Kangmei Pharmaceutical gradually emerged from the shadow of a 30 billion yuan financial fraud case by announcing the "take off the hat".

Tonight, Kangmei Pharmaceutical (stock abbreviation "ST Kangmei") announced that the company's stock will be suspended for one day on July 3, and will resume trading on July 4 and revoke other risk warnings. After revoking other risk warnings, the company's stock will be traded off the risk warning board, and the daily limit of stock price fluctuation will be changed from 5% to 10%. The company's stock abbreviation will be changed from "ST Kangmei" to "Kangmei Pharmaceutical", and the securities code will remain "600518".

The company stated in the announcement that the circumstances of being implemented with "other risk warnings" due to internal control issues have been eliminated. This also means that Kangmei Pharmaceutical has finally "taken off the hat" after going through 5 years of "ST".

On the evening of June 26, Kangmei Pharmaceutical had announced that it would submit an application to the Shanghai Stock Exchange to revoke the "other risk warnings".

The announcement shows that the company's application to revoke the "other risk warnings" is mainly based on three reasons: the internal control audit report for the year 2022 and 2023 is based on the standard unreserved opinions; the company has received the final judgment of the second trial of the Bohai Trust case, and the uncertainty impact on the company has been eliminated; The company's sustainable operating capability has improved and the core main business situation continues to improve.

It is worth mentioning that this is not the first time that Kangmei Pharmaceutical has applied to "take off the hat". In April 2023, Kangmei Pharmaceutical had submitted an application to revoke the "other risk warnings", but the application was withdrawn less than two months later. At that time, Kangmei Pharmaceutical said that the company still had historical lawsuits that were not finally judged, and its profitability needed to be further restored and improved.

Once "wearing a hat" due to huge financial fraud.

Previously, the financial fraud incident of Kangmei Pharmaceutical once shocked the entire capital market, and also brought huge negative impact on the company's development. In 2018, Kangmei Pharmaceutical was investigated by the China Securities Regulatory Commission for suspected financial fraud. According to the investigation, from 2016 to 2018, the actual controllers and chairmen of Kangmei Pharmaceutical, etc. falsified and tampered with value-added tax invoices, forged bank documents, and falsely increased monetary funds by 88.7 billion yuan, falsely increased income by 27.5 billion yuan, and falsely increased profits by 3.9 billion yuan.

In view of Kangmei Pharmaceutical's serious violation of the information disclosure regulations for financial fraud, the Shanghai Stock Exchange implemented a special treatment of "other risk warnings" on the company's stock in May 2019, and the stock abbreviation was changed from "Kangmei Pharmaceutical" to "ST Kangmei".

After Kangmei Pharmaceutical's huge financial fraud was discovered, the company also fell from the altar of the A-share market's pharmaceutical "hakuba stock" and its stock price plummeted, plunged into endless litigation, and once wandered on the edge of delisting. Until announcing the "take off the hat" this time, it also means that the company has emerged from the darkest moment of the financial fraud storm in the secondary market, and Kangmei Pharmaceutical has finally "resurrected".

From the perspective of performance, Kangmei Pharmaceutical has shown positive development, and has achieved a turnaround in net profit. According to the annual report for 2023 and the first quarter report for 2024, the company's operating income in 2023 was 4.874 billion yuan, a year-on-year increase of 16.6%; the net profit attributable to the parent company was 103 million yuan, turning losses into profits. In the first quarter of 2024, operating income was 1.201 billion yuan, a year-on-year increase of 5.01%; the net profit attributable to the parent company was 7.4713 million yuan, turning losses into profits.

However, it is worth noting that although the net profit attributable to the parent company turned losses into profits on a year-on-year basis, Kangmei Pharmaceutical still cannot reverse its continuous loss in terms of adjusted net profit. From 2019 to 2023, Kangmei Pharmaceutical's adjusted net profit was in a huge loss state for 5 consecutive years, namely -4.865 billion yuan, -30.586 billion yuan, -7.968 billion yuan, -1.509 billion yuan, and -753 million yuan. In the first quarter of 2024, the adjusted net profit was still a loss of 58.4 million yuan.

From the perspective of stock price, ST Kangmei's stock price today closed at 1.93 yuan/share, with a total market value of 26.8 billion yuan. Before the financial fraud incident was exposed, the company's total market value reached more than 130 billion yuan at the end of May 2018. The current market value has shrunk by more than 100 billion yuan compared to its peak period.

Public information shows that Kangmei Pharmaceutical mainly engages in the production and sales of traditional Chinese medicine slices, chemical drugs, as well as the sales of external products and the trade of traditional Chinese medicinal materials. The company's main products include traditional Chinese medicine slices, traditional Chinese medicine formula particles, Chinese patent medicine, Western medicine, food and health products, etc.