On November 12, ST Jiuzhi issued a "Notice on the Transfer of Equity by the Controlling Shareholder and the Proposed Change of Control and Equity". On November 10, Li Zhenguo, the controlling shareholder and actual controller of Jiuzhitang, signed the "Share Transfer Agreement on Jiuzhitang Co., Ltd." with Heilongjiang Chenneng University of Technology Venture Capital, stipulating that Li Zhenguo will transfer his 6.25% stake in Jiuzhitang to Chenneng Venture Capital, and the total transfer amount of the target shares is about 385 million yuan.

After the transfer is completed, Chenneng Venture Capital will become the controlling shareholder of ST Jiuzhi, with a controlling proportion of 24.04%, and the Heilongjiang Provincial State-owned Assets Supervision and Administration Commission will become the actual controller of ST Jiuzhi. Li Zhenguo holds 18.19% of ST Jiuzhi's shares, making him the second largest shareholder.
Specific changes in equity:

It is worth mentioning that there were early signs that state-owned assets would take over ST Jiuzhi. In July this year, ST Jiuzhi changed its directors, supervisors and senior managers, and many people with Heilongjiang state-owned assets background entered its board of directors and supervisory board. At that time, Li Zhenguo, the actual controller of ST Jiuzhi, resigned as the legal representative and chairman, and became the vice chairman and general manager; Sun Guangyuan took over as the legal representative and chairman; Zhou Lubao was the financial director. Sun Guangyuan and Zhou Lubao both came from the state-owned assets system of Heilongjiang Province.

Among them, Sun Guangyuan served as the party secretary and chairman of Heilongjiang New Industry Investment Group, vice president of the China Enterprise State-owned Property Rights Trading Institutions Association, vice president of the State-owned Investment Company Professional Committee of the China Investment Association, and vice president of the Heilongjiang Economic Society. He was formerly the deputy director of the Capital Operation Management Department of the Heilongjiang Provincial Department of Finance (State-owned Assets Office), the director of the Enterprise Supervision Bureau of the Heilongjiang Provincial State-owned Assets Supervision and Administration Commission, etc.
Zhou Lubao was the chief accountant of Heilongjiang Venture Capital, the deputy general manager of Heilongjiang Chenneng University of Technology Venture Capital, the deputy director of the Finance Department and the deputy director of the Operation Department of Heilongjiang Chenneng Group, and the deputy general manager of Heilongjiang Chenneng Guarantee Co., Ltd.

As a Chinese time-honored brand with a history of 374 years, ST Jiuzhi has a rich product line, including Chinese patent medicine, Guixi decoction pieces, biopharmaceuticals, and health products. Its traditional Chinese medicine culture has been included in the national intangible cultural heritage protection catalog.
However, this is not the first time that ST Jiuzhi has changed hands. In 2015, Jiuzhitang acquired 100% of the equity of Youbo Pharmaceutical for approximately 6.5 billion yuan, and at the same time transferred 83.5 million shares to Li Zhenguo, the actual controller of Youbo Pharmaceutical. Through this transaction, Youbo Pharmaceutical went public through a backdoor listing, Jiuzhitang obtained Shuxuetong Injection, and Li Zhenguo replaced the "Yongjin Group" as the actual controller of Jiuzhitang.

However, Li Zhenguo has repeatedly occupied non-operating funds and provided illegal guarantees. In 2023, the internal control report of Jiuzhitang was issued a negative opinion by Rongcheng Accounting Firm. The reason is that Jiuzhitang used a non-company account to collect deposits, and part of the funds in the account indirectly flowed to the actual controller and chairman Li Zhenguo through loans.

As of the end of 2023, Jiuzhitang collected a margin balance of 42.7 million yuan through non-company accounts, and the actual controller Li Zhenguo had a non-operating fund balance of 37 million yuan. According to the regulations of the Shenzhen Stock Exchange, if a listed company is issued an internal control report that cannot express an opinion or a negative opinion in the past year, the Shenzhen Stock Exchange will implement other risk warnings on the company's stocks.

On April 26, 2024, Jiuzhitang was implemented with "other risk warnings", and the stock name was changed from "Jiuzhitang" to "ST Jiuzhi".
At present, the problem of funds occupied by the actual controller of ST Jiuzhi has been resolved. The entire margin balance in the account has been fully returned to the agent or the actual controller of the agent. Bobo Pharmaceuticals and the relevant agents are re-signing contracts, and the margin will be received by the Bobo Pharmaceuticals account. ST Jiuzhi said that according to the rules, after the accounting firm has issued a standard unqualified audit report or attestation report and other documents internally in the past year, it can submit an application to the exchange to cancel other risk warnings for stock transactions.

"There is Tongrentang in the north and Jiuzhitang in the south." Jiuzhitang was once as famous as Tongrentang. It has been ranked first in the pharmaceutical industry in Hunan Province for many consecutive years in terms of economic benefits. In 1998, it ranked 15th among the national Chinese medicine industrial production enterprises.

For ST Jiuzhi, the entry of state-owned assets is undoubtedly a new starting point. In the future, Chenneng Venture Capital will combine its own advantages and effectively integrate relevant resources through the Jiuzhitang platform to improve Jiuzhitang's asset quality and enhance Jiuzhitang's sustainable operation and profitability.
However, ST Jiuzhi's performance declined in 2018, and judging from the performance in the past two years, its performance is not satisfactory.

In the first three quarters of 2024, ST Jiuzhi's revenue was 2.064 billion yuan, a year-on-year decrease of 12.94%, and its net profit attributable to the parent was 240 million yuan, a year-on-year decrease of 16.77%. In 2023, Jiuzhitang's revenue was 2.961 billion yuan, a year-on-year decrease of 2.38%; the net profit attributable to the parent was 297 million yuan, a year-on-year decrease of 16.92%. Among them, revenue fell to a new low in the past five years.

The decline in ST Jiuzhi's performance is related to the sales of its product Shuxuetong Injection. As the first animal compound water injection in China, Shuxuetong Injection is mainly used to treat cardiovascular diseases such as cerebral thrombosis. According to Minnet data, the annual sales of Shuxuetong Injection reached 3.7 billion yuan in 2017.

In 2017, the medical insurance catalog was adjusted. The management department imposed restrictions on 26 Chinese medicine injections for the first time, mainly including the level of use units and restrictions on the use of diseases. Jiuzhitang's flagship product Shuxuetong Injection was also among them. In 2018, the sales of Shuxuetong Injection dropped sharply, and Jiuzhitang's performance was also greatly affected. Since then, Jiuzhitang has begun to adjust its sales model with the goal of controlling terminals, focusing on sales, and strengthening team building. It has adopted strategic cooperation, terminal partnership system, and direct cooperation between blank hospitals and terminal partners. However, the results are minimal, and even after collecting a certain amount of sales agency deposit, it leaves room for management to operate.

Regarding the future development, ST Jiuzhi stated in its 2023 annual report that it will first strengthen its attention to cutting-edge technologies and industrial changes such as artificial intelligence and biotechnology, and cultivate leading projects; second, it will expand the pharmaceutical-related industrial chain, find partners that complement existing businesses, and achieve rapid layout in emerging fields through resource integration and strategic cooperation; third, it will promote the transformation and application of intellectual property rights; and fourth, it will promote international development.

Now that state-owned assets have taken over, what kind of future will it bring to ST Jiuzhi in terms of strategic direction, business model, etc., in addition to bringing a more stable development environment to it?

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