Today's Healthy Bell Listing: Leading the Last Wave of Retail Pharmacies?

Pharma.com December 2, 2020 - On December 1, 2020, Yunnan Jianjia Co., Ltd. (605266) was listed on the main board of the Shanghai Stock Exchange.
opened today with a 44 per cent gain, triggering a rally.
Review of the retail pharmacy companies listed on the road, in addition to the just listed health good, before there is a heart, the people, Yifeng pharmacy and Dasinlin four chains in 2014-2017 in turn listed, followed by Shuyu civilians, health and is impacting A shares.
in the increasingly competitive and concentrated drug retail market, this wave of listings, led by Healthy, may be the last chance for drugstore chains to go public.
impact A-shares, three pharmacies blocked and long in May 2017, the total revenue of 2.346 billion yuan of Jianjia first submitted a prospecto, and in October of the same year for the second time.
in June 2019, Jianjia submitted its third prospectus without success.
July this year, Jianjia submitted a prospectus four times, and finally successfully held the meeting on September 3rd.
October 28, Jianjia issued an announcement, confirmed that the stock purchase date is November 19, straight to the day of the official bell listing.
, the listing process of Shuyu civilians has been more tortuous.
first submitted a prospecto in December 2016 and then again in December 2018.
, due to changes in capital increase demand and other reasons, both declarations were voluntarily withdrawn by the civilian population.
june 2020, Shuyu civilians resumed to submit prospecties, impact A shares.
, which first submitted its prospecto in June 2020, has also stepped up its impact on A-shares, submitting a prospecto three times in the past two months.
three companies operating overview of the three companies are chain drugstores regional leader: Shuyu civilian deep into the Shandong Province market, health and layout of Hainan, Hunan, Jianjia Panzhu southwest, stores in Yunnan, Sichuan, Chongqing, Guangxi four provinces.
in terms of the number of stores, Jianjia and Shuyu civilians have more than a thousand direct-run pharmacies, but also a small number of franchise stores, the number of stores is relatively small.
Chart 1: Number of stores per company for 2017-2019 Source: Prospects, China Kang Industrial Capital Research Center in terms of company revenue, Healthy and Shuyu civilian size is comparable, and Jianjia compared to The latter maintained a relatively good growth momentum, with year-on-year growth rates of 14.27 per cent, 17.85 per cent and 27.56 per cent year-on-year in 2017-2019, respectively, with relatively small revenues.
profitability, gross margins of all three companies fell by less than 4 percentage points in 2017-2019, which was related to increased competition in the industry and a decline in overall gross margins.
, health care and maintenance days and net interest rates can be maintained at more than 4%, and the net interest rate of the civilian population remained above 3%.
Chart 2: Gross/Net Interest Rate for Companies 2016-2019 Source: Prospectus, China Health Industrial Capital Research Center (Not Disclosed in 2016) Chart 3: 2016-2016 Revenues for companies in 2019 Source: Prospectus, Zhongkang Industrial Capital Research Center (not disclosed in 2016 data) Multiple factors make it difficult for chain pharmacies to go public Why are the three pharmacies vying to go public in 2020? Perhaps everyone realizes that this is probably the last chance for drug retailers to go public.
. The gross profit margin of the industry decreased, supervision tightened, small and medium-sized chains urgently need to rapidly expand the CMH database shows that in 2019, the size of the national pharmacy retail terminal sales of 455.5 billion yuan, an increase of 4.70% YoY, down from 6.50% growth in 2018.
the impact of the epidemic and medical reform, the size of retail terminal sales in pharmacies nationwide is expected to decline by 6.43% year-on-year in 2020.
drug retailing industry is in trouble as market growth slows or even negative.
the third quarter of 2016-2020, the gross margin of the four major pharmacy chains fell to varying degrees, with the average gross margin falling from 39.54 per cent to 36.45 per cent.
for smaller drug retailers, gross margins are further squeezed because they have less bargaining power upstream than for larger ones.
Chart 4: 2016-2020Q3 Four major pharmacy chain gross margin sources: the company's annual report, the third quarter report, Zhongkang Industrial Capital Research Center at the same time, small and medium-sized chains are also facing the pressure of strict regulation.
In 2018, the Ministry of Commerce issued the Guidance on the Classification and Classification management of Retail Pharmacies (Draft for Comments), which requires that retail pharmacies be divided into three categories according to operating conditions and compliance conditions, including service environment conditions, supply security capabilities, personnel qualifications and training, and the construction of a traceability system.
particularly important in this opinion are the configuration requirements for practicing pharmacists in three types of retail pharmacies.
for the big four chains, it will be easier to adapt to the classification policy of retail pharmacies because of the relatively sound talent pool and training system for practicing pharmacists.
shortage of practicing pharmacists in China, small and medium-sized enterprises may have to pay a higher price to adapt to the policy to hire practicing pharmacists, thereby increasing the labor costs of enterprises.
the compression of profits and the increase in costs, resulting in small and medium-sized enterprises difficult to develop, its development and expansion of their own needs are extremely urgent.
