Analysis of Inventory Growth and Channel Inventory Pressure for Pien Tze Huang (600436.SS)

According to Pien Tze Huang’s latest financial data, the company is facing significant performance pressure [0]:

Indicator	Actual Value	Market Expectation	Deviation
Earnings Per Share (EPS)	$1.14	$1.53	-25.49%
Operating Revenue	$2.06B	$2.88B	-28.40%

In terms of stock price performance, Pien Tze Huang has fallen 21.94% in the past year, with a YTD drop of 18.59%. The current stock price of $170.20 is in the low range of the past year [0].

Based on searched industry information, Pien Tze Huang’s inventory growth is mainly related to the following factors [1][2]:

• Raw material price fluctuation expectations
  : Core raw material prices such as bezoar continue to run at high levels, and the company may conduct strategic stockpiling based on price expectations
• Channel destocking cycle
  : The pharmaceutical circulation industry as a whole has entered an adjustment period, and the procurement rhythm of downstream terminals has slowed down
• Product structure changes
  : The cosmetics business has weak growth, and inventory backlog occurs during the cultivation period of the “second growth curve”

Financial analysis shows that the company adopts relatively aggressive accounting policies, with a low depreciation/capital expenditure ratio [0]. Combined with the analysis of the following indicators:

Financial Indicator	Value	Risk Assessment
Accounts Receivable Turnover	Needs attention	Channel pressure signal
Inventory Turnover Days	Expected to extend	Inventory backlog confirmation
Current Ratio	5.00	Short-term solvency is acceptable

• Cash flow pressure
  : Inventory occupies a large amount of working capital, with free cash flow of RMB 245 million [0], and capital efficiency has declined
• Gross profit margin under pressure
  : Search results show that the company’s gross profit margin has generally declined, and the net profit growth rate has dropped to 6.42% [1]
• Performance fluctuation risk
  : Q4 performance was significantly lower than expected, indicating that channel adjustments are still ongoing

• Opportunity of bezoar import pilot
  : The “opening” of the bezoar import pilot policy is expected to ease raw material supply pressure [1]
• Channel inventory clearance
  : It is expected to take 2-3 quarters to complete channel destocking
• Price strategy adjustment
  : Terminal price control and channel profit restructuring

• Growth bottleneck of core products
  : The main business of Pien Tze Huang lozenges faces a penetration ceiling
• Cultivation of new growth points
  : The cosmetics business has “weak growth”, and the second growth curve has not yet taken shape [2]
• Valuation pressure
  : The current P/E ratio of 42.44x is at a historically medium-high level, and underperforming results will compress valuations

• Inventory risk
  : The 34.9% inventory growth indicates weakened channel digestion capacity
• Performance risk
  : Revenue has missed expectations for two consecutive quarters, and fundamentals are under pressure
• Valuation risk
  : The P/E multiple is higher than the industry average, facing a double blow to performance and valuation

1. Implementation progress of the bezoar import policy and changes in raw material costs
2. Whether channel inventory turnover improves in the 2025 Q1 report
3. Strategic adjustment plan for the cosmetics business and daily chemical sector
4. Development plans of the actual controller and management for the company

Pien Tze Huang’s 34.9% inventory growth is the result of the combined effects of channel inventory pressure, strategic raw material stockpiling, and new product cultivation. In the short term, the company faces dual pressures of underperforming results and destocking, but the advancement of the bezoar import pilot policy is expected to improve the raw material supply pattern in the medium to long term. Considering that the current stock price has reflected some pessimistic expectations, it is recommended that investors closely monitor signals of improved channel inventory turnover and the performance of the first quarter of 2025.

: The above analysis is for reference only. The stock market is risky, and investment needs to be cautious.

[0] Jinling API - Pien Tze Huang (600436.SS) Company Overview and Financial Data
[1] Industry News - Pien Tze Huang’s 2024 Net Profit Growth Rate Declines, Bezoar Import Pilot “Opens”
[2] Industry News - Pien Tze Huang’s Gross Profit Margin Generally Declines, Net Profit Growth Rate Drops to 6.42%, Cosmetics Business Growth Weak