“Investor Network” Cai Jun

Recently, Zhendong Pharmaceutical (hereinafter referred to as the “Company”, 300158.SZ) announced that shareholders pledged shares, involving both the controlling party and the actual controller.

Earlier, the company owned Landy Pharmaceuticals and relied on it to obtain a double harvest of capital and performance. However, since 2022, the company has been in losses, and when to turn losses into profits has become a topic of concern for the market.

If you want to make a profit, you need revenue side growth and cost segment control. At the same time, various transactions between the holding party and the company have also received attention from the supervisory authorities.

Spring breeze blows and is born again

According to the announcement, Zhendong Group, the controlling shareholder of the company, and Li Anping, the actual controller, pledged a total of 305 million shares, accounting for 16.39% of the company's total share capital. As of the first half of this year, Li Anping directly held 0.23% of the company's voting rights and held 99.9% of Zhendong Group's voting rights, thus indirectly owning 29.38% of the company's voting rights.

Among them, Zhendong Group has 95 million pledged shares due within the next six months, accounting for 9.24% of the company's total share capital, corresponding to a financing balance of 260 million yuan. The company said that the group has the ability to repay capital, and the sources of repayment include operating income, stock dividends, investment income and other income.

However, the enterprise investigation revealed that in November 2023, Zhendong Group was fined 50,000 yuan by the Municipal Taxation Bureau of the State Administration of Taxation for “evading tax payment - fabricating a false basis for tax calculation”.

On the other hand, the problem of capital taken over by listed companies has been around for a long time.

At the beginning of 2023, Zhendong Group occupied the company's capital balance of 2.51 million yuan. The nature and causes of the occupation were non-operating and transactional funds. In the first half of the same year, Zhendong Group repaid the total balance.

The holding party on this side settled the occupied funds, and other related parties on the other side took the lead. As of the first half of 2023, the balance of funds occupied by this portion was $3,298 million, up 7% from the beginning of the year. The causes of occupation include transaction payments, project payments, purchase payments, sales payments, service charges, capital transfers between parent and subsidiary companies, etc., covering both operational and non-operating aspects.

It should be pointed out that many related parties belong to the same actual controller as the company, namely Li Anping, and others are subsidiaries of the company. In fact, there is a precedent for corporate affiliates to seize capital.

In 2023, the company received an inquiry letter from the supervisory authority, which required it to self-check the financial transactions, occupation, and external guarantees with related parties. Afterwards, the company announced that all non-operating funds occupied by Zhendong Group had been returned.

At the same time, in response to insufficient internal control revealed in the use of capital, the company has taken corrective measures, such as urging Zhendong Group to pay interest on loans, monthly inspections of the company and subsidiary companies by the financial department, and regular organizational compliance training for directors, supervisors, and actual controllers.

Capital gains, poor performance

In recent years, Zhendong Pharmaceutical's high-profile incident was still a capital transaction.

In 2021, the company sold 100% of its subsidiary Landi Pharmaceuticals to Shanghai Fanglang at a price of 5.8 billion yuan. According to data, the sole shareholder of Shanghai Fanglang is Velvet Holdings, an investment platform registered in the Cayman Islands. The shareholders of this platform are funds owned by Fangyuan Capital. Companies that Fangyuan Capital has invested in include Maoyan Entertainment, 360 Finance, and Ordinary People.

The sale of Landi Pharmaceuticals can be described as a huge profit from the perspective of capital benefits. In 2016, the company purchased the company for 2.65 billion yuan. Based on this calculation, the company made a profit of 3.15 billion yuan.

In fact, Landi Pharmaceuticals can be sold at a high price, thanks to its operating performance. The company specializes in calcium preparations. In 2020, the product became the largest calcium brand in China with a market share of 16%, surpassing Pfizer's Calcium Calcite. In the same period, the company's net profit was 357 million yuan, up from the company's 262 million yuan in the same period.

