How does Hisun attract Hillhouse Capital to become the second shareholder

As of February 1, 2021, 222 listed pharmaceutical companies have announced their year-end performance forecasts, with an industry average net profit of 281 million yuan (the forecast value range is calculated as the median), an average increase of 60.
75%.
Among them, Hisun Pharmaceutical's excellent data with an annual net profit of 410 million yuan, a year-on-year increase of 340.
5%, is far ahead of the industry average, and ranks 17th in the overall industry.
You must know that this includes the large revenue during the epidemic.
If interference factors are eliminated for the rising masks, testing reagents and other equipment industries, Hisun Pharmaceutical's performance last year properly ranked in the top 5.

However, according to Hisun Pharmaceutical's 2020 performance forecast, after deducting non-recurring gains and losses, its estimated profit is only 40 million to 70 million yuan.

The main reason for the company's expected growth is the increase in gross profit contribution from the company's preparation sales growth, the year-on-year decrease in sales and management operating expenses brought about by the improvement of overall operating efficiency, the decrease in the scale of interest-bearing liabilities and the decrease in financing-related financial expenses.

However, what is more critical is that since Hisun Pharmaceuticals put forward the reform policy in 2019, its performance has finally improved, and it ushered in "Hillhouse Capital" as the second largest shareholder last year.
Can it help Hisun Pharmaceuticals have a real meaning? Get out of the predicament and achieve "reversal".

1.
"Brilliant" in the past, "Predicament" now

Whenever Hesun Pharmaceutical is mentioned, it always reminds people of the company's "old years".

Zhejiang Hisun Pharmaceutical was founded in 1956, and listed on the A-share market in July 2000.
In 2012, it established a joint venture with global pharmaceutical giant Pfizer in the field of branded generic drugs to establish Hisun Pfizer (Hisun Pharmaceutical holds 51% of the shares, Pfizer 49% of the shares; later renamed Hanhui Pharmaceuticals), the total revenue in 2014 has exceeded the 10 billion mark, which is two full years earlier than the current "medical brother" Hengrui Pharmaceuticals (total revenue of 11.
09 billion in 2016) yuan).

However, since the highest market value of Hisun Pharmaceuticals reached 26.
2 billion in 2015, it has never exceeded the 20 billion mark.
In the same period, Hengrui Pharmaceuticals has risen from more than 100 billion in 2015 to more than 540 billion so far, becoming the "leading brother" in the domestic pharmaceutical industry.

There are many reasons for this contrast in status, but the fundamental reason is particularly simple in the eyes of bystanders: the market trend is not clear, and the courage is not enough.

In 2017, based on the adjustment of its global business strategic layout (gradual divestment of generic drugs business, more focus on innovative drugs), Pfizer will take Hisun Pfizer's 49% stake to US$28639 million (equivalent to RMB 1.
902 billion) Sold to Sapphire, a company controlled by Hillhouse Capital.

In April 2018, Hisun Pfizer officially changed its name to Hanhui Pharmaceuticals.
Hisun Pharmaceuticals holds 51% of the shares and Sapphire's wholly-owned subsidiary HPPCHoldingSARL (HPPC) holds 49%.
Pfizer's exit this time has greatly reduced the company's revenue.
But the real pity behind it is that Pfizer, the number one in the universe, is abandoning generic drug companies, but still has an afterthought.

On the other hand, knowing that the subsidiaries are troubled and dragging down the core industry, they have no courage to "break their arms.
"

First, Yunnan Biopharmaceutical Co.
, Ltd.
("Yunsheng Company"), a holding subsidiary with an investment of 151 million yuan, has been affected by internal and external factors since 2016.
Its business performance has continued to decline, product planning and project construction have stagnated.
Already insolvent, he filed for bankruptcy and reorganization last year.

As of June 30, 2020, Hisun Pharmaceuticals and its subsidiaries have made 121 million yuan of accounts receivable from Yunsheng Company, and a provision for bad debts of 18.
68 million yuan has been made; the company’s long-term equity investment in Yunsheng Company is 150 million yuan , A provision for impairment of long-term equity investment of 150 million yuan has been withdrawn; at the level of the company’s merger, Yunsheng has confirmed a goodwill of 92.
6 million yuan, and provision for impairment of 92.
6 million has been made.

Many negative factors have occurred frequently, leading to the poor performance of Hisun Pharmaceuticals in recent years.

As a result, Hisun Pharmaceuticals lost 139 million, 283 million, 141 million, 612 million, and 2.
521 million in non-net profits from 2015 to 2019, respectively, and the amount increased year by year.

