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on the evening of september 6, chutian technology (300358.sz) issued a "major event" announcement stating that the company recently received a "notice of evidence collection" from the public security organs, and the company's senior executive lei yu was criminally detained by the public security organs on suspicion of embezzlement.

chutian technology is located in ningxiang, hunan province. it is a pharmaceutical equipment company. the company's main businesses include pharmaceutical water, bioengineering, sterile preparations, solid preparations, and post-test packaging. lei yu, a "post-90s" executive involved in the case, was just appointed by the listed company in june this year to be responsible for the company's domestic sales business.

chutian technology said that as of the date of this announcement, the public security authorities are still investigating the incident, and the company will maintain close communication with the public security authorities and continue to pay attention to the follow-up situation. as of the close of september 6, the company's stock price fell 3.60% to 6.43 yuan, with a total market value of 3.796 billion yuan.

appeared a few days ago

the announcement released by the listed company at that time showed that lei yu had worked at chutian technology for 12 years, and his term of office as senior vice president would end on the day when the term of office of the fifth board of directors expires.

lei yu's last public appearance was on august 30. according to an article published on september 6 by the official account of chutian technology, "chutianren", on august 30, the 2024 biomedicine advanced technology seminar suzhou station, co-organized by chutian technology and suzhou biomedicine industry alliance, was successfully held at the intercontinental suzhou hotel on the shore of jinji lake. relevant persons in charge of nearly 100 biomedicine companies from jiangsu, zhejiang, shanghai and other regions, and more than 200 guests attended the meeting.

the above article stated that lei yu, president of domestic sales of chutian technology, spoke on behalf of chutian technology at the event and said that china's current biopharmaceutical industry is facing both challenges and opportunities. in july this year, the state council reviewed and approved the "implementation plan for full-chain support for the development of innovative drugs", which means that from review and approval, access, use to capital support, especially innovative drugs referencing international pricing, basic medical insurance non-expenditure and other full-chain support for innovative drugs will soon become a reality, and china's biopharmaceutical industry will embark on a new path of innovation.

according to the resume of lei yu disclosed by chutian technology, he was born in january 1991, is 33 years old, and has a bachelor's degree. he joined chutian technology in february 2012 and is responsible for domestic sales.

when lei yu joined chutian technology, the company had not yet gone public and its domestic business team was relatively small. according to the prospectus disclosed by chutian technology in 2012, in terms of marketing network, the company segmented the market according to the combination of multiple variables, using the output value of the pharmaceutical industry, region, logistics conditions, etc. as segmentation variables, and established a complete sales and service network system, dividing the domestic market into four major regions: east, west, south, and north. each sales region has a sales region director and sales district manager, and has established a domestic sales team of more than 50 people, covering 31 provinces, municipalities, and autonomous regions.

chutian technology's business development has grown along with the expansion of china's pharmaceutical industry market. according to an assessment report released by united credit rating in june, in 2023, the sales model and settlement method of chutian technology's main products have not changed, and the production and sales volume and production and sales rate of products have increased year-on-year, and the production and sales rate is at a high level, with a low sales concentration.

according to the above-mentioned lianxin evaluation report, in 2023, chutian technology's revenue increased year-on-year, but its comprehensive gross profit margin and total profit both decreased year-on-year. from january to march 2024, the company's total operating income and total profit both decreased year-on-year due to factors such as product price adjustments, increased r&d investment and salary costs.

domestic sales are still the bulk of chutian technology's revenue. in 2023, chutian technology's domestic revenue reached 4.972 billion yuan, accounting for 72.56% of total revenue; overseas revenue was 1.881 billion yuan, accounting for 27.44% of total revenue.

performance under pressure

in recent years, under the fierce competition in the pharmaceutical market, chutian technology seems to have had a hard time.

the above-mentioned lianxin evaluation report stated that by the end of 2023, chutian technology's accounts receivable increased by 55.20% to 1.47 billion yuan from the end of the previous year. the main reason was that the market competition was fierce. in order to compete for market share, chutian technology appropriately relaxed its credit policy for strategic customers, which led to an increase in accounts receivable. on the other hand, the sales scale increased, which led to an increase in sales balances. among the accounts receivable, the age of accounts is mainly within 1 year (accounting for 68.41%), and a total of 151 million yuan of bad debt reserves have been set aside.

entering 2024, chutian technology still faces great operating pressure. according to its semi-annual report data this year, the revenue in the first half of the year was 2.829 billion yuan, a year-on-year decrease of 15.71%. "the decline in revenue scale is mainly due to the decline in revenue scale of the company's main business segments, including sterile preparation solutions and stand-alone machines of 552 million yuan, a year-on-year decrease of 38.56%; detection and packaging solutions and stand-alone machines of 652 million yuan, a year-on-year decrease of 14.21%; bioengineering solutions and stand-alone machines of 504 million yuan, a year-on-year decrease of 16.21%.

chutian technology also explained that the main reason for the year-on-year decline in revenue was that the company made appropriate adjustments to the sales prices of some products in order to maintain its market size. in addition, the slowdown in project progress on the customer demand side led to delays in the company's project on-site commissioning and delivery, resulting in a decline in revenue.

in addition, in the face of fierce market competition, chutian technology's product gross profit margin is also declining. in the first half of 2024, chutian technology's comprehensive gross profit margin was 27.34%, a decrease of 6.54% from the same period last year, of which sterile preparation solutions and stand-alone machines decreased by 11.24%, testing and packaging solutions and stand-alone machines decreased by 8.26%, and pharmaceutical water equipment and engineering system integration decreased by 7.81%.

chutian technology also "confessed" that it will face the risk of performance not meeting expectations in 2024. in its semi-annual report, chutian technology stated that due to fierce competition in the industry, the company's gross profit margin continued to decline. as of june 30, 2024, the company's revenue and net profit both declined year-on-year. if the company still cannot reverse the situation in the second half of this year, it may lead to a year-on-year decline in annual revenue and net profit, and the target at the beginning of the year cannot be achieved.

in addition, romaco holding gmbh (hereinafter referred to as romaco), an overseas subsidiary acquired by chutian technology in its early years, is now also bringing great financial pressure to the company.

romaco (solid dosage form total solution) was the target of chutian technology's acquisition in germany in 2017. since then, the company has indeed made great improvements in product manufacturing technology and quality.

however, in recent years, during the critical period when chutian technology continued to implement "cost reduction and efficiency improvement", the company's sales expenses in the first half of 2024 still increased by 0.98% year-on-year to 322 million yuan; management fees increased significantly by 16.23% year-on-year to 243 million yuan. on the one hand, this is due to the increase in the number of core management personnel in the company and the increase in salary costs; on the other hand, the subsidiary romaco made annual salary adjustments for employees based on the minimum requirements of local regulations, and salary costs increased. in addition, after romaco went online with sap, the consulting fees for later operation and maintenance consultants increased compared with the same period last year.

crucially, romaco has also built up a relatively high level of goodwill.

as of june 30, 2024, chutian technology's total assets amounted to 13.016 billion yuan, and the net value of goodwill amounted to 886 million yuan, of which the goodwill of romaco group was as high as 599 million yuan.

chutian technology said it faces the risk of goodwill impairment.

"at the end of the reporting period, although romaco group had sufficient new orders and orders in hand, it was still in the red. if romaco group still cannot turn losses into profits in the second half of the year, its associated goodwill, technology and patents, brands and customer relationships may be at risk of impairment, which may lead to a decline in the overall operating performance and profits of the listed company." chutian technology's 2024 semi-annual report said.