ESG Negative List Sample Observation ST Yaxing Reorganization Survey Of Hong Ji Tang: "Obsolete" "Confidential", "Weird" Sales Costs

Nanzhi think tank, twenty-first Century economic report, southern responsibility investment action research team launched the ESG survey of listed companies. Based on the three dimensions of environment, social responsibility and corporate governance, the evaluation system of A share listed companies was formulated respectively. 100 positive observation lists and 20 negative observation lists were formed respectively.

This period focuses on ST, a negative observation sample of social responsibility, and explores the secrets behind its merger and reorganization.

Since the restructuring of the new rules in October last year, the M & A of the A share market has gradually become active. Even if the outbreak of new crown pneumonia has caused some inconvenience to capital market business, capital market support for the extensive merger and acquisition of listed companies is still in order. Twenty-first Century economic report reporter statistics show that in 2018, the average time of acceptance of the merger and acquisition of listed companies was about 18.5 days, and 2019 was 15.43 days, and 2020 1-2 months averaged 12.13 days.

However, under the strong support of regulators, many enterprises are eager to move.

In March 19th, ST Yaxing announced the progress of major asset reorganization, indicating that the related work of this major asset reorganization is in progress. But scrutinize the company's disclosure plan for mergers and acquisitions, there are many doubtful points.

Technical secrets of "obsolescence"

In early January of this year, ST Yaxing, which had been shut down from the entire production line of the environmental protection production plant, launched a "sell shell" tour.

Prior to this, due to the failure to fully resume production within the next 3 months, ST Asia Star was implemented to withdraw the market risk warning.

According to ST's major asset restructuring plan released by Yaxing, the company intends to replace all assets and liabilities as of the date of assessment on January 31, 2020 with the equivalent portion of the 48.99% equity interest of Hong Jin Tang invested by Leno.

At the same time, it is proposed to install 100% stake in the two major companies of the health and health sector of leno group and 100% stake in Keyuan pharmaceutical. The difference in transaction price between assets and proposed assets is purchased by ST Yaxing in the form of issuing shares to all shareholders of the two listed companies. After the completion of the transaction, Hong Ji Tang and Keyuan pharmaceutical will become a wholly owned subsidiary of ST Asia Star.

In addition, ST Yaxing intends to raise the matching funds to the non-public offering shares of Shenzhou ginger cellar, and after the fund-raising is deducted, it will be used to supplement the working capital.

According to the twenty-first Century economic report reporter survey, ST Yaxing intends to inject one of the targets of Hong Ji Tang in the reporting period, the controlling shareholders' funds occupy, the new three board listing period "malicious delisting", related transactions and other issues.

According to public information, Hong Ji Tang mainly engaged in R & D, production and sales of products such as donkey hide gelatin and its products, Chinese patent medicines, Muscone, montmorillonite and other raw materials. Muscone is the main revenue of the company.

What is intriguing is that the Beijing Hong Xin Pharmaceutical Co., Ltd., the only buyer of musk ketone and the largest customer of the company, is the 24% shareholding company.

In twenty-first Century, an economic report correspondent found that Beijing union Xin was founded in November 1999 with a registered capital of 60 million yuan, and the largest shareholder is the Chinese Academy of Medical Sciences (50%), mainly engaged in artificial musk production.

In 2017 -2019, the income of related transactions generated by Hong Ji Tang to Muscone produced by Beijing Lian Xin was 291 million, 199 million yuan and 116 million yuan, accounting for 55.38%, 38.70% and 24.80% respectively.

It is worth mentioning that the total sales volume of the top five customers of Hong Ji Tang gelatin and its products in 2019 is only 96 million 687 thousand and 200 yuan. The revenue of the top five sales customers of Chinese patent medicine is only 18 million 385 thousand and 500 yuan. Prior to 2018 and 2017, the sum of sales revenue of the top five customers of the two major businesses of the Hong Ji Tang donkey hide gelatin and its products and proprietary Chinese medicines were not equal to the purchase number of Beijing Lian Xin.

