1681 — Consun Pharmaceutical Group Limited

Consun Pharmaceutical Group Limited (HKEX: 1681) — deep-value analysis

Date: September 5, 2026 · Reference price: HKD … · Market cap: HKD 11,419.5mn = RMB 9,777.3mn · Shares outstanding: 839,049,111 (issued 841,547,111 minus 2,498,000 treasury shares) · Reporting currency: RMB · Trading currency: HKD · Rate: 1 CNY = …, i.e. 0.8562 CNY per HKD (yfinance CNYHKD=X, 05.09.2026)

Primary sources: Interim Results Announcement for the half-year ended 30.06.2026 (published 26.08.2026, reviewed by KPMG per HKSRE 2410), Annual Results Announcement FY2025 (26.03.2026), Annual Report 2025 (28.04.2026), Interim Report H1 2025, Annual Report 2024, the voluntary announcement from 08.06.2026 (Shanghai Huamao), the First Shanghai Securities broker report from 14.04.2026 (Buy rating, target HKD 25.3) — all in SEC-Filings\1681\. Quotes, consensus and FX: yfinance, 05.09.2026. External flow check: stockanalysis.com/quote/hkg/1681. The issuer is Cayman-registered, exclusively listed in Hong Kong, reports under HKFRS; there are no SEC filings and EDGAR was intentionally skipped (the data pack confirms the symbol collision: “1681” with no suffix resolves to a Japanese index ETF, 1681.T — the correct company is 1681.HK).

What’s new versus the 23.08.2026 analysis. The prior report was written two days before the half-year results were published and ended with two explicit tests: (1) if the effective tax rate rises above 12%, the Horgos exemption has expired; (2) if distribution expenses revert to the pace of revenue and the operating margin falls below 32%, the H2 2025 marketing savings was a deferral, not an efficiency gain. The 26.08.2026 results answered both. The first test triggered (14.3%), the second didn’t (distribution grew 7.8% versus revenue …, and the operating margin climbed to …%). This report rebuilds the valuation over the twelve months ended 30.06.2026, not fiscal 2025.

Executive summary (1 page: thesis, estimated value, verdict)

The thesis. Consun is a niche nephrology franchise — Niaoduqing granules (尿毒清顆粒, “Uremic Clearance Granules”), the only traditional Chinese medicine preparation with a “strong” recommendation in Chinese guidelines for chronic kidney disease stages 3–5 — generating 71.7% of trailing-twelve-month revenue, at an 80.1% gross margin, with negligible invested capital, and with nearly half of market cap covered by net cash. The market prices it as if three-quarters of its flow were fake or about to disappear. The half-year results published August 26, 2026 say the opposite: revenue grew 13.8%, gross margin climbed 4.3 points to 81.4%, and profit attributable to shareholders grew 19.5% even though the effective tax rate more than doubled, from 6.1% to 14.3%. Cash generated from operations grew 58.6%.

The three figures that matter.

1. The prior thesis’s dominant risk materialized and was absorbed. The full income-tax exemption of subsidiary Consun Pharmaceutical (Horgos) expired 31.12.2025. From January 1, 2026, Horgos pays 15% on the 60% portion owed to the central budget and is exempt from the 40% local portion for five years — i.e. an effective rate of roughly 9% instead of zero. The group’s tax concessions fell from RMB 300.9mn in 2025 to roughly RMB 148.8mn annualized in H1 2026, and the group’s effective rate climbed to 14.3%. Profit still grew 19.5%, because the gross margin fully offset it. The risk that justified the largest discount in the prior thesis has become a measured fact, not an uncertainty.
2. The expense deferral suspected in H2 2025 didn’t reverse. Distribution expenses grew 7.8% against revenue …; their share of revenue fell from 32.9% to 31.1%. Meanwhile R&D nearly doubled (RMB 90.8mn versus 45.9mn, …), and headcount fell 8.6%, to 2,847. This isn’t a company cutting to deliver profit; it’s one moving money from sales into research and restructuring.
3. The balance sheet got even thicker. Net cash (cash, current and non-current time deposits, wealth-management products, minus all debt and leasing) climbed to RMB 4,562.4mn, i.e. HKD 6.35 per share — 46.7% of the HKD … price. The operating business is priced at HKD 7.26 per share, i.e. RMB 5,215mn, or 4.66x normalized flow to the shareholder and 4.05x operating profit excluding financial income.

The FCF bridge and the declared base. Over the twelve months ended 30.06.2026: CFO RMB 1,500.5mn − capex 85.6mn = simple FCF 1,414.9mn; after interest, leasing and minority dividends, FCFE 1,405.7mn (divergence of 0.66% — interest placement changes nothing at this company, unlike the AFYA case). From this I deduct three non-repeatable or non-normalized items: excess accrued expenses (RMB 177.7mn), tax normalization to 15% (28.8mn), and capex normalization toward committed capital obligations (80.0mn). Declared owner earnings: RMB 1,119mn.

Estimated value. Five independent models give a range of HKD 10.87 – 48.17, with the median at HKD 19.35, i.e. … versus price. The Monte Carlo simulation over 20,000 scenarios gives a median intrinsic value of HKD … and a …% probability the stock is undervalued within the model. The reverse of the calculation is more instructive than the model itself: for HKD … to be the correct price, with the same 7% growth and full credit for cash, the required discount rate would have to be … — or, holding the rate at 11%, the sustainable flow would have to be RMB 391mn, i.e. 35% of what the company actually produced over the trailing twelve months.

Verdict: BUY. Convergent with the tracker’s GBL score of 85.0% (“FIRM BUY”). The reservation isn’t about flows, but about the fact that the risks that matter most here — the post-2030 tax regime, centralized-procurement renewal, the Hong Kong/China jurisdiction discount — are binary, correlated, and external to the model. Position size is set by the unmodeled risk, not by P(undervalued): maximum 2.5… of the portfolio.