Securities abbreviation: Yantai Dongcheng Biochemicals Co.Ltd(002675) securities code: Yantai Dongcheng Biochemicals Co.Ltd(002675) Yantai Dongcheng Biochemicals Co.Ltd(002675)
And
Minsheng Securities Co., Ltd
about
Letter on making preparations for the meeting of the stock issuance and Examination Committee of Yantai Dongcheng Biochemicals Co.Ltd(002675) non-public Development Bank
Reply from
Sponsor (lead underwriter)
(No. 8, Puming Road, China (Shanghai) pilot Free Trade Zone)
April, 2002
China Securities Regulatory Commission:
According to the letter on making preparations for the meeting of the stock issuance and Examination Committee of Yantai Dongcheng Biochemicals Co.Ltd(002675) non-public Development Bank (hereinafter referred to as the “notification letter”) issued by your association on March 29, 2022, Minsheng Securities Co., Ltd. (hereinafter referred to as “Minsheng securities” or “recommendation institution”) will work with the issuer Yantai Dongcheng Biochemicals Co.Ltd(002675) (hereinafter referred to as “issuer” or “company” or “applicant” or ” Yantai Dongcheng Biochemicals Co.Ltd(002675) ) The issuer’s lawyer, Beijing Zhonglun law firm (hereinafter referred to as “the issuer’s lawyer”), and the issuer’s accountant, zhongtianyun Certified Public Accountants (special general partnership) (hereinafter referred to as “the issuer’s accountant” or “the accountant”), have carefully checked and implemented the issues involved in the notification letter one by one. The reply is as follows, please review.
Unless the context otherwise requires, the abbreviation in this reply has the same meaning as the abbreviation in the due diligence report of Minsheng Securities Co., Ltd. on non-public development of A-share shares in Yantai Dongcheng Biochemicals Co.Ltd(002675) 2021 (hereinafter referred to as the “due diligence report”); For the data quoted in this reply, if there is a difference between the sum of the total number and the number of sub items directly added, or there is a difference between the mantissa after the decimal point and the original data, it is formed by different exact digits or rounding.
catalogue
catalogue 2 question 1 3 question 2 26 question 1
About goodwill. The amount of goodwill of the company in the reporting period was relatively large. By the end of September 2021, the balance of goodwill of the company was 2.596 billion yuan, accounting for 34.29% of the total assets at the end of the period and 50.78% of the net assets at the end of the period. Whether the impairment of goodwill is fully tested according to the assumptions of the applicant and whether the actual impairment of goodwill is fully tested according to the annual impairment test of goodwill. The recommendation institution and the applicant’s accountant shall explain the verification basis and process, and express clear verification opinions. reply:
1、 The applicant is requested to compare the main assumptions and actual conditions adopted in the goodwill impairment test of each year in the reporting period according to a single acquisition project, and explain whether the assumptions in the goodwill impairment test are reasonable and whether the provision for goodwill impairment is sufficient
At the end of each reporting period, the book value of the company’s goodwill was 26975567 million yuan, 25673552 million yuan, 25999815 million yuan and 25959439 million yuan respectively. The details are as follows:
Unit: 10000 yuan
Project 202109.30202012.31201912.31201812.31
Original book value: 27683161277235382739727526975567
Provision for impairment:
Yantai Dongcheng Dayang Pharmaceutical Co., Ltd. 106049710604971060497-
SINO SIAM BIOTECHNIQUE
Co., Ltd. (Zhongtai Biological Products Co., Ltd. 663225663225663225 – company)
Total 172372317237231723723-
Book value:
Yantai Dongcheng Dayang Pharmaceutical Co., Ltd. 1861761861761246673
Chengdu Yunke Pharmaceutical Co., Ltd. 58380665838066583806658380665838066
Shanghai Yitai Pharmaceutical Technology Co., Ltd. 525956525956525956525956
Dongcheng international 3995186401951942975334227921 limited Sino Siam biotechnique
Co., Ltd. (Sino Thai Biological Products Co., Ltd. 19709581987 Holitech Technology Co.Ltd(002217) 03072787635)
Nanjing Jiangyuan andike positron research and Development Co., Ltd
Revolving pharmaceutical asset group 306200306200306200-
Midu (Nanjing) Biotechnology Co., Ltd. 787582 —
Total 25959439259998152567355226975567
Among them, the asset group of Dongcheng International Limited includes Shanghai Xinke, Beijing Senke, Beijing Xinke and Nanjing Senke.
Whirlpool pharmaceutical asset group includes Guangdong whirlpool and Hunan whirlpool.
At the end of 2021, according to the relevant requirements of the CSRC’s accounting regulatory risk tip No. 8 – goodwill impairment, the company made a comprehensive estimation of the future operation of the company with goodwill during the reporting period and conducted a goodwill impairment test. According to the preliminary impairment test results, the company expects to withdraw about 211 million yuan of goodwill impairment reserves for Zhongtai biological asset group and Dongcheng ocean asset portfolio in 2021.