"(a share company is a major customer of a target company") does not constitute a real obstacle to the listing of the company. The verification requirements will be much higher, especially the fairness of the transaction price, who will sell the terminal in the end, why not directly sell it to the terminal, but to go through the share holding company in the middle, and regulatory feedback should focus on this problem. In March 20th, a medium-sized brokerage firm of investment banking in Southern China said.

It is revealed that after the sale of Muscone to Beijing Lian Xin, the company produces artificial musk from Beijing Lian Xin and distributes its products exclusively by Chinese Medicine Co., Ltd. (referred to as "Chinese medicine"). According to Qi Xinbao, Chinese medicine holds 5% of Beijing's joint stock.

However, the price of sales of Muscone such as Muscone sold by Beijing has not been disclosed. The price of Muscone can only be approved by the State Administration of traditional Chinese medicine in 1993. The price of raw materials specified in the factory price of artificial musk is approved by the national administration of traditional Chinese medicine (1993) 35. If the price is adjusted, it should be approved by the board of directors of Beijing Xin Xin.

However, in twenty-first Century, the economic report reporters searched the official website of the State Administration of traditional Chinese medicine and did not find the document. In March 20th, the reporter called ST Yaxing securities department as an investor. The document said: "the document is not necessarily a public document, and the pricing (content) is issued to the relevant units."

According to the question "whether the price is" out of date "adopted by the reporters in 1993, the connection officer pointed out:" this is controlled by the state, and the state has no new guidance to update the price, and the price can not be determined according to the market situation. " If we do not disclose the specific supply price, it may be related to business secrets or other reasons. The document has not been announced, and we have not announced the price. "

However, according to the public information released by Hong Ji Tang, the artificial musk involved in the transaction was jointly identified by the Ministry of science and technology and the State Secrets Bureau as a classified state secret technology in August 16, 2005. The period of secrecy is 10 years. This means that the validity of the "secret technology" has expired in August 2015.

Beijing Lian Xin has submitted a renewal application to the relevant departments before the expiration of the secrecy period. Up to now, the relevant examination and approval is still being accepted, and there is no concrete result.

In fact, within the listed companies, there has been a lot of doubt about the proposed assets.

According to ST Yaxing, three directors and supervisors gave a vote against the board of directors on the restructuring plan. One director abstained, and 5% shareholders.

Among them, the objection of director Wang Xiaohui was that he did not know anything about the reorganization. The "objection" of Wen Decheng, the independent director, is "from the relevant information submitted by the company to the voting motion, the data preparation is hasty and can not accurately determine the quality and operation status of the assets to be put into operation".

Financial data doubtful

In addition to whether Beijing Union's technical secret is effective or unable to renew its impact on Beijing's joint venture business, a large number of accounts have not yet been recovered, and it is also worthy of attention.

According to public information, at the end of 2017, the end of 2018 and the end of 2019, the accounts receivable of Hong Ji Tang for Beijing union Xin Yuan were 233 million yuan, 188 million yuan and 199 million yuan respectively, accounting for 80%, 94.47%, 171.55% of the sales revenue of Beijing union Xin respectively.

"If the accounts receivable ratio of the related party is too high, it may be challenged to transfer or occupy the funds of the listed company. This does not explain clearly, which will cause a great obstacle to the listing." The investment banking department said.

Hong Ji Tang has previously had funds to occupy the "criminal record". In 2015 annual report, Hong Ji Tang has 92 million 975 thousand and 500 yuan for the controlling shareholder, leno group Limited by Share Ltd (hereinafter referred to as the leno group).

By the end of 2019, the fund of non profit occupation of Hong Kong Group and the corresponding interest balance were 173 million yuan. The post leno group has repaid the above non operating capital and corresponding interest through bank remittance in January 10, 2020.

