Dividends have been paid for 9 consecutive years, and the 300-year-old store has been ST

Scale Business

2024-06-05 16:31Posted in Beijing Finance and Economics Creators

Text | Li Delin

I've paid back the money, why do you have to issue me a negative audit opinion? Li Zhenguo is probably confused when he looks at ST Jiuzhitang now. From entering Jiuzhitang in 2015 to the present, Jiuzhitang has been paying dividends for 9 consecutive years, and because of the 2023 internal control audit report issued by the auditor with a negative opinion, Jiuzhitang was put on the ST hat. Jiuzhitang, who has continuously paid dividends, and Boss Li, who frequently violates regulations, how did he send himself to ST step by step?

Jiuzhitang was established in the Shunzhi period and is as famous as Tongrentang. What really made Jiuzhitang famous in the capital market was the Yongjin system. In that year, Wei Dongnan, the boss of the Yongjin Department, fought in the north and pocketed a number of listed companies, and Jiuzhitang was one of the most important acquisitions. In 2008, after Wei Dong's death, the assets of the Yongjin system were disposed of one after another, and before 2015, Jiuzhitang's revenue hovered around 1 billion yuan in 10 years, and the net profit was also around 200 million yuan, until 2015, when Li Zhenguo entered the market, everything began to change.

In 2015, Jiuzhitang acquired 100% of the shares of Youbo Pharmaceutical for 6.5 billion yuan, and at the same time transferred 83.5 million shares of Jiuzhitang to Li Zhenguo, the actual controller of Youbo Pharmaceutical. Li Zhenguo's backdoor listing has a three-year performance commitment, that is, from 2015 to 2017, Youbo Pharmaceutical's non-net profit will not be less than 457 million yuan, 515 million yuan, and 579 million yuan respectively.

After Li Zhenguo entered Jiuzhitang, he insisted on dividends every year. By April 25, 2024, the 2023 financial report will be announced, with Jiuzhitang's revenue of 2.961 billion yuan and net profit of 297 million yuan. Obviously, after Li Zhenguo entered Jiuzhitang, both revenue and profit have changed. However, the internal control audit report issued with the annual report was issued a negative opinion by the auditor because Jiuzhitang failed to effectively implement the relevant corporate management system of margin and non-operating capital occupation by related parties.

What the hell is going on?

Jiuzhitang conducted a self-inspection within the company and found that between 2022 and 2024, the sales staff of Mudanjiang Bobo Pharmaceutical, a second-level wholly-owned subsidiary, negotiated privately with the agent, did not sign the deposit-related agreement, and used a non-company bank account to collect the deposit for the sales agency right of Shuxuetong injection. What's more critical is that there are 25 non-corporate bank accounts that collect deposits and Li Zhenguo have a lending relationship, involving a total amount of 55.9 million yuan. To put it bluntly, Li Zhenguo occupied the funds of listed companies.

From March 2022 to March 2024, Li Zhenguo spent two years on an average balance of 37 million yuan. Translated, the company uses non-company accounts to collect money, and the money received is occupied by the actual controller, so that the sales funds realize the extracorporeal circulation of the listed company, the actual controller overrides the internal control of the listed company, and the financial and compliance risk control system has become a decoration, if they are only obeyed by the actual controller, the company's finance is prone to the possibility of fraud.

A century-old store that insists on dividends every year, how did Li Zhenguo come to the road of ST step by step? Is the capital appropriation of cardiopulmonary bypass just an accidental mistake? Obviously, Rongcheng Certified Public Accountants, as an audit institution, did not audit Jiuzhitang for the first year, and the internal control audit report in 2022 was standard and unqualified. It means that Rong Cheng lied in 2022.

After Li Zhenguo entered Jiuzhitang, he paid a profit distribution of 4 yuan per 10 shares every year, including 2023, and insisted on it for 9 years. After Li Zhenguo's backdoor transaction, Jiuzhitang's revenue was sluggish, and the sales of Shuxuetong injection alone in 2017 were as high as 3.7 billion yuan. In that year, Jiuzhitang's net profit attributable to the parent company reached a historical peak of 712 million yuan. Coincidentally, in the third year of Li Zhenguo's VAM, the 2017 version of the National Medical Insurance Catalogue clarified that 26 kinds of traditional Chinese medicine injections, including Shuxuetong, were limited to the use of medical institutions above the second level, and the sales of Shuxuetong began to decline by 51.87% year-on-year in 2018, and the sales volume will only be 600 million yuan by 2023.

