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IPO Plus - IPO

To-be Listed
Name▼
/
Code▼
 Industry Offer Price Lot Size Entry Fee Closing Date
Grey Market Date▼
Listing Date▲
S.F. Holding
06936.HK		 Air Freight & Logistics 32.3-36.3 200 N/A 2024/11/22 2024/11/26 2024/11/27
Jiuyuan Gene
02566.HK		 Biotechnology - Medical Devices 11.48-12.56 200 N/A 2024/11/25 2024/11/27 2024/11/28
Mokingran
02585.HK		 Watch & Jewellery 12-14.4 200 N/A 2024/11/26 2024/11/28 2024/11/29
MODERN CHI MED (01643.HK)
Summary
We principally engage in the production of proprietary Chinese medicine (the “PCM”), in particular, we offer both OTC and prescribed medicines intended for use by the Middle-aged and the Elderly in the PRC. During the Track Record Period and up to the Latest Practicable Date, we had 59 types of PCM products. Our major products (in terms of revenue) are Vigour and Vitality Supplement Pill (補腎填精丸), Circulation Enhancement Pill (氣血雙補丸), Cardiotonic Enhancement Capsule (山玫膠囊), Kidney Invigoration Pill (金匱腎氣丸), Heart Wellness Capsule (心安膠囊), Menstrual Discomfort Relief Pill (加味逍遙丸), Liver Detox Tablet (護肝片), Additional Ingredient Huoxiang ZhengQi Pill (加味藿香正氣丸) and Fever- removing and Detoxification Pill (清瘟解毒丸). Certain of our products are intended to re-balance and integrate different types of Qi (氣), a Traditional Chinese Medical Concept which usually refers to the force binding all the matters in the human body. For more details regarding the concept of Qi (氣) and our products, please refer to the subsection headed “Business – Our products” in this document. According to the Euromonitor Report, we are in a fragmented market and yet we were one of the leading non-listed companies engaged in the production of PCM in 2019 in terms of the sales of Qi-deficiency and blood-stasis PCM(1) pills (補氣補血類中成藥丸) and cardio-cerebrovascular PCM(2) capsules (心腦血管中成藥膠囊) in Northeast, the PRC.

OUR BUSINESS

Our history could be traced back to the 1980s. Our principal operating subsidiary was transformed from a state-owned enterprise into a limited liability company in 2001. After several ownership changes, our executive Director, Chairman and Controlling Shareholder, Mr. Xie, acquired our Group's business in June 2014 from Independent Third Parties. Leveraging on our then product portfolio and established brand name in Northeast, Mr. Xie prioritised expanding our business (the promotion of existing products) by enlarging the distribution network to other parts of the PRC. During the Track Record Period, it was our pricing strategy to offer a relatively higher discount rate to our distributors to compete in the market and expand our distribution network. With the assistance of Ms. Zhang, our executive Director and Chief Executive Officer, who joined the predecessor of our principal operating subsidiary in 1986 and Mr. Li, our executive Director who oversees our sales and marketing, our distribution network gradually expanded from Northeast to Huadong (華東), Huanan (華南) and Huabei (華 北). Going forward, in addition to providing the Marketing Incentives to our distributors, we consider that it is also necessary for us to engage direct marketing communication to promote or sell our brand to our end users through traditional media as well as new media. Our Directors consider that such marketing efforts will stimulate market demand from the distributors and end users in the long run.

Our business segments

Our products are sold mainly under our brand “Yushi (御室)”. During the Track Record Period, all of our pharmaceutical products were sold to our distributors, who onsold to retailers (such as drugstores, pharmacies and clinics), where end-users could purchase our products. We maintain a buyer/seller relationship with our distributors, and our distributors are our customers.

The gross profit margin of Circulation Enhancement Pill (氣血雙補丸) in FY2017 was lower mainly due to the fact that we offered higher monetary Marketing Incentives for promotion in FY2017. The gross profit margin of Menstrual Discomfort Relief Pill (加味逍遙 丸) decreased in FY2018 mainly due to the fact that we lowered average net selling prices to promote the products and drive up the total revenue. The gross profit margin of Vigour and Vitality Supplement Pill (補腎填精丸) for 9M2020 decreased significantly mainly due to the increase in its cost of sales per kg as the purchase price of Deer Antler (鹿茸), one of its major raw materials, increased in the respective period: (i) we started to purchase Deer Antler (鹿茸) from Tieling Chuntian Pharmaceutical Co. Ltd. (鐵嶺春天藥業有限公司), which offered quality Deer Antler (鹿茸) and could ensure a more steady supply as it operates own deer farm for its products, since 2019; (ii) when the utilisation rate of the extraction line was relatively low, we purchased some keenly priced and less purified raw materials for production as we only require the extracted essence from the raw materials; and (iii) the purchase price of Deer Antler (鹿茸) in the market remained at high level after the use of Deer Antler (鹿茸) is no longer subject to wildlife restriction in May 2020. Our Directors considered such price level might be caused by the temporary shortage and hence had not yet adjusted our selling price accordingly. If the purchase price of Deer Antler (鹿茸) persists at high level, our Group will adjust the net selling prices of our products and pass partial/all of the increase in cost to our customers.

