Net profit fell by nearly 90%. Taiji Group, an established pharmaceutical company, embarks on a mixed reform path, and Sinopharm Group may take over
Chongqing Fuling State-owned Assets has two major holding companies, one is the well-known Fuling mustard tuber, and the other is an established pharmaceutical companyTai Chi Group. With the continuous advancement of the medical reform policy, Taiji Pharmaceutical has had a difficult time in recent years, and the Fuling SASAC decided to implement a mixed reform.
On October 19th, Chongqing Taiji Industry (Group) Co., Ltd. (hereinafter referred to as”Taiji Group”) released the company’s mixed improvement exhibition.
Taiji Group stated that the actual controller of the company intends to introduce China National Pharmaceutical Group (hereinafter referred to as”Sinopharm Group“) or its subsidiaries as strategic investors. At the same time, Taiji Group reminded that the above plan may lead to changes in the company’s actual controller.
However, the news that Sinopharm Group may become the master has not been able to save Taiji Group’s share price. At 9:15 on October 19, the stock had a daily limit during the call auction, and only 1 minute later, the stock price fell heavily. As of the close, the stock closed at 15.59 yuan per share, a drop of 2.68%.
Performance has fallen sharply year after year
According to public information, Tai Chi Group, established in 1993, has a history of 26 years and has become the first batch of listed pharmaceutical companies in China. Relying on Bai Lixi’s precise control of the traditional medicine market, Tai Chi Group has launched a series of well-known star products such as Huoxiang Zhengqi Oral Liquid and Tomato Capsules.
In recent years, with the continuous advancement of medical reform policies, established pharmaceutical companies are no longer popular, and Taiji Group’s performance has been declining. In 2017, the company achieved operating income of 8.735 billion yuan, an increase of 9.84%year-on-year, but its net profit attributable to the parent fell by 88.54%to 98.133.5 million yuan.
Since then, Tai Chi Group’s performance has declined year after year. As of the first half of this year, the company achieved operating income of 5.754 billion yuan, down 6.43%year-on-year; realized net profit attributable to the parent of 10.2176 million yuan, down 88.53%year-on-year.
The reason is related to the decline in sales of the company’s backbone product Huoxiang Zhengqi Oral Liquid. In 2016, the sales of Huoxiang Zhengqi Oral Liquid reached 1 billion yuan. To this end, the company has also formulated a ten-year strategic plan for the product, that is, domestic sales in 2018 will reach 2 billion yuan.
However, the sales volume of Huoxiang Zhengqi Oral Liquid in 2018 was almost”halved” compared to expectations. The product was described in the annual report that year as”reaching 1 billion yuan.” By 2019, the sales decline of Huoxiang Zhengqi Oral Liquid has further intensified, with sales of only 600 million yuan. In the first half of this year, sales of this product were 490 million yuan.
In order to change the performance declining trend, as early as 2018, Taiji Group had already adjusted its capital structure at the level of listed companies. In 2018, Taiji Group completed the private placement and raised 1.997 billion yuan. Jointown Pharmaceutical Group Co., Ltd. (hereinafter referred to as”Jointown”) through this fixed increase holding 4.2%of the shares, became Taiji Group The second largest shareholder.
The market believes that this move is a precursor to the mixed reform of the established pharmaceutical company Taiji Group. According to data, Jointown is one of the few private enterprises that can be deployed nationwide among pharmaceutical distribution companies. On the one hand, the cooperation between the two parties can export the management and operation of private enterprises to the Taiji Group; on the other hand, it can help the Taiji Group expand the sales scope of its products.
The mixed reform officially kicked off
One year after Jointown joined, February 2019 , Taiji Group issued an announcement stating that the controlling shareholder Taiji Co., Ltd. plans to carry out mixed ownership reforms and introduce strategic investors as new shareholders. At that time, the market believed that Jointown was the most likely target to participate in the Taiji Group’s mixed reform.
After more than a year, the mixed reform of Taiji Group finally kicked off. However, unlike market forecasts, the target of participating in the Taiji Group’s mixed reform is Sinopharm Group.
According to the data, Sinopharm Group was established on November 26, 1998. It is China’s largest, most complete industrial chain and strongest comprehensive strength in the pharmaceutical and health industry group directly managed by the State-owned Assets Supervision and Administration Commission of the State Council. It has 11 wholly-owned or holding subsidiaries. Among them, 5 companies including Sinopharm, Sinopharm, Tiantan Biological, Hyundai Pharmaceutical and Accord Pharmaceutical were listed.
In an interview with a reporter from the International Finance News, the middle-level management of an established listed pharmaceutical company said, “Sinopharm Group has a lot of resources, such as capital, products, channel resources, terminal resources, policy resources, etc. , Can help Taiji Group to reverse its current predicament.” In addition to the decline in sales of backbone products, the excessive debt ratio is also an important issue facing Taiji Group’s mixed reform. Financial data show that in recent years, Taiji Group’s debt ratio has been maintained at a high level. In the first half of this year, the asset-liability ratio of Taiji Group in 2018 was 77.77%. In the previous 12 years, the debt ratio of Taiji Group exceeded 70%, far exceeding the average level of the pharmaceutical industry.
At the same time, the cash flow of Taiji Group is also in crisis. According to the financial report, from 2018 to the first half of 2020, Taiji Group’s operating cash flow dropped from 104 million yuan to 146 million yuan. At the same time, Taiji Group’s latest short-term loans and non-current liabilities due within one year are 3.762 billion yuan and 673 million yuan, while the monetary funds on the books are only 1.849 billion yuan, which may face greater debt repayment pressure.
In order to alleviate financial pressure, in addition to the fixed increase in 2018, Tai Chi Group has also sold houses, land use rights, equity, production plants and office buildings and other assets. At the end of September this year, an announcement was issued stating that the assets of Chengdu Xinhengsheng Real Estate Development Co., Ltd. (Chengdu Xinhengsheng Company) and other assets that it intends to hold will be transferred, and it is expected that the proceeds will be about 401 million yuan.
Shi Lichen, head of Beijing Dingchen Pharmaceutical Management Consulting Center, said in an interview with a reporter from International Finance News, “Veteran state-owned pharmaceutical companies generally have low efficiency, low R&D investment, serious bureaucracy, and resource utilization. Lowering these four problems, the introduction of new capital can improve the shortcomings of its old style to a certain extent. However, the effectiveness of the mixed reform depends on how much control the new capital has over the company. If it only changes the company’s equity Structure, and the new capital cannot really participate in the company’s operations and decision-making, the mixed reform is a failure. Mixed reform must be changed to multiple levels, including corporate culture, organizational structure, operating procedures, company systems, etc. to succeed, but this It is difficult to achieve.”
Reporter Jin Min