1.72 Billion: Shaanxi Pharma Player Secures Large Computing Power Order

On the evening of September 16, Shaanxi Kanghui Pharmaceutical Co., Ltd. (hereinafter referred to as “Kanghui Pharmaceutical”) issued an announcement, Its wholly-owned subsidiary, Beijing Kanghui Zhichuang Technology Co., Ltd., has officially signed the “Computing Power Service Contract” with Customer A, with a total contract value of approximately RMB 1.72 billion (including tax) and a service term of up to five years.

Also disclosed simultaneously was a server procurement contract with a total value of RMB 1.141 billion: To ensure the delivery of computing power services, Beijing Kanghui Zhichuang will procure high-performance computing servers from Supplier G to build computing clusters and provide full-lifecycle operation and maintenance services.

The closure of this billion-level order has swiftly thrust this long-established pharmaceutical enterprise from Shaanxi into the industrial spotlight. At the intersection of slowing growth in the pharmaceutical industry and exploding demand for AI computing power, Kanghui Pharmaceutical has opted not to pursue digital upgrades within the pharmaceutical supply chain. Instead, it has directly entered the computing power services sector, aiming to establish a dual-core business model integrating pharmaceuticals and computing power.

From the quiet strategic positioning in 2025 to the current closure of major deals, Kanghui Pharmaceutical’s path of cross-industry diversification not only reflects the growth anxiety of traditional pharmaceutical companies but also provides a noteworthy case study for industrial transformation.

Kanghui Pharmaceutical is a representative enterprise in the traditional Chinese medicine (TCM) sector in Northwest China. Founded in 1999, the company completed its joint-stock restructuring in 2009 and was listed on the Main Board of the Shanghai Stock Exchange in 2017. It is a national high-tech enterprise integrating pharmaceutical research and development, manufacturing, and sales.

Its core business encompasses the research, development, and production of proprietary Chinese medicines, processed Chinese herbal slices, and pharmaceutical intermediates, as well as pharmaceutical distribution and logistics. The company boasts a portfolio of mature products, including Xiaoyin Granules, Kunfukang Capsules, and Compound Shuanghua Tablets, with a marketing network covering medical terminals and retail channels at all levels across China.

Similar to most traditional Chinese medicine enterprises, Kanghui Pharmaceutical has faced sustained pressure on the growth of its core business in recent years. Affected by multiple factors, including medical insurance cost containment, policy adjustments in the traditional Chinese medicine industry, and intensified market competition, the company’s revenue has entered a downward trend since 2023. Financial report data shows that in 2025, Kanghui Pharmaceutical achieved operating revenue of RMB 471 million, a year-on-year decrease of 16.09%; net profit attributable to shareholders was a loss of RMB 333 million, with the loss widening by more than 180% year on year.

In 2026, the pressure on the core business has not significantly eased. In the first half of the year, Kanghui Pharmaceutical achieved a revenue of RMB 205 million, representing a year-on-year decline of 17.05%. However, driven by gains from asset disposals and contributions from emerging businesses, the net profit attributable to shareholders turned around from loss to profit, reaching RMB 9.0925 million.

It is against the backdrop of adjustments to its core business that Kanghui Pharmaceutical has embarked on a cross-industry layout in computing power, a strategic move underpinned by the industrial resources brought in by the company’s actual controller.

From the perspective of its equity background, Kanghui Pharmaceutical’s actual controllers, Li Hongming and Wang Xuefang, own Beijing Yi’an Tianxia Technology Co., Ltd., a company that has long focused on the construction and operation of data centers and comprehensive cloud computing services, possessing mature supply chain resources and project operational experience. This indicates that Kanghui Pharmaceutical’s foray into computing power is not starting from scratch; rather, it leverages the existing industrial foundation of its actual controllers to rapidly assemble teams and launch operations.

In May 2025, Beijing Kanghui Zhichuang Technology Co., Ltd. was officially established with an initial registered capital of RMB 10 million, wholly owned by Kanghui Pharmaceutical. Its business scope covers the development of foundational artificial intelligence software, integration of computing power systems, and cloud computing services. In October of the same year, Kanghui Pharmaceutical injected an additional RMB 90 million into Beijing Kanghui Zhichuang, increasing the registered capital to RMB 100 million and clearly defining its position as the core operational entity for computing power businesses.

Returning to the RMB 1.72 billion order itself, its cooperation model clearly demonstrates the profit logic of Kanghui Pharmaceutical’ computing power business: Beijing Kanghui Zhichuang is responsible for procuring servers, deploying networking, and optimizing hardware and software; it delivers computing clusters in accordance with Customer A’s technical specifications and provides full-lifecycle operation and maintenance services, while the customer pays service fees on a monthly basis. The delivery of computing power will commence at the end of the third quarter of 2026 and be completed in phases by the end of the first quarter of 2027. If implemented as scheduled, it is expected to generate approximately RMB 30 million in additional revenue for the company in 2026.

The supporting server procurement contract, valued at RMB 1.141 billion, involves Supplier G, a subsidiary of an A+H share listed company with strong creditworthiness and sufficient capacity to fulfill its contractual obligations. As agreed, Beijing Kanghui Zhichuang must settle the full payment within 50 days after the delivery of each batch of servers, with project funding primarily relying on financing from financial institutions.

