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Yangtze Business Daily News●Huang Cong, reporter of Yangtze Business Daily

The stock price has fallen 38% this year, and the actual controller has been detained. It is difficult for ordinary people to restore confidence in the market for the time being.

On the evening of July 30, Laobaixing (603883.SH) announced that the company's actual controller and chairman Xie Zilong was detained and investigated.

The announcement by Laobaixing emphasized that the matters involving Xie Zilon have nothing to do with the company. As of the date of this announcement, the company has not received any notification from the relevant authorities, nor has it been asked to assist in the investigation.

However, in the secondary market, Laobaixing's stock price continued to fall, with a drop of 38% since 2024.

In terms of scale, in the first quarter of 2024, the number of Laobaixing stores exceeded 14,000 for the first time, with 642 new stores added in three months. However, the company's operating income in the first quarter only increased by 1.81% year-on-year, almost stagnating.

It is worth mentioning that on July 17, Laobaixing announced that it plans to implement a mid-term dividend for 2024, with the dividend amount being 50% of the net profit in the first half of the year.

A reporter from the Yangtze Business Daily found that over the past nine years, Xie Zilong and his wife, the actual controller of Laobaixing, have earned more than 2 billion yuan in cash through share reductions and dividends.

Said that Xie Zilong's case has nothing to do with the company

On the evening of July 30, Laobaixing announced that the company received a notice from the family of Xie Zilon, the company's actual controller and chairman, on the same day. Xie Zilon's family received a notice issued by the Hunan Provincial Supervision Commission on the same day that Xie Zilon was detained and a case was under investigation.

In the announcement, Laobaixing did not introduce the specific reasons why Xie Zilong was detained and investigated, but stated that "the matters involved have nothing to do with the company. As of the date of this announcement, the company has not received any notification from the relevant authorities and has not been asked to assist in the investigation."

At the same time, Laobaixing said that the company has a sound organizational structure and standardized governance system, and other directors, supervisors and senior management personnel are performing their duties normally. This matter will not have a significant impact on the company's normal operations.

According to information, Xie Zilong was born in September 1966 and is now 58 years old. He graduated from Xiangtan University with a major in industrial automation in 1994. He is the founder and chairman of Laobaixing.

At present, the actual controllers of Laobaixing, Xie Zilong and Chen Xiulan, hold 18.28% and 9.61% of the listed company's shares respectively.

On June 13, Xie Zilon also attended the 2023 Annual Shareholders' Meeting of Laobaixing.

On June 13, Laobaixing issued an announcement on the release of pledge of some shares of the controlling shareholder, showing that the company's controlling shareholder, Laobaixing Pharmaceutical Group Co., Ltd. (hereinafter referred to as "Pharmaceutical Group"), holds 153 million shares, accounting for 26.12% of the shares. Currently, 88.38 million shares are pledged, accounting for 57.86% of its shares and 15.11% of the company's total share capital.

Industrial and commercial information shows that the pharmaceutical group is held by Xie Zilong and Chen Xiulan, who hold 70% and 30% respectively, for a total of 100%.

The number of stores has exceeded 14,000

Laobaixing is one of the leading pharmaceutical retail chain enterprises in China. The company's business categories include Chinese and Western patent medicines, Chinese herbal medicines, health-preserving Chinese medicines, health equipment, health foods, general foods, personal care products and daily necessities.

In addition to drug retail, Laobaixing also engages in drug wholesale and manufacturing (mainly the manufacturing of Chinese patent medicines and Chinese herbal medicines).

As of December 31, 2023, Laobaixing has built a marketing network covering 18 provinces and more than 150 prefecture-level cities across the country, with a total of 13,574 stores, including 9,180 directly-operated stores and 4,394 franchise stores. In 2023, the company will add 3,388 new stores, including 1,802 directly-operated stores (1,471 self-built stores and 331 acquired stores) and 1,586 franchise stores.

Among pharmaceutical retail chains, Laobaixing is a leading company.

Statistics show that as of the end of 2023, the number of Dasanlin stores is 14,074, the number of Yifong Pharmacy stores is 13,250, the total number of Guoda Pharmacy stores under Sinopharm United is 10,516, and the number of Yixintang stores is 10,255.

In the first quarter of 2024, Laobaixing achieved operating income of 5.539 billion yuan, a year-on-year increase of 1.81%; net profit of 321 million yuan, a year-on-year increase of 10.27%.

Obviously, Laobaixing's revenue growth almost stagnated in the first quarter, but the company continued to expand and grab land.

As of March 31, 2024, Laobaixing's chain network (excluding alliances) covers 18 provincial markets and more than 150 cities at the prefecture level and above, with a total of 14,109 stores nationwide, including 9,470 directly-operated stores and 4,639 franchise stores.

In the first quarter of 2024, the number of Laobaixing stores exceeded 14,000 for the first time, with 642 new stores added, including 357 directly-operated stores (351 self-built stores and 6 acquired stores) and 285 franchised stores.

At the same time, Laobaixing introduced that the company has been focusing on deepening its presence in the lower-tier cities. As of March 31, 2024, the company's stores in prefecture-level cities and below accounted for 76%; among the company's new stores in the first quarter of 2024, stores in advantageous provinces and key cities accounted for 85%, and stores in prefecture-level cities and below accounted for 77%.

The stock price hit a new low and fell 38% this year

In the capital market, Xie Zilong and his wife have made a fortune through share reduction and dividends.

On April 23, 2015, Laobaixing entered the A-share market through an IPO.

Three years later, in 2018, the restrictions on the sale of some of the shares held by Xie Zilong and his wife were lifted. In July of that year, Chen Xiulan sold 3.0669 million shares through the secondary market, cashing in about 217 million yuan.

In 2020, the pharmaceutical group carried out two share reductions, and the shares reduced through block transactions were 5.7336 million shares and 4.3734 million shares, respectively, cashing in approximately 426 million yuan and 321 million yuan.

At that time, Laobaixing announced that the pharmaceutical group's reduction in holdings was mainly to adjust its assets and financing structure and reduce the stock pledge rate.

In September 2022, the pharmaceutical group further reduced its holdings by 11.6469 million shares, cashing in 344 million yuan.

Over the past four years, Xie Zilong and his wife have sold off their shares and cashed out a total of about 1.3 billion yuan.

Not only that, since its listing, Laobaixing has distributed dividends 10 times, with a cumulative dividend amount of 1.756 billion yuan.

Incomplete statistics show that Xie Zilong and his wife have received dividends totaling more than 500 million yuan.

On July 17, Laobaixing announced that it plans to implement a mid-year dividend for 2024, with the dividend amount being 50% of the net profit in the first half of the year.

Overall, over the past nine years, Xie Zilong and his wife, the actual controllers of Laobaixing, have earned more than 2 billion yuan in cash through share reductions and dividends.

However, in the secondary market, Laobaixing's issue price is 16.41 yuan per share, and the current share price is hovering around 14 yuan per share, which is the lowest point in the company's history. It has fallen by about 38% in 2024.

At the end of June 2024, Laobaixing said in a survey that with the tightening of supervision on the pharmaceutical retail industry and the intensification of market competition, the operating pressure on small and medium-sized chains and single pharmacies will further increase, the willingness to sell and exit the market will further strengthen, and valuations may show a downward trend.

The market is also optimistic. BOC International Securities believes that the average size of China's chain pharmacies is relatively small, and there is still room for industry integration. Even in advantageous regions where leading pharmacies have deep roots, there is still room for improvement in the number of stores they sell. The circulation mechanism and reimbursement issues for prescription outflows are gradually improving, and the process is expected to accelerate.