How to break the stagnant situation of performance? This requires thinking.
text｜Kingfisher Capital
, the old pharmaceutical company that was once known as the "first son of the pharmaceutical industry", North China Pharmaceutical (600812.SH), has long since disappeared from its former style.
North China Pharmaceutical is one of the largest chemical pharmaceutical companies in China. Its predecessor, North China Pharmaceutical factory, was a key construction project during the "First Five-Year Plan" period. It was planned to be built in 1953 and completed and put into production in 1958.
However, as the growth rate of the chemical pharmaceutical industry slows down, North China Pharmaceutical has also begun to adjust its industrial structure and focus on the biopharmaceutical field.
Not long ago, North China Pharmaceutical issued an announcement stating that the company plans to issue shares and pay cash to North China Pharmaceutical Group Co., Ltd. (hereinafter referred to as " Huayao Group ") for 886 million yuan through issuance of shares and payment of cash, and purchase 51% of the equity of North China Pharmaceutical Group Ainuo Co., Ltd. (hereinafter referred to as " Animal Insurance Company ") held by Huayao Group (previously North China Pharmaceutical already holds 49% of the equity of North China Pharmaceutical Group Animal Health Products Co., Ltd. (hereinafter referred to as " Animal Insurance Company ") and 100% of the equity of North China Brand Series Trademark Assets held by Huayao Group. At the same time, North China Pharmaceutical plans to issue shares to no more than 35 (including 35) specific investors to raise matching funds, and the total amount of matching funds will not exceed 550 million yuan.
North China Pharmaceutical 's restructuring target assets and payment methods; Source: Company Announcement
It is worth noting that North China Pharmaceutical 's transaction is an affiliated transaction. The transaction party Hua Pharmaceutical Group is a wholly-owned subsidiary of the listed company's controlling shareholder Ji Zhong Energy Group. Before this transaction, Hua Pharmaceutical Group held 15.73% of the shares of North China Pharmaceutical , and is the second largest shareholder of North China Pharmaceutical . Behind the blockbuster acquisition of
: highlighting the embarrassment of stagnation in performance
Public information shows that Ainuo Company was established in 1996 with a registered capital of 66.6 million yuan. Its business scope includes the development, production and sales of pesticides (except for hazardous chemicals and first-class prone to drugs), veterinary drugs (the product types and validity period shall be subject to the approval certificate); the development, production and sales of water-soluble fertilizers, micro (medium) fertilizers, biological organic fertilizers, and microbial preparations; the wholesale of chemical fertilizers and organic fertilizers; self-operated or agent for import and export business of goods and technology; the sales of mixed feed additives; the technology research and development, technology transfer, technical consultation, and technical services of veterinary drugs.
According to the financial data of Ainuo Company without this special audit, in 2018 and 2019, Ainuo Company achieved operating income of RMB 377.1542 million and RMB 424.1173 million, of which the main business income was RMB 376.8479 million and RMB 418.6557 million, respectively; the operating profit was RMB 24.5074 million and RMB 27.0704 million, respectively, and the net profit was RMB 21.817 million and RMB 24.5041 million. The specific situation is shown in the table below:
AIO Company's financial data from 2018 to 2019/unit 10,000 yuan; Source: Company Announcement
According to the financial data that has not been audited for this special audit, in 2018 and 2019, AIO Company's return on equity was 12.92% and 13.46%, respectively, with operating profit margins of 6.5% and 6.38%, respectively, and net sales profit margins of 5.78% and 5.78%, respectively, both higher than the corresponding profitability indicators of listed companies during the same period (return on equity: 2.7% and 2.66%; operating profit margin: 2.22% and 2.22%; net sales profit margin: 1.58% and 1.36%).
announcement believes that the acquisition of Ainuo Company will help expand the business scope of North China Pharmaceutical , cultivate new growth points for North China Pharmaceutical , and enhance its own sustainable profitability.