Kanghui Pharmaceutical warned in its announcement that if the project proceeds as planned and financing is secured, the company’s debt-to-asset ratio will rise from 69% at the end of June 2026 to approximately 78%, with a corresponding increase in interest-bearing debt levels. Fluctuations in financing costs will directly impact the project’s profitability.

In fact, this is not the first time Kanghui Pharmaceutical has disclosed a major computing power contract this year.

As recently as July 22, just two months ago, Kanghui Pharmaceutical issued an announcement stating that Beijing Kanghui Zhichuang had signed a computing power service contract with Customer D. The total contract value ranges from RMB 415 million to RMB 679 million, with a cooperation period of five years, comprising an initial three-year term and a two-year renewal period.

Including the newly secured fixed-amount order worth RMB 1.72 billion, Kanghui Pharmaceutical’ total maximum value of on-hand computing power orders has reached nearly RMB 2.4 billion within just two months, far exceeding the revenue scale of its core pharmaceutical business for the full year 2025.

Behind the surge in orders lies the rapid expansion of Kanghui Pharmaceutical’ computing power business. In addition to direct computing power service contracts, the company is also extending its reach across the upstream and downstream segments of the industry chain:

In June 2026, Beijing Kanghui Zhichuang signed a cooperation agreement with Beijing Wajinke Technology Co., Ltd. to jointly establish Beijing Huijin Zhichuang Technology Co., Ltd., expanding into the data processing and storage services sector. In July, another wholly-owned subsidiary, Shanghai Kanghui Zhichuang, won the bid for the Yiguang Cloud Data Center Renovation Project with a bid amount of RMB 50.5992 million, extending its business scope from computing power services to infrastructure engineering.

Under this continuous layout, Kanghui Pharmaceutical’ strategic framework of “strengthening the pharmaceutical foundation and fostering diversified synergy” has become clear. The underlying logic is that the growth ceiling for its traditional pharmaceutical business has become apparent, necessitating new business segments to hedge against industry cycles. Meanwhile, the computing power industry is in a period of rapid growth driven by AI, offering vast market potential. Furthermore, the company benefits from resource advantages provided by its actual controller, making the entry barrier relatively manageable. In the 2026 semi-annual report, the computing power business contributed approximately 15% of revenue, becoming a key pillar in the company’s performance recovery.

From an industry perspective, the integration of the pharmaceutical industry with computing power is following two distinct paths.

One is the mainstream path of internal empowerment: Global pharmaceutical companies are significantly increasing their investment in computing power to support AI-driven drug discovery and development. Roche has deployed over 3,500 GPUs to build its “AI Factory,” while Eli Lilly has launched the “LillyPod” AI factory with a computing capacity of 9,000 petaflops. Bristol Myers Squibb has procured supercomputers to advance AI projects in oncology and immunology. Computing power is now regarded as the core infrastructure for breaking the “Eroom’s Law” (or the “double ten” rule) in drug R&D.

Among domestic enterprises, Tasly has built the “Digital Intelligence Materia Medica” large language model for Traditional Chinese Medicine (TCM) based on computing power, while Guangzhou Pharmaceutical Holdings has partnered with Huawei to create a fully localized, full-stack AI platform for new drug development—both initiatives focusing on technological upgrades centered around their core pharmaceutical businesses.

The other is the independent business path chosen by Kanghui Pharmaceutical: Instead of limiting computing power to internal R&D, the company directly provides computing infrastructure and operations and maintenance (O&M) services to the external market, establishing computing power as an independent revenue stream. This model breaks through the ceiling of internal demand within the pharmaceutical industry, unlocking a larger market space. However, it also means entering a fully competitive arena, facing direct market competition from leading cloud providers and specialized computing service firms.

Kanghui Pharmaceutical also highlighted industry risks in its announcement: The computing power services sector is currently in a phase of rapid capacity expansion, with leading cloud providers and emerging computing service providers continuously increasing their investments. This intensifying competition may lead to a sustained decline in market prices for computing power services. Given the company’s high financing costs for its projects, there is limited room for downward adjustment in service pricing, posing a risk of continuous compression on gross profit margins. Furthermore, five-year long-term contracts face uncertainties such as reduced customer demand and equipment depreciation driven by technological iterations.

Despite numerous challenges, the securing of this RMB 1.72 billion order has validated Kanghui Pharmaceutical’s initial capability to enter the computing power sector. For traditional pharmaceutical companies, there is no one-size-fits-all approach to transformation: they can deepen their core pharmaceutical business through innovation and upgrading, diversify by extending along the industry chain, or, like Kanghui, leverage shareholder resources to cross over into emerging sectors. The ultimate test lies in whether they can establish sustained competitiveness in these new arenas.

Next, as the computing power clusters are gradually delivered and put into operation, Kanghui Pharmaceutical’ computing business will enter a performance verification phase. If delivery proceeds smoothly and stable profitability is maintained, the computing business is poised to become a core revenue pillar for the company in the coming years, driving its transformation from a traditional Chinese medicine enterprise into a diversified technology group. The experiences and lessons learned during this exploration will also provide valuable references for other traditional pharmaceutical companies seeking transformation.