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Is Consun Pharmaceutical Group Limited's (HKG:1681) Recent Stock Performance Tethered To Its Strong Fundamentals?

Simply Wall St · 2d ago

Most readers would already be aware that Consun Pharmaceutical Group's (HKG:1681) stock increased significantly by 5.6% over the past month. Since the market usually pay for a company’s long-term fundamentals, we decided to study the company’s key performance indicators to see if they could be influencing the market. Particularly, we will be paying attention to Consun Pharmaceutical Group's ROE today.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.

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How Do You Calculate Return On Equity?

The formula for return on equity is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Consun Pharmaceutical Group is:

22% = CN¥1.0b ÷ CN¥4.6b (Based on the trailing twelve months to June 2025).

The 'return' is the amount earned after tax over the last twelve months. One way to conceptualize this is that for each HK$1 of shareholders' capital it has, the company made HK$0.22 in profit.

View our latest analysis for Consun Pharmaceutical Group

What Has ROE Got To Do With Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics.

A Side By Side comparison of Consun Pharmaceutical Group's Earnings Growth And 22% ROE

At first glance, Consun Pharmaceutical Group seems to have a decent ROE. Further, the company's ROE compares quite favorably to the industry average of 10%. Probably as a result of this, Consun Pharmaceutical Group was able to see an impressive net income growth of 20% over the last five years. However, there could also be other causes behind this growth. Such as - high earnings retention or an efficient management in place.

As a next step, we compared Consun Pharmaceutical Group's net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 5.4%.

past-earnings-growth
SEHK:1681 Past Earnings Growth December 18th 2025

Earnings growth is a huge factor in stock valuation. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is 1681 fairly valued? This infographic on the company's intrinsic value has everything you need to know.

Is Consun Pharmaceutical Group Making Efficient Use Of Its Profits?

The three-year median payout ratio for Consun Pharmaceutical Group is 47%, which is moderately low. The company is retaining the remaining 53%. So it seems that Consun Pharmaceutical Group is reinvesting efficiently in a way that it sees impressive growth in its earnings (discussed above) and pays a dividend that's well covered.

Additionally, Consun Pharmaceutical Group has paid dividends over a period of at least ten years which means that the company is pretty serious about sharing its profits with shareholders. Our latest analyst data shows that the future payout ratio of the company over the next three years is expected to be approximately 50%. Therefore, the company's future ROE is also not expected to change by much with analysts predicting an ROE of 25%.

Summary

In total, we are pretty happy with Consun Pharmaceutical Group's performance. Specifically, we like that the company is reinvesting a huge chunk of its profits at a high rate of return. This of course has caused the company to see substantial growth in its earnings. That being so, a study of the latest analyst forecasts show that the company is expected to see a slowdown in its future earnings growth. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company.