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After more than a year, Kangmei Pharmaceutical (ST Kangmei) once again applies for "take off the hat".
On the evening of June 26, ST Kangmei announced that it will apply to revoke the "other risk warning (ST)". On June 27, the company's stock price rose by the daily limit and was 1.85 yuan/share at the time of publication, up 5.11%.
According to the announcement of ST Kangmei, there are three reasons for this application to "take off the hat".
From the perspective of internal control, in 2021, the auditing agency issued an internal control auditing report with negative opinions on ST Kangmei, and the company was also subject to other risk warnings due to this. In 2022, the auditing agency issued an internal control audit report with emphasized matters section for the company. However, in the internal control audits of 2022 and 2023, the auditing agency issued standard unqualified opinions on internal control audit reports. Therefore, ST Kangmei believes that the corresponding situation related to the "other risk warnings" triggered by internal control reasons has been eliminated.
From the performance perspective, since the completion of reorganization at the end of 2021, ST Kangmei's profitability has continued to improve. In 2023, the company achieved revenue of 4.874 billion yuan, a year-on-year increase of 16.60%, and achieved net income attributable to the parent company of 103 million yuan, reversing losses to profits. In the first quarter of 2024, the company's revenue was 1.201 billion yuan, a year-on-year increase of 5.01%; net income attributable to the parent company was 7 million yuan, which also reversed losses to profits. In addition, the overall asset-liability structure of the company has been optimized. As of the end of 2023, the company's current ratio was 1.46 and the quick ratio was 0.86, both significantly improved compared to before the bankruptcy reorganization.
In addition, ST Kangmei also mentioned that in 2018, the company and some affiliated parties provided guarantees for a loan between Kangmei Industrial, the former major shareholder, and Bohai Trust, but because Kangmei Industrial did not repay the loan in time, Bohai Trust sued ST Kangmei, Kangmei Industrial and related parties to court. In August 2023, the second instance judgment of the case has been issued and has taken effect. The impact of related matters on the company has been determined.
Based on the above three reasons, ST Kangmei applied to the Shanghai Stock Exchange to revoke the "other risk warning". The final outcome of the revocation application still depends on the review opinions of the Shanghai Stock Exchange.
This is not the first time that ST Kangmei has applied to "take off the hat". As early as April 2023, the company submitted an application to the Shanghai Stock Exchange to revoke the "other risk warning". However, since the company's litigation with Bohai Trust had not received the second instance judgment at that time and the company was still in a loss state, ST Kangmei withdrew the application in June 2023.
ST Kangmei's predecessor, Kangmei Pharmaceutical, was established in 1997. In 2001, the company was listed on the Shanghai Stock Exchange and is a pharmaceutical manufacturing company with traditional Chinese medicine as its core business.
However, at the end of 2018, the company was investigated by the China Securities Regulatory Commission for suspected violation of information disclosure laws and regulations. In August 2019, the investigation results were released, and the company was found to have falsely inflated revenues by 29.128 billion yuan, inflated operating profit by 4.101 billion yuan between 2016 and 2018, and continued to falsely inflate monetary funds and total assets. In addition, the company also provided non-operating funds of 11.619 billion yuan to its controlling shareholder and its affiliates.
In November 2021, as a direct participant in the "Kangmei Case", ST Kangmei's former actual controller Ma Xingtian was convicted of manipulating the securities market, violation of disclosure regulations, failure to disclose important information, and unit bribery, and was sentenced to 12 years in prison and a fine of 1.2 million yuan. His wife Xu Dongjin and 11 other responsible persons were also sentenced to prison and fined for participating in relevant securities crimes.
Affected by this case, ST Kangmei also suffered a serious setback. From 2019 to 2021, the company's revenue was 11.446 billion yuan, 5.412 billion yuan, and 4.153 billion yuan, respectively; net income attributable to the parent company was -4.661 billion yuan, -31.085 billion yuan, and 7.918 billion yuan, respectively.
In November 2021, Guangdong Shenongshi, a subsidiary of Guangzhou Pharmaceutical Group, intervened in the bankruptcy reorganization of ST Kangmei. In the end, Guangdong Shenongshi replaced Kangmei Industrial as the new controlling shareholder of the company. As of the end of 2023, Guangdong Shenongshi held 25.31% of the company's shares.