Southbound capital continues its robust influx into Hong Kong stocks, establishing the market as Asia's capital reservoir. According to Wind data, as of September 3, 2025, southbound funds through Stock Connect have accumulated net inflows of RMB 935.997 billion year-to-date, with the Hang Seng Healthcare sector attracting RMB 163.683 billion in net purchases, emerging as a primary target for capital allocation.

During this "golden accumulation period" for Hong Kong pharmaceutical stocks, SIHUAN PHARM (00460) has experienced substantial southbound buying. Stock Connect holdings increased from 528 million shares (8.83% of total H-shares) at year-beginning to 1.321 billion shares (14.15% of total H-shares) by September 3. This sustained southbound investment has propelled the company's share price, with SIHUAN PHARM recording cumulative gains exceeding 140% year-to-date, delivering outstanding performance.

What drives market confidence in SIHUAN PHARM with real capital deployment? The answer lies in the company's latest interim results: comprehensive medical aesthetics business explosion and innovation drugs entering their harvest phase. Most notably, SIHUAN PHARM holds nearly RMB 3.9 billion in cash, while its current valuation stands below the combined value of "medical aesthetics + cash reserves" – essentially implying the market prices its innovation drug business at zero.

Capital markets are inherently astute, positioning ahead of "performance inflection points" and "valuation valleys." As industry tailwinds strengthen, SIHUAN PHARM stands at the critical juncture of capital and performance resonance.

**Medical Aesthetics + Innovation Drugs Dual-Engine Growth Drives Performance Turnaround**

From a performance perspective, SIHUAN PHARM has clearly entered its performance inflection point, with 2025 interim results officially achieving profitability turnaround, marking significant operational improvement.

In the first half, SIHUAN PHARM generated total revenue of approximately RMB 1.146 billion, representing 20.7% year-over-year growth. Net profit reached approximately RMB 103 million, successfully reversing losses and substantially improving profitability. Overall gross margin stood at 66.1%, up 2.0 percentage points from 64.2% in the prior year, further demonstrating effectiveness in cost control and product portfolio optimization.

Specifically, the medical aesthetics business, serving as SIHUAN PHARM's most significant revenue source, achieved revenue of approximately RMB 580 million in the first half, growing 81.3% year-over-year. Segment profit reached RMB 310 million, surging 215.3% year-over-year. This represents not merely numerical advancement, but comprehensive manifestation of strategic implementation, product matrix maturation, and deep channel penetration, becoming the key driver of overall performance turnaround.

Simultaneously, the innovation drug business entered its harvest period, generating revenue of RMB 58 million in the first half, up 96.6% year-over-year, primarily driven by substantial diabetes drug sales growth. Rapid expansion of the innovation drug business further solidified the company's performance inflection trend.

As multiple products transition from R&D to commercialization phases, company R&D expenses declined 21.9% year-over-year to RMB 153 million, with research resources clearly shifting toward commercialization. This change not only relieves profit pressure but also reflects SIHUAN PHARM's core products progressively entering return periods, with the company overall moving toward sustainable growth trajectory.

Most remarkably, while achieving profitability turnaround, the company declared an interim cash dividend of RMB 0.99 cents per share, continuing its "dividend regular" record of 33 distributions totaling approximately RMB 7.5 billion since its 2010 listing through 2024. Stable dividend policy not only rewards shareholder trust but also demonstrates management confidence in future cash flow and profitability.

In summary, from performance inflection point emergence to successful loss reversal, to consistent stable dividend distributions, SIHUAN PHARM displays comprehensively positive development momentum. Under medical aesthetics and innovation drugs dual-engine drive, the company not only demonstrates solid current performance recovery but also accumulates momentum for subsequent growth.