The outbreak of the new crown epidemic last year also affected the company's performance to a certain extent.
As of the first three quarters of 2020, the company achieved operating income of 8.
15 billion yuan, a year-on-year decrease of 1.
9%; net profit attributable to the parent company was 343 million yuan, a year-on-year decrease of 72.
71%.

2.
Hillhouse's blessings will usher in changes

In order to make up for the huge losses, the company's management carried out drastic reforms.
In 2019, the three principles of “focusing, slimming, and optimization” were put forward, and funds were recovered through the sale of various assets such as real estate and equity.

Under the influence of the new crown epidemic last year, the internal control implemented by the company has therefore achieved significant results.
In the first half of 2020, sales expenses fell 20% year-on-year to 1.
15 billion yuan, of which marketing business expenses and sales department expenses fell 25% and 44% year-on-year respectively.
In the first half of the year, operating income was 5.
32 billion yuan, down 6.
13% year-on-year; net profit attributable to parent company was 241 million yuan, up 357.
31% year-on-year.

The outbreak of the new crown epidemic has increased its sales of anti-infective products.
In the first half of the year, it increased by 53.
42% year-on-year, and its revenue accounted for an increase of 7 percentage points.
Among them, Hanhui Pharmaceutical, which has a production line of anti-tumor preparations, oral solid preparations and high-end penem preparations, has established a professional product image and market positioning in various disease treatment fields through professional sales behaviors and a variety of academic promotion methods.
Sexual effect.

But judging from the current state of Hisun Pharmaceutical, its three principles seem to have only achieved the slimming stage? As for focus and optimization, there is currently no clear content display.

In fact, Sun's Hanhui Pharmaceutical has always been one of Hisun's main sources of income.

According to financial reports, in 2018, 2019, and January-June 2020, Hanhui Pharmaceutical achieved net profits of 529 million, 541 million, and 389 million, respectively, and operating cash flows of 470 million, 489 million, and 255 million, respectively.
It is a very high-quality asset.
In the same period, Hisun Pharmaceutical (Hangzhou), a 100%-controlled subsidiary of Hisun Pharmaceutical, achieved revenue of 2.
8 billion yuan, but lost 23.
016 million yuan in net profit.
Based on this, Hillhouse Capital's news that it sold Hanhui Pharmaceutical's inter-connected stock of Hisun Pharmaceutical has also triggered heated discussions in the market.
Perhaps its main purpose is to rescue this high-quality enterprise from the source and play the card in hand.

On July 20, 2020, Hisun Pharmaceuticals announced that it will purchase 49% of Hanhui Pharmaceuticals from HPPC through the issuance of shares, convertible corporate bonds and payment of cash, and raise matching funds.
After this transaction, Hanhui Pharmaceutical will be 100% owned by its parent company, Hisun Pharmaceutical.

Therefore, the asset reorganization plan that has undergone many adjustments has been conditionally approved by the management on December 25 last year.
This means that Hillhouse Capital will not only make a lot of money in Hanhui Pharmaceutical, but will also hold a 21.
53% stake in Hisun Pharmaceutical and become the second largest shareholder.

At present, it seems that only hope that the empowerment of Hillhouse Capital, the "sacred hand of pharmaceutical investment", can make a major change in Hisun Pharmaceuticals, which once gave up the research and development of some drugs, and sold real estate and holding companies to fill the huge losses and "survive".
.

3.
Can the dilemma be reversed?

In summary, Hisun Pharmaceutical, which has the blessing of Hillhouse, has a relatively high degree of certainty in the reversal of the predicament.

On the one hand, compared with other generic drug companies in the same industry, Hisun Pharmaceuticals itself has a very interesting API business and can produce low-cost high-end generic drugs.
After all, the successful transformation from APIs to preparations also gives the company a greater advantage in dealing with centralized procurement.
For example, the company’s four drugs have all won bids in the third batch of national procurement.
Among them, letrozole and anastrozole are "blockbusters" with sales of up to 1 billion yuan (in 2019, sales of 100 million yuan respectively 1.
52 billion, 978 million).

On the other hand, the consolidation of Hanhui Pharmaceuticals will also make the company's financial situation healthier, which is conducive to enhancing the company's investment value.

But at the same time, after all, Hisun Pharmaceutical's current debt pressure is still great.
Whether the follow-up performance can continue to maintain beautiful growth and whether Hillhouse's entry can lead the company to regain its former glory, it will be tested by time.
(Yaozhi.
com )