On March 7, Shanghai Pharmaceuticals Holding Co.Ltd(601607) ( Shanghai Pharmaceuticals Holding Co.Ltd(601607) , SH) replied to the feedback of the CSRC on its non-public offering in 2021.
The reporter of the daily economic news noted that the CSRC gave feedback on the subscription objects, monetary funds, liabilities, goodwill, accounts receivable and other issues of Shanghai Pharmaceuticals Holding Co.Ltd(601607) .
As for the risk of goodwill impairment of Shanghai Pharmaceuticals Holding Co.Ltd(601607) , the recommendation institution indicated that as of the end of June 2021, the book value of Shanghai Pharmaceuticals Holding Co.Ltd(601607) goodwill was RMB 11.28 billion, accounting for 25.36% of non current assets. If the future operation of relevant enterprises fails to meet the expectations, the goodwill of the company may be impaired, and there is a certain risk of goodwill impairment.
said that there was no risk of significant impairment of goodwill
At the end of 2020, the goodwill balance of Shanghai Pharmaceuticals Holding Co.Ltd(601607) was 11.342 billion yuan. The CSRC required Shanghai Pharmaceuticals Holding Co.Ltd(601607) to explain the reasons for the formation of goodwill, the performance of underlying assets, and the impairment of goodwill.
"The goodwill of the issuer is mainly generated by the acquisition of pharmaceutical manufacturing, distribution and retail business through business merger not under the same control, which are directly related to the main business." Shanghai Pharmaceuticals Holding Co.Ltd(601607) said, "during the reporting period, the issuer formed goodwill of 6.738 billion yuan due to acquisition, accounting for 50.76% of the total goodwill as of June 30, 2021."
The CSRC asked: "if there is any difference between the predicted performance of goodwill impairment test at the end of 2019 and the actual performance in 2020, explain the reason and rationality of the difference, whether there is a significant impairment risk of goodwill, and whether the relevant risk tips are sufficient."
Image source: Shanghai Pharmaceuticals Holding Co.Ltd(601607) announcement screenshot
According to Shanghai Pharmaceuticals Holding Co.Ltd(601607) announcement, compared with the actual performance in 2020, many companies and businesses predicted in the goodwill test at the end of 2019 have not been completed. Among them, Zhejiang Jiuxu Pharmaceutical Co., Ltd. (hereinafter referred to as Zhejiang Jiuxu) has a revenue completion rate of 63% and an EBIT completion rate of 13%; The revenue completion rate of bigglobal limited and its subsidiaries is 75%, and the EBIT completion rate is 62%.
Shanghai Pharmaceuticals Holding Co.Ltd(601607) said that the actual performance of Zhejiang Jiuxu in 2020 was lower than the forecast of goodwill impairment test at the end of 2019, mainly because the epidemic reduced sales, blocked its OTC channel sales in Hubei, and suspended cooperation with some downstream dealers of the channel, resulting in a sharp decline in sales.
For big global limited and its subsidiaries, Shanghai Pharmaceuticals Holding Co.Ltd(601607) said that Dongying pharmaceutical is the main business entity of big global limited, its revenue mainly comes from cisatracurium benzenesulfonate for injection, and its product structure is relatively single. Cisatracurium benzenesulfonate for injection is an auxiliary anesthetic for surgery. Although only four enterprises in China have been approved to produce, the imitation narcotic drugs are under the centralized control of the state, and the growth of sales end customers slows down. At the same time, due to the outbreak of the epidemic in 2020, the operation business of the hospital is limited, and the demand for narcotic drugs is greatly reduced, resulting in lower profitability than expected.
As for the impairment of goodwill, Shanghai Pharmaceuticals Holding Co.Ltd(601607) believes that from January to June 2021, Zhejiang Jiuxu achieved a sales revenue of 110 million yuan, a year-on-year increase of 67.5%, a net profit of 14 million yuan, a year-on-year increase of 139.9%. The performance has gradually recovered, and there is no risk of significant impairment of goodwill; For big global limited and its subsidiaries, Shanghai Pharmaceuticals Holding Co.Ltd(601607) said that the provision for impairment of goodwill had been further withdrawn by 350 million yuan in 2020. The asset group had fully withdrawn the provision for impairment of goodwill, and there was no risk of further impairment of goodwill.
"The difference between the predicted performance in 2020 and the actual performance in 2020 in the goodwill impairment test at the end of 2019 is reasonable, and there is no risk of significant impairment of goodwill." Shanghai Pharmaceuticals Holding Co.Ltd(601607) indicates.
said the balance of accounts receivable matched the business scale
By the end of the third quarter of 2021, the balance of accounts receivable of Shanghai Pharmaceuticals Holding Co.Ltd(601607) was about 60.879 billion yuan. The CSRC requires Shanghai Pharmaceuticals Holding Co.Ltd(601607) to explain the reasons for the high amount of accounts receivable, whether it matches the business scale, and explain the rationality of the high scale of accounts receivable and the provision for bad debt reserves.
"With the continuous growth of the issuer's business scale, the income scale is also increasing year by year, and the balance of accounts receivable is also increasing. The proportion of the balance of accounts receivable to the current operating income is 27.70%, 26.48%, 28.51% and 28.81% respectively, and the balance of accounts receivable matches the issuer's business scale." Shanghai Pharmaceuticals Holding Co.Ltd(601607) indicates.
Image source: Shanghai Pharmaceuticals Holding Co.Ltd(601607) announcement screenshot
Shanghai Pharmaceuticals Holding Co.Ltd(601607) said that there was no significant difference between the proportion of its accounts receivable balance and income scale compared with comparable companies in the same industry; The turnover rate of accounts receivable is slightly lower than that of comparable companies in the same industry, but there is no significant difference.
Image source: Shanghai Pharmaceuticals Holding Co.Ltd(601607) announcement screenshot
In 2018, 2019, 2020 and the first half of 2021, Shanghai Pharmaceuticals Holding Co.Ltd(601607) the withdrawing proportion of bad debt provision for accounts receivable was 4.33%, 4.18%, 3.59% and 3.56% respectively.
Shanghai Pharmaceuticals Holding Co.Ltd(601607) said: "there is no significant difference between the issuer's provision for bad debts of accounts receivable and comparable companies in the same industry. Affected by the application time of the new financial instrument standards, the overall provision for bad debts in 2018 and 2019 is slightly higher than the average level of comparable companies in the same industry."
In addition, in response to the CSRC's question about whether the introduced subscription object Yunnan Baiyao Group Co.Ltd(000538) meets the regulations, Shanghai Pharmaceuticals Holding Co.Ltd(601607) said that Yunnan Baiyao Group Co.Ltd(000538) meets the relevant requirements of strategic investors.
" Yunnan Baiyao Group Co.Ltd(000538) can bring advanced mechanism experience empowerment and strong financial support to Shanghai Pharmaceuticals Holding Co.Ltd(601607) to promote Shanghai Pharmaceuticals Holding Co.Ltd(601607) to accelerate the implementation of innovation and transformation strategy. At the same time, it can bring leading market, channel, brand and other strategic resources to Shanghai Pharmaceuticals Holding Co.Ltd(601607) and greatly promote Shanghai Pharmaceuticals Holding Co.Ltd(601607) market expansion and industrial upgrading." Shanghai Pharmaceuticals Holding Co.Ltd(601607) scale.
