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Consumer Daily News (Reporter Lu Yue) On the evening of July 30, the peoplePharmacyChain Store Co., Ltd. (hereinafter referred to as "Laobaixing Pharmacy") issued an announcement stating that it had recently received a notice from the family of the company's chairman that the company's chairman had been investigated and detained by the supervisory department. "The matter involving the chairman's detention has nothing to do with the company. The company's other directors, supervisors and senior management are performing their duties normally. This matter will not have a significant impact on the company's normal operations."

Perhaps affected by the chairman's detention, on July 31, Laobaixing Pharmacy's stock price fluctuated, falling to a low of 13.17 yuan per share and closing at 13.89 yuan per share, a drop of 5.06%. The company told the media that it could not comment on the recent stock price fluctuations. Since the end of May this year, the company's stock price has been nearly halved.

also,Xie Zilongand their spouses through the common peoplePharmaceutical GroupCo., Ltd. (hereinafter referred to as "Pharmaceutical Group") controls approximately 26.11% of Laobaixing PharmacyEquityAs of now, more than half of the shares of the pharmaceutical group are pledged.

1

Chairman detained

On the evening of July 30, Laobaixing Pharmacy issued an "Announcement on the Detention of the Chairman". The announcement showed that it received a notice from the family of Xie Zilon, the company's actual controller and chairman, on July 28. His 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.

Regarding the specific details of the chairman's detention, the company stated in the announcement that the matter involved has nothing to do with the company, and it has not received any notification from the relevant authorities, nor has it been asked to assist in the investigation. The company has a sound organizational structure and a 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 the annual report, Xie Zilong is a Chinese national, born in 1966, the founder of Laobaixing Pharmacy, and the current chairman of the company. His term of office as chairman ends in February 2027. In addition, Xie Zilong is also a member of the Central Committee of the China Democratic National Construction Association, deputy chairman of the Hunan Provincial Committee, honorary president of the China Pharmaceutical Materials Association, vice president of the China Pharmaceutical Commerce Association, and president of the Hunan Pharmaceutical Distribution Industry Association.

It is worth noting that many officials who have served in the Hunan Provincial Committee of the Chinese People's Political Consultative Conference have been investigated this year. On July 29, according to the Central Commission for Discipline Inspection and the National Supervisory Commission, Li Weiwei, deputy director of the Population, Resources and Environment Committee of the 14th National Committee of the Chinese People's Political Consultative Conference, was suspected of serious violations of discipline and law and is currently undergoing disciplinary review and supervision investigation by the Central Commission for Discipline Inspection and the National Supervisory Commission. In January and February this year, Dai Daojin, who was the deputy secretary of the Hunan Provincial Committee of the Chinese People's Political Consultative Conference, and Yi Pengfei, who was the vice chairman of the Hunan Provincial Committee of the Chinese People's Political Consultative Conference, were also investigated.

In addition, Dasanlin Pharmaceutical Group Co., Ltd. ("Dasanlin"), also a leading chain drugstore company, recently disclosed the news that its actual controller was detained for bribery. On the evening of April 12, Dasanlin issued an announcement showing that the company received a "Criminal Judgment" and its subsidiary Maoming Dasanlin Chain Drugstore Co., Ltd. ("Maoming Subsidiary") was convicted of corporate bribery and was fined 4 million yuan; the company's actual controller Ke Jinlong was convicted of corporate bribery and sentenced to three years and six months in prison and a fine of 500,000 yuan.

2

Stock prices fell sharply at the opening

As soon as the news of the chairman being investigated and detained was released, the stock price of Laobaixing Pharmacy began to fall the next day. As of the close of July 31, the company's stock price fell sharply at the opening, falling to a low of 13.17 yuan per share, and finally closed at 13.89 yuan per share, a drop of 5.06%.

In response to this, the investor relations hotline of Laobaixing Pharmacy told the media that the company has already explained its response to this incident in the announcement, and it is unable to comment on the recent fluctuations in the company's stock price for the time being.

It is worth mentioning that the share price of Laobaixing Pharmacy has continued to fall recently. According to data from Tonghuashun, from May 31 to July 31, the company's share price fell from 25.30 yuan per share to 13.89 yuan per share, with a cumulative decline of about 45.10%.

Public information shows that Laobaixing Pharmacy was established in October 2001 and listed on the Shanghai Stock Exchange in April 2015. It is a pharmaceutical retail industry enterprise engaged in drug retail, drug wholesale and manufacturing. As of now, it has 14,109 stores and more than 40,000 employees.

According to the annual report, in 2023, Laobaixing Pharmacy's operating income was about 22.437 billion yuan, a year-on-year increase of 11.21%; net profit attributable to the parent company was about 929 million yuan, a year-on-year increase of 18.35%. Although the performance has increased, the gross profit margin of sales is still lower than that of comparable companies in the same industry.

During the same period, Laobaixing Pharmacy's sales gross profit margin was 32.55%, while Yifeng Pharmacy's sales gross profit margin was 38.21%. This may be related to the company's relatively large number of franchise stores. In 2023, its franchise stores accounted for 32.37%, while Yifeng Pharmacy's franchise stores accounted for 22.54%.

It is worth mentioning that Xie Zilon and his spouse Chen Xiulan control approximately 26.11% of the shares of Laobaixing Pharmacy through the Pharmaceutical Group. According to an announcement previously disclosed by the company, more than half of the shares of the Pharmaceutical Group are currently pledged.

In June this year, Laobaixing Pharmacy issued the "Announcement on the Unpledging of Part of the Shares of the Controlling Shareholder", which showed that the pharmaceutical group unpledged 16.9 million shares, accounting for 11.06% of its shares and 2.89% of the company's total share capital; after this unpledging, the cumulative pledged number was 88.38 million shares, accounting for 57.86% of its shares and 15.11% of the company's total share capital.

Laobaixing Pharmacy has not yet responded to the details of the chairman's detention. We will continue to pay attention to this.