual report across four major dimensions: performance quality, profitability, funding pressure and safety, and operating efficiency.

I. Performance quality

During the reporting period, the company’s operating revenue was 2.418 billion yuan, down 14.29% year over year; net profit was 125 million yuan, down 28.23% year over year; and net cash flow from operating activities was 491 million yuan, down 52.64% year over year.

From the overall performance perspective, attention is needed for:

• Operating revenue decline. During the reporting period, operating revenue was 2.42 billion yuan, down 14.29% year over year.

From the ratio of revenue, costs, and period expenses, attention is needed for:

• A divergence between operating revenue and taxes and surcharges. During the reporting period, operating revenue changed year over year by -14.29%, taxes and surcharges changed year over year by 7.1%, and the changes in operating revenue and taxes and surcharges diverged.

In combination with the quality of operating assets, attention is needed for:

• Continued increase in the accounts receivable-to-operating revenue ratio. In the past three annual reports, the accounts receivable-to-operating revenue ratio was 75.37%, 85.4%, and 88.72%, respectively, showing a sustained increase.

In combination with cash-flow quality, attention is needed for:

• Net cash flow from operating activities continues to decline. In the past three annual reports, net cash flow from operating activities was 1.13 billion yuan, 1.04 billion yuan, and 490 million yuan, respectively, continuing to decline.

II. Profitability

During the reporting period, the company’s gross margin was 74.56%, down 6.44% year over year; net profit margin was 5.18%, down 16.27% year over year; and return on net assets (weighted) was 1.91%, up 26.49% year over year.

From the operating side, attention is needed for the following in terms of returns:

• Sales gross margin continues to decline. In the past three annual reports, sales gross margin was 85.47%, 79.69%, and 74.56%, respectively, with the trend continuing to decline.

• Sales net profit margin continues to decline. In the past three annual reports, sales net profit margin was 12.43%, 6.18%, and 5.18%, respectively, with the trend continuing to decline.

In combination with the company’s asset side, attention is needed for:

• Average return on net assets over the past three years is below 7%. During the reporting period, the weighted average return on net assets was 1.91%, and the weighted average return on net assets for the most recent three accounting years was on average below 7%.

• Return on invested capital is below 7%. During the reporting period, the company’s return on invested capital was 1.85%, and the average value across the three reporting periods was below 7%.

From the perspective of whether there is impairment risk, attention is needed for:

• The year-over-year change rate of impairment losses exceeds 30%. During the reporting period, impairment losses were -100 million yuan, up 41.03% year over year.

From the perspectives of customer concentration and minority shareholders, attention is needed for:

• Minority shareholders’ profit and loss is negative, while net profit attributable to shareholders is positive. During the reporting period, minority shareholders’ profit and loss was -50 million yuan, and net profit attributable to shareholders was 180 million yuan.

III. Funding pressure and safety

During the reporting period, the company’s asset-liability ratio was 20.99%, down 3.89% year over year; the current ratio was 2.35, and the quick ratio was 2.05; total debt was 411 million yuan, of which short-term debt was 221 million yuan, and the proportion of short-term debt in total debt was 53.87%.

From short-term funding pressure, attention is needed for:

• A sharp increase in the ratio of short-term to long-term debt. During the reporting period, short-term debt/long-term debt increased sharply to 0.89.

From the perspective of fund control, attention is needed for:

• Significant change in advances to suppliers. During the reporting period, advances to suppliers were 20 million yuan, with a change rate of 81.55% compared with the beginning of the period.

• The growth rate of advances to suppliers is higher than the growth rate of operating costs. During the reporting period, advances to suppliers increased by 81.55% compared with the beginning of the period, operating costs grew by 7.38% year over year, and the growth rate of advances to suppliers was higher than that of operating costs.

• Significant change in notes payable. During the reporting period, notes payable were 40 million yuan, with a change rate of 93.35% compared with the beginning of the period.

IV. Operating efficiency

During the reporting period, the company’s accounts receivable turnover was 1.06, up 3.68%; inventory turnover was 0.93, up 44.64%; and total asset turnover was 0.18, down 3.04% year over year.

From long-term assets, attention is needed for:

• Total asset turnover continues to decline. In the past three annual reports, total asset turnover was 0.27, 0.19, and 0.18, respectively, indicating weakening total asset turnover capability.

• Unit fixed-asset revenue production decreases year by year. In the past three annual reports, the ratio of operating revenue to original value of fixed assets was 1.98, 1.45, and 1.4, respectively, showing a sustained decline.

• Construction in progress exceeds fixed assets. During the reporting period, construction in progress was 2.28 billion yuan and fixed assets were 1.72 billion yuan; construction in progress exceeds fixed assets.

Click Watson Biologics’ hawk-eye early warning to view the latest warning details and a visual preview of the financial report.

Introduction to Sina Finance’s hawk-eye early warning system for listed company financial reports: The hawk-eye early warning system for listed company financial reports is an intelligent, professional analytical system for listed company financial reports. By aggregating a large number of authoritative financial experts, including accounting firms and listed companies, the hawk-eye early warning monitors and interprets the latest financial reports of listed companies across multiple dimensions such as company performance growth, earnings quality, funding pressure and safety, and operating efficiency, and provides a prompt of potentially existing financial risk points in the form of text and graphics. It offers professional, efficient, and convenient technical solutions for identifying and issuing early warnings of financial risks for financial institutions, listed companies, and regulatory authorities.

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Responsible editor: Xiaolang Express News