. Market concentration has increased rapidly, leading enterprises accelerated integration in 2019, China's top 100 retail pharmacies sales reached 186.3 billion yuan, the market share reached 40.9%, 9.7 percentage points higher than the size of the market occupied by the top 100 in 2015.
even so, our drug retail market is still large and loose.
2019, McKesson (MCK), AMerisource Bergen (ABC) and Cardinal Health (CAH) each had a market share of 37.8%, 29.6% and 25.7%, respectively.
the U.S., there is still plenty of room for improvement in the concentration of Chinese drug retailing.
Chart 5: Top 100 Chain Sales Scale (Billions) and Market Share Source: Zhongkang CMH, Zhongkang Industrial Capital Research Center
capital strength has grown rapidly since the listing of the world's leading pharmacy chain, and the pace of store expansion and acquisition of small and medium-sized pharmacy chains has accelerated.
The third quarter of 2020 shows that the common people added 804 direct-to-market and merger stores, 253 dasinlin merger and acquisition stores, Yifeng pharmacy acquisition stores 68; Xintang net increase in direct stores 694, 519, 742, 645, the proportion of new stores is 16.53 percent, 20.88 percent, 15.29 percent, 10.39 percent.
, owned by Gaoji Capital, expanded its stores in three years through a frenzied acquisition.
2019, the number of Gaoji medical stores has reached 11,610, according to public information released by the Ministry of Health.
Chart 6: The number of new stores in the four major chains in the first three quarters of 2020: prospecto, China Health Industrial Capital Research Center, in addition to the National University Pharmacy also acquired 1,507 stores in 2020.
it is understood that in 2018 into a large round of revenue of 3,027 million yuan, with Jianjia, Shuyu civilian body size equivalent, but by the National University pharmacy in July this year, the rapid acquisition.
, such as The Large Square Circle, has become the target of cross-regional leading acquisitions, it can be seen that the current acquisition scale has reached the Pre-IPO volume.
the 20th century pharmaceutical circulation industry mergers and acquisitions process, in the near future, the pharmaceutical retail industry may even appear between listed companies integration.
signs that consolidation in the drug retail industry is accelerating means there is little time left for the drugstore chain's "second tier" to go public.
· The pace of IPOs has increased sharply, and as of November 1, 2020, there were 431 companies on the Shanghai Stock Exchange and Shenzhen Stock Exchange, surpassing even the total number of companies meeting in 2018 and 2019, reaching a five-year high.
2020, the Shenzhen Stock Exchange has accumulated 319 filings, of which 282 are GEM, accounting for 88.4% of the cumulative filings.
gem registration system, which launched in August, should be one of the reasons for the steep increase in the rate of IPOs.
Chart 7: Domestic IPO Meetings 2016-2020 Source: Anxin Securities, Public Data Collation, China Health Industrial Capital Research Center October 5, 2020, The State Council issued the Opinions of the State Council on Further Improving the Quality of Listed Companies, which calls for regulating the governance and internal control of listed companies, improving the quality of information disclosure, and insisting on controlling incremental and dissolving stocks.
in recent months, the number of weekly IPOs has been around 20, while approvals have been issued in single digits.
this wave of listings, there may be a tightening of listing policies.
for drug retailers that have not yet submitted a prospecto, it could be more difficult to miss the market after this window.
cross-border giants have entered the market, listing is the only way out on November 25, 2020, JD.com Health announced that it will be officially listed on the Hong Kong Stock Exchange on December 8.
addition to JD.com, Ali, Tencent and Baidu are all located on the health track.
Among them, Ali Health was successfully listed in Hong Kong in 2014 on the back of CITIC 21st Century, Tencent has Lilac Garden, Micromedicine Group, Good Doctor Online and other industry head players, Baidu is focused on the field of medical AI, On September 25, Baidu founder Robin Li, as the lead sponsor, officially set up a biocomputing technology-driven life sciences company Baitusheng.
in the context of the "Internet plus medical" policy, Internet giants are actively layout the health industry upstream and downstream, and gradually extend their business to self-employed drug retail terminals.
has had a huge impact on the traditional drug retailing industry.
fierce capital competition, the only way to avoid mergers and acquisitions is to go public.
generally enough, the increase in the concentration of China's pharmaceutical retail market is the general trend, as the capital strength of participants becomes stronger, the pace of industry consolidation will gradually accelerate.
for companies that are still not yet prepared to go public, want to ensure the survival of enterprises under such momentum, listing is not only a "war of defense", but also for enterprises to fight for the opportunity to shock the leader.
and the successful listing of Jianjia has undoubtedly made a good start for the industry.
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