Core views
Incident: Jinshi Oriental and its wholly-owned subsidiary Chengdu Jinshi plan to buy 100% of Asia Pharmaceutical's shares from all 49 shareholders of Asia Pharmaceuticals through a combination of issuing shares and paying cash. The transaction price is 2.1 billion yuan.
Asia Pharmaceutical is an excellent domestic pharmaceutical company. The company's core product is the “Quick” series of cold medicine, which is one of the top ten famous domestic cold medicine brands. The company also produces and sells Western medicines, modern proprietary Chinese medicines, and health foods. It has 90 drug production approval numbers and 2 health food production approval numbers, covering various drug categories such as respiratory, cardiovascular, digestive, and vitamin supplements for colds.
Asia Pharmaceuticals achieved operating income of 629 million yuan in 2015 and achieved net profit attributable to the parent company of 96 million yuan. According to the “Profit Compensation Agreement”, Asia Pharmaceuticals promised a cumulative net profit of 126.5981 million yuan, 2804.708 million yuan, and 444.344 million yuan at the end of the 16, 17, and 18 years respectively.
Through this transaction, Jinshi Oriental will achieve a dual business development model of machinery manufacturing and pharmaceutical manufacturing, and profits will be greatly increased. Jinshi Oriental achieved operating income and net profit of 117 million yuan and 23.38 million yuan respectively in 2015. Against the backdrop of a slowdown in the domestic economy and a decline in the growth rate of fixed asset investment, the development of the company's original main business, steel-reinforced plastic composite pipe business, has hit a bottleneck. The long-term development of the domestic pharmaceutical and health industry is promising. Consumer demand for pharmaceutical products is stable, and it has entered the pharmaceutical industry on the basis of machinery manufacturing, which has greatly increased the company's profitability and optimized its revenue structure. The company's strategic transformation is worth looking forward to.
Risk warning: The progress of the fixed increase is lower than expected.