in recent years. Major listed chain drugstores are competing for M & A and expansion, and the industry enclosure competition is fierce. Can Jiuzhitang Co.Ltd(000989) work together Yifeng Pharmacy Chain Co.Ltd(603939) stand out
On April 25, Jiuzhitang Co.Ltd(000989) and Yifeng Pharmacy Chain Co.Ltd(603939) announced that Yifeng Pharmacy Chain Co.Ltd(603939) planned to invest 204 million yuan to acquire 51% of the equity of Jiuzhitang Co.Ltd(000989) subsidiary Hunan Jiuzhitang Co.Ltd(000989) Pharmaceutical Co., Ltd. (hereinafter referred to as “Hunan Jiuzhitang Co.Ltd(000989) “).
On the same day, Jiuzhitang Co.Ltd(000989) shares closed at 9.07 yuan / share, down 10.02%, and Yifeng Pharmacy Chain Co.Ltd(603939) shares closed at 33.18 yuan / share, down 5.74%.
“Yifeng Jiuzhitang Co.Ltd(000989) ” or birth
The acquired Hunan Jiuzhitang Co.Ltd(000989) has two subsidiaries, which are respectively engaged in drug retail and drug wholesale business. It has 190 direct chain stores and 359 franchise stores, all located in Hunan Province.
In fact, this transaction is not the first contact between the two companies.
As early as this transaction, on April 23, Li Zhenguo, the controlling shareholder and chairman of Jiuzhitang Co.Ltd(000989) signed a stock transfer agreement with Yifeng Pharmacy Chain Co.Ltd(603939) to transfer 5% of the company’s shares held by him to Yifeng Pharmacy Chain Co.Ltd(603939) , with a total transaction price of 428 million yuan.
Subsequently, Yifeng Pharmacy Chain Co.Ltd(603939) spent 204 million yuan to purchase Jiuzhitang Co.Ltd(000989) subsidiaries, and the two transactions involved a total amount of 632 million yuan. According to the agreement, Yifeng Pharmacy Chain Co.Ltd(603939) may become the fourth largest shareholder of Jiuzhitang Co.Ltd(000989) within one year.
Jiuzhitang Co.Ltd(000989) was established in 1999 and listed on the Shenzhen Stock Exchange in 2000. It has two “Chinese well-known trademarks” Jiuzhitang Co.Ltd(000989) “and” Youbo “. The product categories cover cardio cerebrovascular, kidney tonifying, blood tonifying, women and children, facial features and other fields.
In 2015, the Youbo Pharmaceutical Co., Ltd. of Li Jianguo from Northeast China was backdoor Jiuzhitang Co.Ltd(000989) listed.
Therefore, the cooperation between Yifeng Pharmacy Chain Co.Ltd(603939) and Jiuzhitang Co.Ltd(000989) , in a sense, is also the return of Jiuzhitang Co.Ltd(000989) “Xiang school gene”. Both parties also specially emphasized in the announcement that the time-honored name of ” Jiuzhitang Co.Ltd(000989) ” can be retained.
In recent years, with products facing the ceiling of growth, the net profit data of Jiuzhitang Co.Ltd(000989) is not bright. According to the data, from 2019 to 2021, the company’s revenue was 3.184 billion yuan, 3.56 billion yuan and 3.784 billion yuan respectively, but its net profit was only 187 million yuan, 270 million yuan and 268 million yuan respectively.
High sales expenses account for almost half of the revenue. No wonder the net profit has not improved after a short increase.
So, what changes can Jiuzhitang Co.Ltd(000989) bring to by cooperating with Yifeng Pharmacy Chain Co.Ltd(603939) ?
The announcement shows that new Hunan Jiuzhitang Co.Ltd(000989) purchases Jiuzhitang Co.Ltd(000989) traditional Chinese medicine and great health products in accordance with the principle of market fairness, and actively introduces Jiuzhitang Co.Ltd(000989) products Yifeng Pharmacy Chain Co.Ltd(603939) will make use of its advantages of centralized commodity purchase and high-quality pharmaceutical retail supply chain system to import Yifeng Pharmacy Chain Co.Ltd(603939) core competitive varieties into new Hunan Jiuzhitang Co.Ltd(000989) by taking advantage of its own advantages of centralized commodity purchase.