Li Zhenguo began to look for a second growth curve in 2018 after the adjustment of the medical insurance catalog. In 2018, it wants to acquire 26.87% of the equity held by Liu Meisen, the former natural person shareholder of Kexin Virtue, for 1.011 billion yuan. CoxinMed's product diabetes drug candidate, REMD-477, was hot at the time, but the deal didn't go through. Why? Because Li Zhenguo actually wants to cash out through Jiuzhitang personally in this transaction, that Liu Meisen works in a company actually controlled by Li Zhenguo, and the 60 million funds invested in Kexin Virtue are also Li Zhenguo's. Li Zhenguo cashed out his own by acquiring the interests held by the so-called third party Liu Meisen.

The exchange asked Jiuzhitang 16 questions at the time, except for Liu Meisen, Li Zhenguo's daughter Li He, as a supervisor of Kexin Virtue, held 22% of its shares, but Jiuzhitang did not say that the transaction was a related party transaction. If the acquisition of Liu Meisen's equity is successful, then Li Zhenguo will let Jiuzhitang acquire the equity of Kexin Virtue step by step, and the Li family can cash out more. The Hunan Securities Regulatory Bureau felt that Jiuzhitang and its executives had problems with their integrity, and issued a warning letter to them, which was also recorded in the integrity file of the China Securities Regulatory Commission.

Once a listed company has integrity problems, it is easy to be targeted by regulators. In 2020, the Hunan Securities Regulatory Bureau issued a warning letter to Li Zhenguo and the chief financial officer of Jiuzhitang, because the sales return of 39.3533 million yuan that occurred in Youbo Pharmaceutical in 2017 was not reflected in the financial report, because the large sales return after the balance sheet date is a balance sheet adjustment and should be reflected in the 2017 financial report, and the error correction will not be made until 2020. In addition, in 2018, there were major changes in external policies for drug sales, such as allowing additional conditions to be returned, which would have an impact on revenue recognition, and Jiuzhitang did not make an announcement.

The change in the medical insurance catalogue in 2017 had a huge impact on Jiuzhitang's products led by Shuxuetong injection, and Li Zhenguo's impact on it should be very clear, which is reflected in the financial statements in 2019, when the Securities Regulatory Bureau warned Li Zhenguo, Jiuzhitang's net profit attributable to the parent company fell to 192 million yuan, and has been within 400 million yuan since then. I wanted to cash out through mergers and acquisitions, but I didn't succeed, and in 2020, the 42.33% equity of Jiuzhitang held by Li Zhenguo was lifted one after another, and before this time it was ST, Boss Li's shareholding ratio had dropped to 25.17%, and the cumulative cash out exceeded 1 billion, if you count the annual dividends, Li Zhenguo took away more than 500 million book dividends.

After Li Zhenguo entered Jiuzhitang, in addition to the profit of six or seven billion yuan during the gambling period, after the gambling basically returned to the profit level before Jiuzhitang, almost 200 million. After the completion of the VAM, Jiuzhitang has not changed much in terms of product research and development, with R&D expenses never exceeding 150 million yuan in a single year, and the total marketing expenses being as high as 7.603 billion yuan. Although the gross profit is as high as more than 60%, the net profit is not high due to high sales expenses, and the return on equity is below 8% all year round.

Where is the future of Jiuzhitang?

In 2023, Jiuzhitang's revenue will be 2.961 billion yuan and sales expenses will be 1.11 billion yuan, and in 2022, the revenue will be 3.033 billion yuan and sales expenses will be 1.118 billion yuan. The sales rate is above 37%. There is Jiuzhi Hall in the south and Tongrentang in the north. In 2023, Tongrentang's revenue will be 17.861 billion, sales expenses will be 3.437 billion, and the sales rate will be 19.2%. Looking at Pien Tze Huang again, the revenue in 2023 will be 10.058 billion, the sales expenses will be 783 million, and the sales rate will be 7.78%. There is no harm if there is no comparison, the perennial return on net assets is low, and with this ST, the refinancing of Jiuzhitang may be difficult to achieve in the short term.

Jiuzhitang's ST encounter is actually traceable. When investors pay attention to the financial data of listed companies, there is a other receivable in the current assets of the balance sheet, if the data of this account is too large, it is easy to hide the non-operating funds occupied by major shareholders or related parties, and the proportion of other receivables in total assets is less than 1% relatively healthy. Jiuzhitang accounted for less than 1% from 2022 to 2023, didn't Rongcheng, as a professional accountant, go to check the accounts? It's not that there is no problem if it's less than 1%, but this subject in Jiuzhitang will only be 9.46 million in 2021, which is too big a jump from more than 40 million in 2022, shouldn't you ask why?

The 300-year-old store that has paid dividends for 9 consecutive years suddenly put on the ST hat to remind the bosses of listed companies that the operation of listed companies is a systematic project, do not hold a fluke mentality of covering up a hundred ugliness, and operate under the principle of three publics, in order to truly achieve a win-win situation. In the face of Jiuzhitang wearing an ST hat, perhaps, the common people will say that they are all cripples pulling radishes, nonsense.

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