The gross profit margin of Cardiotonic Enhancement Capsule (山玫膠囊) and Heart Wellness capsule (心安膠囊) decreased in FY2018 primarily due to the change in our production facilities from coal-heated to gas-heated, which increased the cost of production for these capsule products. The gross profit margin of Cardiotonic Enhancement Capsule (山玫膠 囊) increased notably in 9M2020 due to the increase in its average net selling price as we reduced the types of packing offered to distributors (i.e. no longer offering promotional packings with lower average net selling prices) due to the temporary change in market demand. The gross profit margin of Heart Wellness Capsule (心安膠囊) further decreased in FY2019 and 9M2020 due to (i) the increase in monetary Marketing Incentives offered for promotion in FY2019; and (ii) the fact that we adjusted our pricing strategy to decrease the average net selling price of this product for 9M2020 in order to drive up the demand during the period. The change in gross profit margin of Liver Detox Tablet (護肝片) in FY2019 and 9M2020 primarily due to an increase in average cost of sales per kg mainly resulted from increase in purchase price of Chinese Magnoliavine Fruit (五味子), one of its major raw materials, during the respective year/period. We had adjusted its net selling price in order to cope with the increase in average cost.

As compared to those for 9M2019, our gross profit margin for Circulation Enhancement Pill (氣血雙補丸), Menstrual Discomfort Relief Pill (加味逍遙丸) and Kidney Invigoration Pill (金匱腎氣丸) increased in 9M2020 which were mainly due to the decrease in their major cost of raw materials consumed. In particular, (i) our improved quality control of raw materials led to a decrease in production loss; and (ii) the purchase prices of Dangshen (黨蔘), White Peony Root (白芍), Tuckahoe (茯苓) and Tree Peony Bark (牡丹皮), the major raw materials used in one or more of these three major products, decreased during the respective period.

For 9M2020, Additional Ingredient Huoxiang ZhengQi Pill (加味藿香正氣丸) and Fever-removing and Detoxification Pill (清瘟解毒丸) were two of our top selling products as they were believed to be having the intended therapeutic effect for the treatment of the symptoms of COVID-19 and/or similar illness. Their higher gross profit margins were mainly due to the surging demand and we did not offer any monetary Marketing Incentives during the respective period. The higher gross profit margins of these two products compensated the decrease in gross profit margins of some other major products, namely Vigour and Vitality Supplement Pill (補腎填精丸) and Heart Wellness Capsule (心安膠囊) for 9M2020 and we were able to attain our overall gross profit margin at approximately 44.9%.

Generally, during the Track Record Period, the overall gross profit margin of our OTC medicine was relatively lower than that of our prescribed medicine. This was mainly due to the higher nominal selling prices of prescribed medicine compared to that of OTC medicine, as well as the cost of principal raw materials of different products applied. For example, the principal raw materials of our OTC medicines, such as Vigour and Vitality Supplement Pill (補 腎填精丸) and Circulation Enhancement Pill (氣血雙補丸), are Ginseng (人蔘), Deer Antler (鹿茸), Chinese Angelica (當歸) and honey, which are relatively more expensive than those of our prescribed medicine, such as Cardiotonic Enhancement Capsule (山玫膠囊) and Heart Wellness Capsule (心安膠囊), which are Hawthorn Leaves (山楂葉) and ethanol (for extraction).

Throughout the Track Record Period, Northeast contributed more than 50% of our revenue, and we gradually developed Huadong (華東) and Huanan (華南) markets with the aim to broaden our distribution network, and the total revenue generated from these two regions increased from approximately RMB26.0 million in FY2017 to approximately RMB58.4 million in FY2019.

The revenue in FY2019 increased by approximately 26.1% compared to FY2018. It was mainly due to the revenue growth of Northeast and Huanan (華南) by approximately RMB31.8 million and approximately RMB12.0 million, respectively, which were primarily contributed by our Cardiotonic Enhancement Capsule (山玫膠囊) and Kidney Invigoration Pill (金匱腎氣 丸). Such increase was partially offset by the decrease in our revenue by approximately RMB3.3 million which was derived from Huabei (華北) as the amount of our transactions with Heilongjiang Jintian Aixin Pharmaceutical Distribution declined in FY2019. The increase in revenue for 9M2020 compared to 9M2019 by approximately 26.5% was mainly due to the growth from Northeast, Huabei (華北) and Huanan (華南) by approximately 22.4%, 55.4% and 55.4%, respectively, which was partially offset by the decrease in revenue generated from Huadong (華東) by approximately 31.5% as we have recorded lower sales in Vigour and Vitality Supplement Pill (補腎填精丸), Circulation Enhancement Pill (氣血雙補丸) and Cardiotonic Enhancement Capsule (山玫膠囊) by approximately RMB11.3 million.

Source: Modern Chi Med (01643) Prospectus (IPO Date : 2020/12/31)
Listing Market MAIN
Industry Pharmaceuticals
Background Others
Major Business Area N/A
Corporate Information
Substantial Shareholders Sun Xinlei (67.00%)
Directors Sun Xinlei (Chairman and Executive Director)
Zhang Hongli (Chief Executive Officer and Executive Director)
Jia Yanru (Executive Director)
Leung Tsz Wing (Independent Non-Executive Director)
Liu Ling (Independent Non-Executive Director)
Wong Chi Kin (Independent Non-Executive Director)
Company Secretary Chan Tsz Hei Sammi
Jia Yanru
Principal Bankers Bank of China Limited
Solicitors Mason Ching & Associates
Auditors Forvis Mazars CPA Limited
Registered Office Room 2404, World-Wide House, 19 Des Voeux Road Central, Hong Kong
Share Registrars Tricor Investor Services Ltd. [Tel: (852) 2980-1333]
Share Registrars Tel No (852) 2980-1333
Internet Address http://www.cdysjdyy.com
Email Address IR@cdysjdyy.com
Tel No (852) 3958-7604
Fax No (852) 3958-7604
 
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