In Hunan Province, the new stores in Hunan Jiuzhitang Co.Ltd(000989) will still adopt the form of ” Jiuzhitang Co.Ltd(000989) ” store recruitment. However, in the areas outside Hunan Jiuzhitang Co.Ltd(000989) or newly developed areas in the future, according to the regional culture and consumption characteristics and needs, a new “Yifeng Jiuzhitang Co.Ltd(000989) ” may be born to realize the differentiated development of chain pharmacies with stores or in store stores with traditional Chinese medicine characteristics.
After the completion of this transaction, Hunan Jiuzhitang Co.Ltd(000989) will no longer be included in Jiuzhitang Co.Ltd(000989) consolidated statements, and it is expected to increase Jiuzhitang Co.Ltd(000989) current net profit (non recurring profit and loss) by about 158 million yuan. In the first year after the completion of business integration, Hunan Jiuzhitang Co.Ltd(000989) sales volume is expected to be no less than 1.137 billion yuan and net profit no less than 18.4 million yuan.
drugstore opens M & a race
In recent years, the major listed chain pharmacies have competed for M & A and expansion in order to stand out in the brand competition.
Previously, Yunnan Jianzhijia Health-Chain Co.Ltd(605266) acquired Tangren pharmaceutical, which has more than 660 Direct stores After the acquisition of Hunan Yiren pharmacy, it has become the third largest drugstore in Hunan Province.
It is the core logic of the retail pharmacy industry to continuously increase stores through “new construction + M & a” to achieve greater market share and scale effect. Under this trend, Yifeng Pharmacy Chain Co.Ltd(603939) is also sparing no effort to catch up.
From 2017 to 2020, Yifeng Pharmacy Chain Co.Ltd(603939) the average number of stores acquired was 440. In the golden age of market concentration improvement, we ran to seize the location resources. Especially in 2018 and 2019, Yifeng acquired nearly 1400 pharmacies, increasing the performance by more than 30% in these two years.
However, in the continuous “internal volume” of the industry, Yifeng Pharmacy Chain Co.Ltd(603939) still lags behind Lbx Pharmacy Chain Joint Stock Company(603883) , Yixintang Pharmaceutical Group Co.Ltd(002727) and Dashenlin Pharmaceutical Group Co.Ltd(603233) .
As of the third quarter of 2021, Yixintang Pharmaceutical Group Co.Ltd(002727) as the brand with the smallest market value among chain drugstores, has 8356 stores, ranking first Lbx Pharmacy Chain Joint Stock Company(603883) and Dashenlin Pharmaceutical Group Co.Ltd(603233) followed, with 8163 stores and 7610 stores respectively. The total number of Yifeng Pharmacy Chain Co.Ltd(603939) stores is only 7246, ranking last.
Recently, the trend of Yifeng Pharmacy Chain Co.Ltd(603939) share price has also been declining. Since June 2021, its share price has fallen from 70.54 yuan / share to 32.90 yuan / share in today’s session, down 53.35%.
In October 2021, the Ministry of Commerce issued a document announcing that the overall goal of the country is to cultivate and form 1-3 large-scale digital and comprehensive drug circulation enterprises exceeding 500 billion yuan and 5-10 large-scale comprehensive drug circulation enterprises exceeding 100 billion yuan, 5-10 professional and diversified drug retail chain enterprises exceeding 50 billion yuan, and about 100 intelligent, characteristic and platform drug supply chain service enterprises by 2025. The annual sales of the top 100 pharmaceutical wholesale enterprises account for more than 98% of the total volume of the pharmaceutical wholesale market; The annual sales of the top 100 drug retail enterprises account for more than 65% of the total drug retail market; The drug retail chain rate is close to 70%.
To achieve this goal, the growth rate of stores must be fast, and the acquisition of small and medium-sized brands is obviously not as efficient as the acquisition of large brands. It can be seen that the M & a competition of listed chain pharmacies will be more intense in the future.
