Recently, the "time-honored" pharmaceutical distribution enterprise in Shanghai, First Pharmaceutical (600833. SH), announced the expected guarantee amount for its wholly-owned subsidiary in 2025.

To support the operation and development of its wholly-owned subsidiaries, First Pharma plans to provide an additional guarantee limit of no more than RMB 210 million for three wholly-owned subsidiaries: First Pharma (Hong Kong) Limited (hereinafter referred to as "First Pharma Hong Kong"), Shanghai HSBC Pharmaceutical Materials Co., Ltd. (hereinafter referred to as "HSBC Pharma"), and Shanghai First Pharmaceutical Store Chain Operation Co., Ltd. (hereinafter referred to as "First Pharma Chain"). The above matters will be submitted to the shareholders' meeting for deliberation on February 27, 2025.

According to the arrangement, the newly added guarantee amounts for Yiyi Hong Kong, HSBC Pharmaceuticals, and Yiyi Chain are 60 million yuan, 100 million yuan, and 50 million yuan respectively, accounting for 20.97% of the latest net assets of Yiyi Pharmaceuticals. As of February 12, 2025, First Pharma has actually provided a guarantee balance of RMB 18.1243 million to its subsidiaries (with HSBC Pharmaceuticals as the guarantor). Therefore, the total guarantee amount provided by First Pharma to its subsidiaries in 2025 is approximately RMB 228 million.

It is worth noting that the guarantee provided by First Pharmaceutical for its subsidiary this time has no counter guarantee, and the guarantee methods include but are not limited to guarantee, mortgage, pledge, etc. Among the three subsidiaries guaranteed this time, two have asset liability ratios exceeding 70%, among which one medical chain has an asset liability ratio of 101.27%, which is already insolvent.

Regarding the issue of whether there are any related risks and the current operating status of the subsidiary regarding the newly added guarantee limit for the subsidiary mentioned above, a reporter from China Business News called and wrote to First Pharmaceutical. On February 19th, the other party replied that "the company is currently in a quiet period before the annual report is disclosed, and it is not convenient to accept interviews at this time." Previously, relevant staff members of the First Pharmaceutical Board of Directors Office told reporters over the phone that the addition of new guarantee amounts for the three subsidiaries was a coordinated plan based on the annual work plans of each subsidiary and possible funding needs. Relevant work will be carried out according to the specific needs of the subsidiaries in the future. The guarantee procedure this time is legal and compliant, and the form of guarantee provided also meets relevant requirements

According to the announcement, the newly added guarantee amount of First Pharmaceutical is the estimated guarantee amount that the company will provide to some wholly-owned subsidiaries during the validity period of the resolution. The relevant guarantee agreement has not yet been signed, and the main content of the guarantee agreement will be jointly negotiated and determined by the company, relevant wholly-owned subsidiaries, and financial institutions. The final actual guarantee amount will not exceed the guarantee amount granted this time.

The first pharmaceutical company stated that the expected guarantee amount is to meet and support the business development and financing needs of the wholly-owned subsidiary, which is in line with the company's actual operation, overall development strategy, and sustainable development requirements. The company also has a full understanding of its operating conditions, creditworthiness, and debt paying ability.

The announcement shows that among the three subsidiaries guaranteed this time, except for One Medical Hong Kong, whose main business is cross-border trade, the other two subsidiaries are mainly engaged in retail of drugs, medical devices, and non pharmaceutical health products, and HSBC Pharmaceuticals also involves wholesale business.

Among them, HSBC Pharmaceuticals had a revenue of approximately 1.067 billion yuan and a net profit of 22.4928 million yuan in 2023, and a revenue of approximately 909 million yuan and a net profit of 22.1596 million yuan in the first three quarters of 2024; The revenue of Yiyi Chain in 2023 is about 347 million yuan, with a net profit of -17.8947 million yuan. In the first three quarters of 2024, the revenue is about 292 million yuan, with a net profit of -12.634 million yuan. As of September 30, 2024, the net assets of HSBC Pharmaceuticals and Yiyi Medical Chain were 98.711 million yuan and -15.7261 million yuan, respectively.

In fact, a medical chain was already insolvent in 2023, with total assets of about 244 million yuan, total liabilities of about 247 million yuan, and net assets of -3092100 yuan. By the end of the third quarter of 2024, the company's debt amount will double. According to the disclosure of First Medical, the net profit of First Medical Chain has changed in 2023 and the first half of 2024 due to short-term losses caused by the incubation of new stores.

According to the financial report, First Pharmaceutical mainly engages in the retail and wholesale business of drugs. The first pharmacy was opened in 1953, and its First Pharmaceutical Store, located on the pedestrian street of Nanjing East Road in Shanghai, once enjoyed the title of "the largest pharmacy in the Far East" and has a wide reputation in the industry and market. According to the performance forecast, First Pharma is expected to achieve a net profit of 124 million yuan to 18500 yuan in 2024, a year-on-year increase of 38.9% to 107.22%. However, the net profit after deducting non recurring expenses will decrease by 1.8758 million yuan to 4.8758 million yuan, a year-on-year decrease of 17.25% to 44.83%.

The first pharmaceutical company stated that the increase in net profit in 2024 was mainly due to the compensation received for housing expropriation during the reporting period. The decrease in non deductible net profit was mainly due to the impact of policies and market environment, further intensified competition in the pharmaceutical industry, and an increase in the number of new stores in recent years. The new stores are still in a period of performance growth, which has an impact on profits in the short term.