Hanmi Pharmaceutical(128940) CEO Hwang Sang-yeon and key executives have embarked on an overseas business trip carrying a double burden surrounding a core Chinese subsidiary. That is because both Beijing Hanmi Pharmaceutical Co., Ltd. (hereinafter Beijing Hanmi)'s earnings shock and a large volume of long-term uncollected receivables have surfaced at the same time.
On the 10th, according to the industry, Hwang and other key Hanmi Pharmaceutical executives left for a business trip to Beijing on the 6th. It was the first trip to China since Hwang took office as CEO of Hanmi Pharmaceutical in Mar..
Recently, Beijing Hanmi's long-term uncollected receivables over three months surpassed 90 billion won, pushing the adequacy of receivables management to the forefront. On top of that, with second-quarter operating profit plunging by more than 96% year over year, normalizing the overall China business has become an urgent task.
In the securities market, Beijing Hanmi's recovery is cited as a key variable for Hanmi Pharmaceutical's second-half results. Some say Hwang, selected as a "finance-oriented CEO," is being tested from his first year in office to prove his financial and China business management capabilities.
◇ Beijing Hanmi operating profit plunges 96%…long-term receivables in the 90 billion won range
While Hanmi Pharmaceutical's overall performance was strong in the first half, Beijing Hanmi moved in the opposite direction. Beijing Hanmi's second-quarter sales were 60.7 billion won, down 29.9% from a year earlier, and operating profit was 600 million won, down 96.6%.
Beijing Hanmi is a key overseas subsidiary that posted annual sales of 402.4 billion won last year, accounting for about 26% of Hanmi Pharmaceutical's consolidation sales. Hanmi Pharmaceutical cited the seasonal off-peak period due to fewer respiratory disease patients in China and the expansion of the China centralized drug procurement system (VBP) as the main causes of the earnings deterioration.
However, the market also sees long-term uncollected accounts receivable in the 90 billion won range, along with weak results, as a major risk for Beijing Hanmi.
Beijing Hanmi's total accounts receivable fell from about 900 million yuan at the end of last year to 670 million yuan recently. In contrast, long-term uncollected receivables over three months dropped from 320 million yuan at the end of last year to 90 million yuan in Feb. this year, then surged again recently to 430 million yuan. That is about 90 billion won.
Overall receivables have decreased, but among them, receivables with prolonged collection delays have instead increased. If long-term uncollected receivables continue to rise, they could weigh on Beijing Hanmi's cash flow. If the probability of recovery declines going forward, it could also lead to accounting losses such as allowance for doubtful accounts or impairment losses.
Hanmi Pharmaceutical, however, says it is difficult to judge collectibility based solely on the accounts receivable balance or the size of long-term receivables at a specific point in time. The company explained that Beijing Hanmi's accounts receivable have repeatedly increased during the year and been collected at the beginning of the year, and that it believes a significant portion of the current long-term receivables is also collectible.
◇ 40% of sales to Runmeikang…receivables doubled in a year
At the center of the receivables management issue is Chinese distributor Runmeikang. Sales that Beijing Hanmi supplied to Runmeikang last year were 154.3 billion won, about 40% of Beijing Hanmi's total sales. Beijing Hanmi's accounts receivable from Runmeikang also more than doubled in one year, from 60.5 billion won at the end of 2024 to 125.4 billion won at the end of 2025.
Runmeikang is effectively controlled by Lim Jong-yoon, chair of Kory Group. Obmom Hong Kong, 60.2% owned by Kory Yuhan Corporation controlled by Lim, holds 100% of Runmeikang. Lim has also served as co-chair at Beijing Hanmi since Feb. last year.
Beijing Hanmi supplied pharmaceuticals equivalent to 40% of its total sales to a distributor effectively controlled by Lim, and in the process piled up a large amount of accounts receivable. With both sales and receivables concentrated on a specific counterparty, there are calls to examine whether the transaction terms and receivables management were appropriate.
This distribution transaction structure has long been contentious. Since 2012, suspicions of funneling work have been raised over transactions between Beijing Hanmi and Runmeikang. In 2024, allegations of funneling and opaque contracts resurfaced, and at the time Hanmi Pharmaceutical said it had launched an official operational review through the audit committee and would improve related processes if problems were found.
With a large volume of long-term uncollected receivables now in the spotlight, there are also questions about whether the long-standing transaction structure is amplifying risk.
◇ "Finance-oriented CEO" Hwang Sang-yeon faces Beijing Hanmi normalization as first task
The executives on the Beijing trip face a task that goes beyond simply collecting receivables to review the entire process, including client selection, credit terms, and receivables management.
Hwang is a veteran of the financial investment industry. He served as head of research at Mirae Asset Securities, CIO at Allianz Global Investors, and CEO at Brain Asset Management, before leading Chong Kun Dang Holdings. Regarded as a manager strong in finance and investment and appointed as a professional manager at Hanmi Pharmaceutical, Hwang cannot help but find the controversy over accounts receivable management burdensome.
Beijing Hanmi's problem is not confined to a single quarter's weak results. It must restore profitability in response to China's drug price cuts and VBP expansion while also turning a large volume of long-term uncollected receivables into actual cash.
Beijing Hanmi posted 402.4 billion won in sales last year and has paid cumulative dividends of about 138 billion won to Hanmi Pharmaceutical since 2009. That is why the normalization of the China business has a significant impact on Hanmi Pharmaceutical's results and cash flow.
Securities firms also uniformly cite the normalization of Beijing Hanmi as a key task for Hanmi Pharmaceutical.
NH Investment & Securities(005940) analyzed that the decline in Beijing Hanmi's sales and operating profit acted as a factor weighing on China business results. DB Securities(016610) also said a recovery at Beijing Hanmi in the second half is important.
Mirae Asset Securities(006800) on Jul. 29 issued a report saying, "We should focus on Beijing Hanmi's recovery and progress in pipeline development," and lowered the target price for Hanmi Pharmaceutical from 700,000 won to 640,000 won. Meritz Securities also cut its fair price to 630,000 won, reflecting the prolonged impact of VBP and delays in normalizing profitability.