In addition, the sales revenue of musk ketone was sold to Beijing Lian Xin in a large amount by the Hong Ji Tang. At the same time, due to the participation relationship between both sides, he also confirmed a large amount of investment income from Beijing Lian Xin office.

It is understood that in 2017 -2019, through the equity law, confirmed that the investment income of Beijing union Xin was 34 million 683 thousand and 600 yuan, 32 million 525 thousand and 700 yuan and 38 million yuan respectively, accounting for 172.51%, 70.17% and 45.31% respectively.

This means that once Beijing Lian Xin's business fluctuates, the performance of Hong Ji Tang will be greatly affected.

Sales cost "weird" trend

In addition to the "cut and run" relationship with Beijing union Xin, other financial data of Hong Ji Tang are rather "weird".

According to public information, in 2017 -2019, the net profit of Hong Ji Tang was 20 million 105 thousand and 400 yuan, 46 million 354 thousand and 300 yuan and 83 million 861 thousand and 500 yuan respectively, with an average annual compound rate of 104.23%, which is a curve of rapid growth.

However, in the period of rapid growth of net profit, the operating income and net cash flow of Hong Ji Tang did not increase significantly, and fluctuated. In 2017 -2019, the operating income of Hong Ji Tang was 489 million yuan, 515 million yuan and 467 million yuan respectively, and the net cash flow in the same period was -7725.74 yuan, 129 million yuan and 114 million yuan.

For the reasons for the difference in net profit, Hong Ji Tang pointed out that the change in the company's sales expenses. According to its disclosure, the sales expenses of Hong Ji Tang in 2017 -2019 - the marketing expenses were 109 million yuan, 71 million 865 thousand and 400 yuan and 45 million 717 thousand and 100 yuan respectively, showing a declining trend year by year.

Hong Ji Tang said that in 2016, the company started the product of Ejiao products in an all-round way. In order to expand product sales, the company began to increase brand publicity, layout and sales network, expand sales channels and enrich the product structure from 2017.

In 2018 and 2019, the advertising expenses were 17 million 484 thousand and 500 yuan and 4 million 460 thousand and 600 yuan respectively, and the decrease in sales cost led to the relatively high net profit of Hong Ji Tang in 2018 and 2019.

However, it is quite surprising that in 2017, the year of selling expenses was the highest, Hong Ji Tang sold only 100 million yuan of its products and its advertising expenses and sales expenses dropped in 2018 and 2019. The revenue of the company's Ejiao and its products rose sharply, reaching 198 million yuan and 214 million yuan respectively.

Horizontal comparison can show the strange data.

Take the Dong'e Ejiao as the example of the main business as donkey hide gelatin, in 2017, 2018 and the first three quarters of 2019, the operating income of Dong'e donkey hide gelatin was 7 billion 372 million yuan, 7 billion 338 million yuan and 2 billion 830 million yuan respectively, and the selling expenses were 1 billion 805 million yuan, 1 billion 776 million yuan and 883 million yuan respectively, and the data showed a typical correlation curve.

In addition, our correspondent has compared with the pharmaceutical listed companies similar to the business structure of Hong Ji Tang (Tongrentang, Ling Rui pharmaceutical, and Chi Chi Tang, etc.). The sales expenses and revenue trends of these enterprises are also highly consistent.

"According to the general logic, pharmaceutical companies invest a lot in the cost of sales, because most of our pharmaceutical companies mainly focus on the production of generic drugs and proprietary Chinese medicines, homogenization of products, and fierce competition in the market. Every year, pharmaceutical companies have to invest a lot of money in marketing activities, and even many pharmaceutical companies are driven by sales expenses, and there are many customs in the market. It is controversial about the high cost of pharmaceutical companies, but the shortage of R & D investment. " In March 20th, a private equity agency in Southern China noted that it was.

It points out that there is a reverse change in sales cost and revenue, but sales expenses generally increase, and sales revenue has not risen.

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