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Our reporter Su Hao and Cao Xueping reported from Beijing

Recently, Pien Tze Huang (600436.SH) disclosed an announcement on the outward investment and related transactions of its wholly-owned subsidiary, stating that its wholly-owned subsidiary Zhangzhou Pien Tze Huang Investment Management Co., Ltd. intends to use its own or self-raised funds of approximately RMB 254 million to acquire 100% of the equity of Zhangzhou Mingyuan Spice Co., Ltd. (hereinafter referred to as "Mingyuan Spice") from Zhangzhou State-owned Assets Investment and Operation Co., Ltd. (hereinafter referred to as "State-owned Assets Investment and Operation Co., Ltd.").

Regarding the specific circumstances of this related-party transaction, a reporter from China Business News wrote to Pianzihuang for an interview. A staff member from its securities department said that there would be a dedicated person to be responsible for the liaison, but as of press time, no further response had been received from the company.

Public information shows that Pien Tze Huang is mainly engaged in pharmaceutical manufacturing, pharmaceutical distribution and cosmetics. The company's main product is "Pien Tze Huang", covering many fields such as liver disease medicine, cold medicine, and dermatology medicine. Mingyuan Spice is mainly engaged in traditional spice products and spice crop planting.

Since the foreign investment transaction party, SDIC, was originally a subsidiary of Zhangzhou Jiulongjiang Group, the controlling shareholder of Pien Tze Huang, this transaction constitutes a related-party transaction. SDIC had already divested its shares in Jiulongjiang Group in February this year.

The announcement shows that in 2023 and the first quarter of 2024, Mingyuan Spice's operating income was 0, and its net profit was approximately 13.9426 million yuan and -0.07 million yuan, respectively.

The transaction price is based on the valuation, and the valuation base date is December 31, 2023. The audited book value of all shareholders' equity of Mingyuan Fragrance is RMB 143 million. After the asset-based valuation, the valuation of all shareholders' equity of Mingyuan Fragrance is confirmed to be RMB 254 million, with an increase of RMB 112 million and an appreciation rate of 78.29%.

Regarding the reason for this transaction, Pianzihuang stated that it was mainly based on comprehensive considerations of the upstream and downstream of the big health industry chain, in order to further focus on the development of the main business, in order to give play to the industrial synergy effect, and actively explore and cultivate new growth points.

Although Mingyuan Spice has had zero revenue in recent years, its core asset, Zhangzhou Narcissus Pharmaceutical Co., Ltd. (hereinafter referred to as "Narcissus Pharmaceutical"), may be the key factor in facilitating this transaction.

It is understood that Shuixian Pharmaceutical is a pharmaceutical company integrating scientific research, development, production and sales. The company's profit sector is mainly based on the sales of Fengyoujing, and its leading products are Shuixian brand products: Fengyoujing, Wuji Cream, Dingpeng Cream, Ruanmailing, Manshanbai, Mian'anning, etc. Mingyuan Fragrance currently holds a 30% stake in Shuixian Pharmaceutical.

From 2022 to 2023, Narcissus Pharmaceutical's operating income was RMB 283 million and RMB 306 million respectively, and its net profit was RMB 35.0273 million and RMB 47.0082 million respectively.

Pianzihuang believes that Narcissus Pharmaceutical has good profitability and stable dividends. In 2022 and 2023, Narcissus Pharmaceutical's cash dividends will be 10 million yuan and 20 million yuan respectively. Assuming that the dividend level remains at 10 million yuan after the acquisition is completed, it will bring the company 3 million yuan in dividend cash inflow each year.

"Moreover, after the acquisition is completed, Narcissus Pharmaceuticals can carry out in-depth cooperation with Pianzihuang in the fields of brand promotion, product marketing, channel expansion, etc., relying on Pianzihuang's existing management advantages and brand advantages to achieve synergy effects, increase both parties' sales revenue, market share and sustainable development capabilities, and further enhance both parties' market competitiveness." Pianzihuang said.

However, on August 14, the Shanghai Stock Exchange issued a regulatory work letter to the company regarding Pianzihuang's related-party transactions.

In addition, on the evening of August 16, Pien Tze Huang also disclosed its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 5.651 billion yuan, a year-on-year increase of 12%; the net profit attributable to shareholders of listed companies was 1.722 billion yuan, a year-on-year increase of 11.73%.

In terms of products, during the reporting period, the gross profit margins of Pianzihuang's liver disease drugs and cardiovascular and cerebrovascular drugs both declined, among which the gross profit margin of liver disease drugs decreased by 5.32% year-on-year; the gross profit margin of cardiovascular and cerebrovascular drugs decreased by 25.04% year-on-year.

From a single quarter perspective, in the second quarter of 2024, Pianzihuang achieved operating income of 2.48 billion yuan, a year-on-year increase of 2.66%; the net profit attributable to shareholders of the listed company was 747 million yuan, a year-on-year decrease of 3.13%.

(Editor: Cao Xueping, Reviewer: Tong Haihua, Proofreader: Yan Jingning)