**Medical Aesthetics Segment Full-Category Layout with Robust Growth Logic**

The medical aesthetics segment has seen SIHUAN PHARM further perfect its product matrix, becoming a key performance growth factor. The company's subsidiary Meiyan Space has established one of China's medical aesthetics industry's most comprehensive product lines, covering botulinum toxin, hyaluronic acid, Rejuran, Sculptra, photoelectric equipment, etc., forming complete scenario solutions for anti-aging, contouring, and skin rejuvenation.

Core product Letibotulinum toxin has achieved market share approaching 20%, while photoelectric equipment Sylfirm X delivered over 100 units in the first half, becoming a performance "accelerator."

More noteworthy, the company's two blockbuster new products, Sculptra and Rejuran, have received marketing approval and rapidly initiated commercial promotion. Promising varieties including mesotherapy and collagen are expected to launch successively during 2025-2027, forming sustained product iteration capability.

On the R&D front, SIHUAN PHARM has established five major technology platforms including synthetic biology, regenerative materials, and biological macromolecules, with pipeline products exceeding 30. Recently, the company actively explores "AI + Medical Aesthetics" field, signing framework agreements with Beijing Shenyuanzhi Pharmaceutical Biotechnology Co., Ltd. to jointly advance AI-driven medical aesthetics product development, constructing "AI design - high-throughput experimental validation - data feedback iteration" wet-dry loop R&D platform.

AI technology application promises to accelerate company medical aesthetics product development, injecting momentum for long-term medical aesthetics business development, further enhancing SIHUAN PHARM's core competitiveness and market value in the medical aesthetics industry.

R&D strength serves as the foundation for constructing rich product matrices, while channel operations act as the engine converting product potential into market sales. In channel operations, SIHUAN PHARM employs "direct sales + distribution" dual-drive model. Currently, Letibotulinum and Botulax marketing teams exceed 660 personnel. In the first half, the company conducted over 200 practical training sessions, covering nearly 1,800 physicians.

Additionally, SIHUAN PHARM assembled 60-person direct sales teams and 20-person medical teams, focusing on academic promotion and marketing for Rejuran and Sculptra, subsequently driving sustained volume growth for these products.

Actively implementing Marketing 3.0 strategies, SIHUAN PHARM's channel network currently covers over 6,800 medical aesthetics institutions across more than 370 cities nationwide, including over 1,400 strategic partner institutions. Simultaneously, the company continuously builds brand reputation through multi-dimensional activities including academic conference empowerment and new media marketing, constructing medical highlands.

These marketing strategies will continuously and effectively enhance SIHUAN PHARM's brand awareness and market penetration, providing solid foundation for new product volume growth.

**Innovation Drugs Enter Harvest Period, Valuation Catalysts Imminent**

SIHUAN PHARM's innovation drug business primarily stems from Xuanzhu Biology and Huisheng Biology. Xuanzhu Biology possesses over 10 investigational drugs covering digestive system diseases, oncology, and NASH treatment areas.

Currently, Xuanzhu Biology has successfully obtained marketing approval for 3 key innovation drugs, including: Vonoprazan sodium enteric-coated tablets (Anjiuwei®), Pirtobrutinib tablets (Xuanyuening®), and Divarasib tablets (Xuanfeining®). Key drug approvals mark Xuanzhu Biology's formal transition from R&D phase to harvest period.

Pirtobrutinib tablets (Xuanyuening®), as China's first approved CDK4/6 inhibitor for monotherapy treatment of HR+/HER2- advanced breast cancer, demonstrates substantial competitiveness through breakthrough clinical data and long-term medication tolerability, achieving first prescription fulfillment within two months of approval.

As breast cancer represents the most common malignant tumor among women, with domestic breast cancer new cases ranking fourth nationally after lung, colorectal, and gastric cancers, the target population is substantial. Domestic CDK4/6 inclusion in medical insurance in 2021 positions the market in volume expansion phase, with CDK4/6 expected to reach RMB 13 billion by 2032. Xuanyuening®'s market entry coincides with industry high-growth phases, and leveraging excellent clinical data, it anticipates capturing attractive market share.