The capital benefited, but then Zhendong Pharmaceutical's business performance began to fail.

In 2022, the company's operating income and net profit attributable to shareholders of the parent company were 3.73 billion yuan and -51 billion yuan respectively, down 26.8% and 101.96% year-on-year. In 2023, the company still expects a loss of 30 million yuan to 40 million yuan; a loss of 95 million yuan to 110 million yuan after deducting non-net profit.

The company said that the estimated impact of non-recurring profit and loss on net profit attributable to mother is 65 million yuan to 70 million yuan, mainly government subsidies and financial management income. Take wealth management revenue as an example. In the first half of 2023, the company's investment income was 0.17 billion yuan, accounting for 57.42% of total profit; during the same period, the total amount of financial management entrusted by the company was 2.84 billion yuan, of which banks, brokerage firms, trusts, etc. generated 960 million yuan, 564 million yuan, and 954 million yuan respectively, all from its own funds.

As can be seen, the company's wealth management earnings may determine whether it can turn a loss into a profit this year. However, in the context of the trust storm, the company holds more of this type of product, and it remains to be seen whether it will be affected.

Moreover, in addition to financial benefits, the company's asset impairment losses are also one of the concerns.

In the first half of 2023, the company's assets depreciated - RMB 11 million, and in the same period of 2022 - RMB 140,000. Take accounts receivable as an example. The book balance for the same period was 912 million yuan, bad debt provisions were 274 million yuan, and the book value was 638 million yuan.

Entering the medical and aesthetic circuit

Taking the initiative to sell off his ace business, Li Anping found a medical and aesthetic circuit.

In the 2023 performance forecast, the company revealed a rapid increase in sales revenue for the hair growth product Minoxidil liniment (brand name “Dafeixin”). In the first half of this year, Dafeixin's sales increased 49.52% year over year.

In fact, Zhendong Pharmaceutical almost gave up this asset earlier.

In the same year that Landi Pharmaceuticals was sold, the company also planned to divest Ante Pharmaceuticals. Ante Pharmaceuticals is its wholly-owned subsidiary. Key products include colloidal pectin bismuth capsules to treat the digestive tract, Dafexin, etc. The reason for the divestment was that the company lost money year after year, and the company was preparing to replace it with another platform owned by the holding party.

In 2021, the medical aesthetic and hair loss economy gradually heated up, and Dafeixin's sales grew rapidly. As a result, the company terminated the replacement. The “barbaric” decision now seems to be the right one.

Up to now, Sansheng Pharmaceuticals' Mandi and Dafexin are similar products. According to the former, Mandi's revenue for the first half of 2023 was about 496 million yuan, an increase of 35.3% over the previous year, accounting for 70.3% of the domestic market share. According to this estimate, Dafeixin had the highest sales volume of 210 million yuan during the same period; the chemical sector to which this product belongs had current revenue of 1.09 billion yuan, an increase of 8.63% over the previous year.

In other words, Dafeixin is the main growth point for the company's chemical sector. In the 2023 forecast, the company disclosed “increasing investment in brand building products such as Dafexin Minoxidil liniment”.

However, it should be pointed out that from 2020 to 2023, the supervisory authorities issued several inquiry letters to the company, requiring it to explain the reasons and details of the high sales expenses.

Taking 2022 as an example, the first of the top ten payers is the related party Beijing Zhendong Health Technology Co., Ltd., with a transaction amount of 65.3 million yuan, an increase of 72% over the previous year. The business content is online store promotion services. Earlier, the company provided e-commerce platform hosting services for the company, and was responsible for product network sales and formulation of operation plans.

In the first three quarters of 2023, the company's sales expenses were 1,073 billion yuan, a year-on-year decrease of 5%. The decline occurred mainly in the third quarter. In the first half of the same year, sales expenses amounted to 716 million yuan, an increase of 7.54% over the previous year. (Produced by Thinking Finance) ■