Pharma Firm Kanghui Signs $240M Computing Deal, Must First Buy $160M in Servers

By 21st Century Business Herald Reporter Ling Chen

A traditional pharmaceutical company with annual revenue of just 471 million yuan ($66 million) is attempting to digest computing service contracts worth over 2.1 billion yuan ($300 million). How?

New $1.72 Billion Computing Contract Signed

Kanghui Pharmaceutical Co., Ltd. (603139.SH) has announced another major computing services deal. According to a company filing, its wholly-owned subsidiary, Beijing Kanghui Zhichuang Technology Co., Ltd. ("Beijing Kanghui"), has signed a Computing Services Contract with "Client A." The total contract value is approximately 1.72 billion yuan (including tax), with a service term of five years.

To fulfill this order, Beijing Kanghui simultaneously signed a High-Performance Computing Server Procurement Contract with "Supplier G," with a total contract value of approximately 1.141 billion yuan (including tax).

Total Orders Exceed 2.1 Billion Yuan

This is not Kanghui's first major computing order this year. In July, the company disclosed that Beijing Kanghui had signed a computing services contract with "Company D," with an estimated total value (including tax) ranging from 415 million yuan to 679 million yuan.

Combined, the computing orders disclosed in the past two months total between 2.135 billion yuan and 2.399 billion yuan — approximately 4.5 to 5.1 times the company's total revenue for the full year 2025.

Revenue Begins to Flow, but Traditional Business Struggles

The company's 2026 semi-annual report shows that computing services have begun contributing revenue and profit. However, the traditional pharmaceutical business remains under pressure, with the company still reporting a net loss (excluding non-recurring items) in the first half of the year.

The more immediate challenge is that the 1.72 billion yuan contract does not represent immediate cash income. To execute the order, the company must first secure over 1.1 billion yuan for server procurement.

As the question of "whether there are orders" fades, Kanghui faces a new exam: Where will the money come from? How will the equipment be delivered? How much profit and cash flow will the 1.72 billion yuan contract ultimately generate?

Revenue Recognition and Financial Impact

For a company with 2025 annual revenue of 471 million yuan, the latest contract alone is about 3.65 times last year's total revenue. However, the 1.72 billion yuan cannot be simply interpreted as new revenue.

Under the business model, Beijing Kanghui must first purchase high-performance servers from Supplier G, build the server cluster infrastructure, perform software and hardware adaptation and load optimization. After client acceptance, the company provides full lifecycle operation and maintenance services, collecting monthly service fees. Revenue is recognized over five years, or 344 million yuan per year.

According to Kanghui's plan, computing services will be delivered in phases from the end of Q3 2026 to the end of Q1 2027. If delivered on schedule, the contract is expected to add approximately 30 million yuan in new revenue for 2026. The impact on net profit is currently uncertain.

Kanghui believes Supplier G, a subsidiary of an A+H-share listed company, has sufficient履约保障能力.

This is not a one-time equipment sale but a capital-intensive, long-cycle service business. The company's risk disclosure notes that its asset-liability ratio is expected to rise from 69% (as of end-June 2026) to approximately 78%, with correspondingly higher interest-bearing debt levels.

Semi-Annual Report: First Signs of Computing Revenue

Kanghui's 2026 semi-annual report shows:

• Total revenue: 205 million yuan, down 17.05% year-on-year
• Net profit attributable to shareholders: 9.09 million yuan, turning profitable year-on-year
• Net profit (excluding non-recurring items): Still a loss of 19.76 million yuan
• Non-current asset disposal gains: Approximately 42.73 million yuan (a one-time boost)

Traditional business performance:

• Pharmaceutical manufacturing revenue: 108 million yuan, down 27.73% year-on-year
• Pharmaceutical distribution revenue: 56.22 million yuan, down 38.76% year-on-year

Meanwhile, a new revenue stream emerged:

• Computing services revenue: 29.52 million yuan
• Computing services cost: 19.21 million yuan
• Gross margin: 34.91%
• Beijing Kanghui subsidiary revenue: 26.10 million yuan; net profit: 7.31 million yuan

While computing services have entered the income statement, the 29.52 million yuan in revenue is still small compared to the billions in disclosed contracts, indicating the business is in its early stages.

Kanghui now shows a clear "scissors gap" between old and new businesses: traditional pharmaceutical revenue continues to decline, while computing services contribute incremental growth but are not yet sufficient to transform the company's profit structure.

The Funding Challenge

To fulfill the 1.72 billion yuan contract, Beijing Kanghui must pay Supplier G 1.141 billion yuan for server procurement.

A critical detail is the payment cycle:

• Beijing Kanghui must pay the supplier in full within 50 days of each batch of server delivery.
• Client A pays monthly service fees over the contract term.

This means Kanghui must bear large upfront equipment costs and recover them gradually over five years.

As of end-June 2026, the company's cash and cash equivalents stood at approximately 61.16 million yuan. The latest server procurement contract (1.141 billion yuan) is about 18.7 times that amount.

Kanghui stated that funds for the procurement contract will come from its own cash and, primarily, financial institution financing. The company expects its asset-liability ratio to rise from 69% to about 78%.

Beyond the Headline Number

The 1.72 billion yuan contract is not just a revenue story; it is a capital story. Server procurement costs are only the beginning. Equipment depreciation, financing interest, electricity costs, ongoing maintenance, and client payment collection will all determine the final profit margin.

The company has warned that rapid expansion of computing capacity, combined with potential price declines and high financing costs, could pressure gross margins.

This is a fundamental difference from Kanghui's traditional pharmaceutical business: larger orders demand greater capital strength, financing capability, and operational endurance.

Conclusion: The Real Test Begins

From 471 million yuan in 2025 annual revenue to over 2.1 billion yuan in computing contracts disclosed in two months, Kanghui's cross-border move has moved from "planning" to "large-scale contract execution."

But orders are just the starting point. In the coming quarters, what matters more than the 1.72 billion yuan headline figure is:

• How will the 1.141 billion yuan in servers be financed and procured?
• Can the project be delivered on schedule?
• Will the client pay on time?
• How much profit and cash flow will these orders ultimately generate?

For Kanghui, the first challenge was securing orders. With the 1.72 billion yuan contract signed, the real test has just begun.