By the end of 2021, the book value of Dongcheng ocean’s goodwill was 186176 million yuan. According to the preliminary test results, the provision for goodwill impairment is expected to be 186176 million yuan in 2021, which is mainly due to the impact of the national medical reform policy. It is expected that the market promotion of Dongcheng ocean’s main products will be more difficult in the future, and the company has reduced its performance expectations for Dongcheng ocean in the future; The book value of the goodwill of Zhongtai biology is 19264001 million yuan. According to the preliminary test results, it is estimated that the goodwill impairment provision of 19264001 million yuan will be withdrawn in 2021, mainly because the international market price of chondroitin sulfate continues to be in the doldrums, and there is no sign of improvement in the short term. The company has reduced its expectations for the future performance of Zhongtai biology. After the preliminary impairment test, the remaining asset groups are not expected to make provision for goodwill impairment.
(I) Dongcheng ocean
During the reporting period, Beijing zhongtianhua Assets Appraisal Co., Ltd. accepted the entrustment of Yantai Dongcheng Biochemicals Co.Ltd(002675) and comprehensively considered various influencing factors to evaluate the recoverable value of Dongcheng Dayang assets group.
The main assumptions predicted in the asset appraisal report include:
(1) There are no significant changes in the current relevant national laws, regulations and policies, the national macroeconomic situation, and the political, economic and social environment of the region where the parties to this transaction are located.
(2) According to the actual situation of the assets on the benchmark date, it is assumed that the enterprise will continue to operate.
(3) It is assumed that the company’s operators are responsible and the company’s management is capable of taking their positions.
(4) Unless otherwise stated, it is assumed that the company fully complies with all relevant laws and regulations.
(5) It is assumed that the accounting policies to be adopted by the company in the future are basically consistent with those adopted when preparing the evaluation report in important aspects.
(6) It is assumed that the cash inflow of the appraised entity after the benchmark date is uniform inflow and the cash outflow is uniform outflow.
(7) It is assumed that the business scope and mode of the company are consistent with the current direction on the basis of the existing management mode and management level.
(8) There will be no significant changes in relevant interest rates, exchange rates, tax benchmarks and tax rates, policy collection fees, etc.
(9) There are no other force majeure and unforeseen factors that have a significant adverse impact on the enterprise. Based on the above main assumptions, the company has determined the predicted value of the main financial data. The comparison between the predicted value of the financial data of each year and the actual situation is as follows:
Unit: 10000 yuan
Project 20192020 2021
Forecast data actual data forecast data actual data forecast data actual data
Revenue growth rate 66.34%, 2.48%, 49.96% – 62.08%, 239.97% – 30.13%
Operating income 11947707306931103850279100948861194995
Total profit 191180 343.36 715.30 -192256 -412.20 -291259
Cost rate 29.61%, 33.39%, 33.72%, 84.52%, 53.89%, 141.77%
Gross profit margin 47.34%, 39.12%, 41.72%, 23.23%, 51.21%, 7.43%
Discount rate 12.80% – 12.90% – 13.00%-
Note 1: the actual performance in 2021 has not been audited. The company has conducted pre communication with the annual audit accounting firm on the unaudited actual performance. There is no significant difference between the two sides on the actual performance. The specific financial data shall be subject to the 2021 annual report disclosed by the company. Note 2: the forecast data of 2019 comes from the data of the first year of the forecast period of 2018 goodwill impairment assessment report, the forecast data of 2020 comes from the data of the first year of the forecast period of 2019 goodwill impairment assessment report, and the forecast data of 2021 comes from the data of the first year of the forecast period of 2020 goodwill impairment assessment report.
1. Goodwill impairment test in 2018
At the end of 2018, the company conducted an impairment test on Dongcheng Dayang asset group. The company expects the operating revenue and total profit of Dongcheng Dayang asset group to be 119477 million yuan and 19.618 million yuan respectively in 2019, and the expected revenue growth rate will reach 66.34%. The above prediction made by the company is mainly based on the following factors: in 2018, under the background that the consistency evaluation of the drugs in the 289 base drug catalogue must be completed by the end of 2018 according to the relevant national policies, the company expects that the ambroxol market will be rearranged in 2019, bringing new opportunities. Therefore, the company has specially established ambroxol business unit and OTC business unit to manage sales through sub channels and fully grasp the opportunities, Improve the market share of the company’s products, and it is expected that the sales volume of ambroxol series products will increase significantly in 2019. According to the goodwill impairment test results at the end of 2018, the fair value of the overall goodwill included in Dongcheng Dayang asset group is 176370800 yuan, and the present value (recoverable amount) of the expected future cash flow of the asset group is 1924011 million yuan. The present value of the expected future cash flow is greater than the fair value of the overall goodwill included in the asset group, so no provision for goodwill impairment is made.
2. Hypothetical realization and goodwill impairment test in 2019
In 2019, the total operating income and profit of Dongcheng Dayang asset group were 730693 million yuan and 3.4336 million yuan respectively, which was significantly different from the predicted data during the goodwill impairment test at the end of 2018. It was mainly affected by the failure of the consistency evaluation of ambroxol oral dosage form generic drugs and the progress of 4 + 7 centralized purchase. The company originally predicted ambroxol