. Behind this, highlights the embarrassing North China Pharmaceuticals 's performance stagnant .
North China Pharmaceutical The operating income of the 2015 annual report was 7.903 billion yuan, the operating income of the 2016 annual report was 8.082 billion yuan, the operating income of the 2017 annual report was 7.709 billion yuan, the operating income of the 2018 annual report was 9.214 billion yuan, and the operating income of the 2019 annual report was 10.881 billion yuan.
seems to have maintained a growth trend, but in a longer timeline, North China Pharmaceutical revenue in 2010 and 2019 was 10.287 billion yuan and 10.881 billion yuan, respectively, and net profit was 242 million yuan and 153 million yuan, respectively. Over the past 10 years, the revenue growth has not been obvious, and the net profit has also declined significantly.
In addition to Aino, another acquired animal insurance company was established in 2002 with a registered capital of 70 million yuan. Its business scope includes the production and sales of veterinary drugs; the wholesale and import and export of veterinary drug preparations and veterinary drug raw materials, the production of mixed feed additives; the technology research and development, technology transfer, technical consultation, and technical services of veterinary drugs; the wholesale and retail of unprocessed primary agricultural products and pre-packaged foods.
However, in 2019, the Animal Insurance Company achieved operating income of 190.6442 million yuan, a year-on-year decrease of 4.79%, and a net profit of 6.5369 million yuan, a year-on-year decrease of even greater, reaching 24.32%.
At the same time, the net cash flow generated by operating activities was RMB 12.0648 million, an increase of 97.4% year-on-year. In addition, the net assets of the Animal Insurance Company in 2018 were only -6.5786 million yuan. On November 28, 2019, Huayao Group, the single shareholder of the Animal Insurance Company, increased its capital by 50 million yuan.
Animal Insurance Company Based on the financial data without this special audit, in 2018 and 2019, the Animal Insurance Company achieved operating income of RMB 200.2444 million and RMB 190.6442 million, respectively, of which the main business income was RMB 190.1253 million and RMB 180.3882 million; the gross profit of the main business was RMB 39.2047 million and RMB 37.1591 million, respectively, and the net profit was RMB 8.6379 million and RMB 6.5369 million, respectively.
specific situation is shown in the following table:
2018-2019 financial data; Source: Company Announcement
According to financial data without this special audit, in 2018 and 2019, the operating profit margin of the animal insurance company was 5.09% and 4.75%, respectively, and the net sales profit margin was 4.31% and 3.43%, respectively, both higher than the corresponding profitability indicators of listed companies during the same period (operating profit margin: 2.22% and 2.22%; net sales profit margin: 1.58% and 1.36%).
Announcement believes that the acquisition of the animated insurance company will help broaden the business scope of listed companies, cultivate new growth points for listed companies, and enhance the sustained profitability of listed companies.
is exactly the same as Aino's wording, but the acquisition has received regulatory attention.
regulatory feedback requirements: (1) Based on the operation, sales and collection policies, changes in major customers, etc., explain the reasons for the significant increase in the net cash flow generated by operating activities when the operating income of the animation insurance company declined year-on-year; (2) Based on the business development, historical financial data and profit situation, explain the reasons for the negative net assets of the animation insurance company in 2018; (3) Based on the industry development and market competition pattern, explain the reasons for the decline in the performance of the animation insurance company, whether it is consistent with comparable companies in the same industry, and whether it has the risk of continuous decline; (4) The reasons, basis for valuation and rationality of Huayao Group's capital increase to the animation insurance company; (5) In combination with the above issues, explains the necessity of acquiring the animation insurance company. The plan shows that the production and operation site used by the Animation Insurance Company is the land that has been acquired and stored. The land use right holder before the acquisition and storage was Huayao Group, which was used by the Animation Insurance Company. The company plans to renovate its new preparation branch 206 workshop (hereinafter referred to as "new factory building") and lease it to the animal insurance company.
