01. CR Torch has officially become a subsidiary of Kunming Pharmaceutical Group
On December 20-21, CR Sanjiu and Kunming Pharmaceutical Group successively announced the latest progress in the transfer of 51% equity of Kunming CR Torch. On December 20th, the relevant business registration procedures for the transfer of equity of CR Torch were completed. Kunming Pharmaceutical Group holds 51% of the equity of CR Torch, and CR Torch has become a subsidiary of Kunming Pharmaceutical Group and included in its consolidated financial statements.

This also means that Kunyao Group, positioned as a leader in the silver hair health industry, has officially taken an important step towards strategic and professional integration of its Sanqi business. Next, Kunyao Group will continue to build itself into a benchmark enterprise in the Sanqi industry chain, further enhancing its market share in the field of cardiovascular and cerebrovascular products.

The integration of two major pharmaceutical companies under the "CR Group" can be traced back to June this year, when CR Sanjiu released the "Asset Evaluation Report on the Project of CR Sanjiu Pharmaceutical Co., Ltd.'s Proposed Transfer of 51% Equity of Kunming CR Holy Fire Pharmaceutical Co., Ltd. to Kunming Pharmaceutical Group Co., Ltd.", which attracted widespread attention in the industry. Behind this equity transfer, there is also an impressive transaction amount of 1.791 billion yuan.

In the first three quarters of 2024, Kunming Pharmaceutical Group achieved a net profit of 387 million yuan, which is nearly 4-5 times its net profit in the first three quarters of this year. The reason for such a large investment is to integrate the Sanqi industry and promote the development of the traditional Chinese medicine industry chain represented by "Sanqi". In addition, the issue of industry competition between CR Sanjiu and Kunming Pharmaceutical Group can also be easily resolved.

02. Kunyao focuses on Xuesaitong soft capsules, Sanqi industry, and elderly products
As Kunming Pharmaceutical Group, which was also acquired into the "CR Group", its main products cover the field of cardiovascular and cerebrovascular treatment (injection of Xuesaitong (freeze-dried), Xuesaitong soft capsules, Xuesaitong tablets, Tianma Su injection), orthopedic series (Afacalcitriol soft capsules), etc.

Sanqi, a traditional Chinese medicine known as "Jin Bu Huan" and "King of Ginseng", is an important product of Kunyao Group. Its significance to Kunyao Group is not only reflected in its economic value, but also involves multiple aspects such as scientific research innovation and industrial chain development.

CR Holy Fire, which also has a certain market share in the Sanqi industry, became a wholly-owned subsidiary of CR Sanjiu in 2016. Its core product, "Lijingwang" Xuesaitong Soft Capsules, is one of the important products in the Sanqi oral series.

According to the research report of securities firms, the total sales scale of Xuesaitong soft capsules in the hospital and retail market exceeded 1 billion yuan in 2022. Xuesaitong Soft Capsules are the core product of CR Torch, and currently only two manufacturers, Kunming Pharmaceutical Group and CR Torch, produce them in the market.

In recent years, the operating performance of CR Torch has been relatively stable, and it has maintained stable profitability in the Sanqi industry. From 2022 to 2023, CR Torch will achieve revenue of approximately 739 million yuan and 751 million yuan respectively, and net profits of approximately 201 million yuan and 203 million yuan respectively.

Sanqi plays an important role in the elderly industry. Kunyao Group stated that it focuses on the Sanqi industry chain, deeply cultivates the elderly health track, and expands the field of chronic disease management.

According to the China Aging Science Research Center, the current scale of China's silver economy is around 7 trillion yuan. It is expected that by 2035, the scale of China's silver economy is expected to reach 30 trillion yuan. Among them, the elderly health industry, as an important component of the silver economy, is constantly expanding in market size.

Kunming Pharmaceutical Group, which has identified the development of this track, is gradually realizing its strategic core of "inheriting high-quality Chinese medicine, taking the Sanqi industry chain as the core, focusing on elderly health, expanding the field of chronic disease management, and becoming the first stock of silver hair health".

03. The next step for CR Sanjiu's acquisition - focus on CHC business
Traditional Chinese medicine is one of the important sectors in the development of CR Pharmaceuticals. The traditional Chinese medicine assets of "CR Series" mainly include CR Sanjiu, CR Jiangzhong, Dong'e ass hide glue, etc.

CR Sanjiu has handled various acquisition cases, such as the acquisition of 100% equity of Guangdong Shunfeng Pharmaceutical for nearly 600 million yuan in 2012; In 2013, it acquired Guilin Tianhe Pharmaceutical for nearly 580 million yuan; Later on, it acquired 28% of the shares of Kunyao Group for nearly 2.9 billion yuan and 28% of the shares of Tasly for nearly 6.2 billion yuan These acquisition cases involve different business areas and product lines, collectively forming the existing business layout and product line system of CR Sanjiu.

The CHC Health Consumer Products business is the core business of CR Sanjiu. The CHC business group mainly includes OTC business unit, Professional Brand business unit, and Big Health (Shenghai) business unit, covering nearly 10 categories such as cold, skin, gastrointestinal, cough, orthopedics, pediatrics, dietary supplements, etc. Its core products occupy a high market share, such as "999 Cold Spirit", "999 Dermatitis Flat", "Sanjiu Weitai", "999 Children's Cold", etc.

In the first half of 2024, this business sector saw a year-on-year growth of 14%. CR Sanjiu stated in its investor relations activity record that the CHC business will continue to advance towards product upgrades.

From the perspective of future merger and acquisition plans, the China Securities Regulatory Commission has issued policies such as the "Six Measures for Mergers and Acquisitions", and the State owned Assets Supervision and Administration Commission encourages listed companies to increase their restructuring and integration efforts as platforms, especially in strategic emerging industries. The State owned Assets Supervision and Administration Commission encourages and supports the development of specialized integration work. CR Sanjiu stated that it will continue to pay attention to industry investment and integration opportunities in the future.

In the future, we will adopt a diversified approach to support the overall innovation and transformation of CR Sanjiu through investment and mergers and acquisitions, increase exploration efforts in the field of innovative drugs, and continue to focus on brand assets with opportunities and potential in CHC's core business direction.

Source: https://pharm.jgvogel.cn/c1475512.shtml