Vonoprazan sodium enteric-coated tablets (Anjiuwei®) represents China's first and only independently developed proton pump inhibitor, leveraging differentiated metabolism and excretion characteristics plus superior safety advantages to continuously enhance market penetration. Moreover, Anjiuwei®'s new indication for reflux esophagitis treatment has entered Phase III clinical trials. With new indication approval, subsequent commercial value will further improve.

Divarasib tablets (Xuanfeining®) received approval in August, representing Xuanzhu Biology's independently developed ALK inhibitor for first-line treatment of ALK-positive advanced non-small cell lung cancer, demonstrating outstanding systemic and intracranial anti-tumor efficacy with superior safety profile, capable of crossing blood-brain barrier with effectiveness for lung cancer brain metastasis patients. Commercial sales are also expected within the year.

Notably, Xuanzhu Biology has submitted Hong Kong Main Board spin-off listing materials. Should Xuanzhu successfully access Hong Kong stock market, it may more efficiently advance R&D pipeline, accelerating core project clinical progress and listing processes.

Huisheng Biology primarily focuses on diabetes and complication treatment areas, with nearly 20 approved products progressively launching, approaching high-speed growth phase. In the first half, Huisheng Biology's dapagliflozin tablets received approval for adult Type 2 diabetes treatment. This variety has been included in National Medical Insurance and Essential Drug lists, leveraging policy benefits for rapid grassroots penetration.

Semaglutide's diabetes indication NDA has been accepted, with weight management indication completing Phase III clinical trials, expected to launch in the next two years as the next growth engine.

For channels, the company constructs "self-operated + distribution + retail" three-dimensional networks, enabling rapid new product patient access and accelerated commercialization. Simultaneously, layouts across five major emerging markets including Latin America, Southeast Asia, South Asia, Middle East North Africa, and CIS plus Eastern Europe show international "second curve" prototype emergence.

Clearly, SIHUAN PHARM's innovation drug business has begun exerting force. With multiple innovation drug launches, company innovation drug business will shoulder major responsibilities, with gross margins and net margins potentially achieving significant improvement.

**Valuation Analysis: Medical Aesthetics + Cash Cover Market Cap, Innovation Drugs Essentially "Free"**

As of September 3, 2025 close, SIHUAN PHARM's market capitalization stood at merely HK$15.1 billion. The company's first-half medical aesthetics net profit reached RMB 310 million. Estimating full-year at RMB 600 million with 20x PE multiple, medical aesthetics business valuation alone reaches RMB 12 billion. Adding book cash of RMB 3.9 billion totals over RMB 15.9 billion, equivalent to approximately HK$17.3 billion, meaning medical aesthetics plus cash already covers current market capitalization.

This implies the market assigns virtually zero valuation to innovation drugs, completely ignoring value from Xuanzhu Biology, Huisheng Biology, and the entire generic drug segment. With innovation drug commercialization acceleration, sustained medical aesthetics high growth, and generic drug stabilization and recovery, valuation repair space appears substantial.

Additionally, company management continuously signals confidence, implementing 12 buybacks in 2025 totaling RMB 94.8674 million, fully demonstrating management confidence in SIHUAN PHARM's future development.

**Conclusion**

Comprehensively viewed, SIHUAN PHARM no longer represents a traditional pharmaceutical enterprise relying on generic drug "legacy." Medical aesthetics business comprehensive explosion, innovation drugs entering harvest period, generic drugs providing cash flow support – three major segments coordinated efforts construct a clear, sustainable, verifiable growth model.

As medical aesthetics and innovation drugs dual-engine performance growth logic continuously solidifies, SIHUAN PHARM completes the leap from growth expectations to value realization. Current valuation remains in undervalued territory where "medical aesthetics + cash" provides coverage, with innovation drug components essentially free.

With sustained performance delivery and catalytic events landing, SIHUAN PHARM's valuation valley is being rapidly filled.