Hong Hung Group (600981): Termination Of Acquisition Of 25.05% Stake In Jincheng Medicine

600981.SH announces that the company is concerned about the media's report on the company's investment masks production line. In order to facilitate investors to understand the company's related circumstances, the following are the following:

In order to speed up the construction of the leading group in the supply chain of the group and complete the material procurement support task of the procurement group of the epidemic prevention materials and jointly fight the epidemic situation, the company's wholly owned subsidiary, Jiangsu Honghong international group medical health products import and Export Co., Ltd. ("Honghong medicine") purchased a full-automatic production line of its mask with its own capital of 770 thousand yuan, which is in line with the Wuxi Yulu Medical Equipment Co., Ltd. Xi Yu Shou) co production of disposable medical masks.

Wuxi Yu Shou has received the Jiangsu Provincial Drug Administration's "export medical protective clothing and masks from Jiangsu province for the domestic emergency control of the epidemic prevention and control." the approval number is Suying No. 20200001. The filing date is January 29, 2020, valid until April 28, 2020. This Hui Hong Pharmaceutical Co operates with Wuxi Yu Shou, which is supplied by Hui Hong medicine and produced by Wuxi Yu Shou masks. The production workshop site is provided by Wuxi Yu Shou and equipped with equipment operators. The capacity is 100 thousand masks of Nissan. The two sides signed a contract in March 2, 2020 and agreed that after purchasing, the first 1 million pieces of masks purchased from the production line were obtained by Hui Hong medicine and the delivery was completed before March 17, 2020. After that, the supply price of masks during the cooperation period will be adjusted accordingly according to the changes in the purchase price of the raw material melted cloth, giving Wuxi Hui medicine a preferential reduction in accordance with the mask market purchase price, and making a definite agreement in the specific procurement contract signed by both parties. The cooperation period is three years.

During the epidemic prevention and control period, the company will give priority to the local government's epidemic prevention and protection, and the rest of the market will be sold according to the needs of the provincial epidemic prevention materials protection group. Follow up will be used for mask export and domestic market.

The risk is as follows:

1, the investment mask production line is conducive to the company's masks export business cost control and industrial chain extension, but the respirator is not the main product of the company and its subsidiaries. At present, the revenue of this kind of business is smaller than that of the Hong Kong Pharmaceutical Company, and has no significant impact on the performance of the company and its subsidiaries.

2, at present, Wuxi Yu Shou emergency production qualification will expire in April 28, 2020. No medical masks can be produced if the qualification is not extended after the expiration of the qualification. Wuxi Yu Shou will apply for a formal medical device registration certificate in time. If the relevant qualification is not available, the civil respirator will be produced.

3, with the gradual release of market mask production capacity, there will be uncertainties in the future downstream demand and sales of masks, which may result in mask sales and productivity utilization.