At present, the animal insurance company is in the process of relocation and construction, and the new factory real estate certificate is still being processed and needs to undergo renovation, environmental assessment acceptance, production conditions acceptance, etc. It is expected that the stable operating conditions will be met before the end of June 2020. Supervision requires the company to disclose additional disclosures: (1) The current progress of relocation and renovation, and whether there are obstacles in the processing of relevant rights and certificates; (2) The specific impact of this relocation and renovation on the daily production and operation of the Animal Insurance Company, and whether there are obstacles to this transaction; (3) Whether the cost standards for the relevant factory rentals of the Animal Insurance Company and the Company are different from the previous rental costs.
financing machine or subsidy maniac?
public information shows that 280 million yuan was raised during the IPO in 1994, North China Pharmaceutical has since raised 130 million yuan, 541 million yuan and 579 million yuan through three share allotment between 1995 and 1999, 2.986 billion yuan was raised through additional issuance in 2012, and 1.132 billion yuan was raised through additional issuance in 2014. as of the end of 2019, a total of 5.649 billion yuan was raised.
In contrast, the net profit of North China Pharmaceutical is surprising. According to the annual report net profit data from 1994 to 2019, the cumulative net profit of North China Pharmaceutical was only 2.322 billion yuan, which is less than 42% of the raised funds.
In response to this, North China Pharmaceutical once bluntly stated in the announcement that since the new park project has not yet achieved the expected results, the project loans have been returned one after another, and the company used other funds to replace the project loan, resulting in an unreasonable financing structure and a risk of short-term loans and long-term investment. In addition, in 2019, North China Pharmaceutical also stated that it will adjust its financing ideas.
However, obviously, as of now, North China Pharmaceutical is still inseparable from financing, and it does not have excellent profitability for the time being.
According to North China Pharmaceutical 2019 annual report and financial data for the first quarter of 2020, a total operating income of approximately 10.881 billion yuan in 2019, a year-on-year increase of 18.09%, and an attributable net profit of approximately 153 million yuan, a slight increase of 1.86% year-on-year, and a net profit of 116 million yuan with non-net profit of 116 million yuan.
In the first quarter of 2020, the operating income was 2.21 billion yuan, a year-on-year decrease of 17.1%, and the attributable net profit was 62.9725 million yuan, a year-on-year increase of 104.5%, and the non-net profit was -18.2008 million yuan.
non-reliance data also hides another embarrassment, that is, North China Pharmaceutical 's deep dependence on government subsidies .
In February this year, North China Pharmaceutical received a subsidy of 75.83 million yuan for job stability refunds allocated by Shijiazhuang Employment Service Center. After statistically reviewing other government subsidies received recently, the company and its subsidiaries received a total of approximately RMB 76.02 million from December 27, 2019 to the date of this announcement, all of which are related to the income.
In addition to the job stability refund subsidy, the company's subsidiaries also received small subsidies such as scientific research project subsidies, export credit guarantee support funds, totaling 196,000 yuan, of which 146,000 yuan was received from December 27 to December 31, 2019, and 50,000 yuan has been received from January 1, 2020 to the present.
announcement shows that the subsidy funds received in 2019 were 146,000 yuan included in other income in 2019; while the 75.877 million yuan received in 2020 was included in other income in 2020.
Looking back on the past years, it has become a common occurrence for listed companies to receive government subsidies frequently. Generally speaking, moderate government subsidies or targeted government subsidies are conducive to the transformation and upgrading of some enterprises and provide a certain degree of financial support for the development of enterprises.
Some analysts believe that excessive dependence on subsidies will gradually cause local listed companies to become overly dependent on government subsidies; on the other hand, it will lead to the continuous reduction of the operating efficiency of local enterprises, and even aggravate the blind waste of local finances. In the long run, if this problem is not effectively solved, it is easy to cause a series of vicious cycles.
Will this acquisition of North China Pharmaceutical go smoothly? Welcome to leave a message for discussion.
