Zhongzhi Announces First Interim Results After Successful Listing on HKEx

HONG KONG, Aug. 25, 2015 /PRNewswire/ -- The patented modern decoction pieces granulation technique inventor, a leading modern decoction pieces and Chinese patent medicines manufacturer, Zhongzhi Pharmaceutical Holdings Limited ("Zhongzhi" or the "Company", together with its subsidiaries, the "Group"; Stock code: 3737), today announced its first interim results for the six months ended 30 June 2015 (the "Period") after its successful listing on the Main Board of the Hong Kong Stock Exchange on 13 July 2015. 

Robust Growth in Sales and Earnings

For the Period, Zhongzhi delivered a strong set of results with total revenue grew 20.6% to RMB347.3 million, primarily led by robust modern decoction pieces sales growth of 44.5% to RMB102.1 million. Profit attributable to Shareholders rose 29.9% to RMB62.1 million. Basic earnings per Share was RMB10.35 cents, an increase of 30.0% over last year. After reviewing the working capital requirement for the Group's future business expansion, the Board did not recommend the payment of interim dividend for the six months ended 30 June 2015.

Margin Enhancement Supported by Higher Margin Own-branded Products

Overall gross margin further enhanced 1.8 percentage points to 55.3% for the Period, primarily attributable to an increase in wholesale value of the Group's higher margin, own-branded products such as modern decoction pieces and Chinese patent medicines.  

Healthy Balance Sheet

The Group maintained a healthy financial position with a gearing ratio of 13.1% (31 December 2014: 12.4%). As at 30 June 2015, its total cash and bank balances amounted to RMB36.8 million (31 December 2014: 58.0 million).

Mr. Lai Zhi Tian, Chairman and Executive Director of Zhongzhi, said, "We are delighted to announce such a remarkable first set of results since listing on the Hong Kong Stock Exchange last month with both turnover and earnings achieved double digit growth. We are especially proud of our record modern decoction pieces sales of over RMB102.1 million, up 44.5% year-on-year, and solid sales growth momentum of our other own-branded products in the first half of 2015, reflecting the consistent and successful execution of our growth strategy."

As a leading modern decoction pieces and Chinese patent medicines manufacturer, Zhongzhi is principally engaged in the research and development, manufacturing, marketing, retail sales and distribution of its own-branded products under three core brands of "Zeus", "Liumian*" and "Caojinghua*". The Group sells and distributes its own-branded products through its self-operated pharmacy chain in Zhongshan, Guangdong, and, on a wholesale basis, to its distributors and independent chain pharmacies across the PRC.  

Pharmaceutical Manufacturing Segment

During the Period, the Group is engaged in manufacturing, and sales and marketing of its three core own-branded Chinese decoction pieces (traditional and modern) and patent medicines. It posted remarkable increase in this segment revenue and gross profit by 25.5% and 35.4% to RMB175.8 million and RMB111.8 million, respectively, primarily attributable to the Group's effort to expand its sales and distribution network, successfully expanding its market share and deepening its market penetration, resulting in an increase in sales of the Group's higher margin, own-branded products such as modern decoction pieces and Chinese patent medicines. Signature modern decoction pieces included red sage root modern decoction pieces*, American ginseng modern decoction pieces* and sanqi modern decoction pieces*.

According to the National Bureau of Statistics, the retail sales of Chinese and Western medicine in June 2015 amounted to RMB67.6 billion, was up 16% year-on-year compared to June 2014, while the value in the first half of 2015 increased by 14.5% to RMB368 billion, fueled by growing awareness of health and wellness, the continuing urbanization process and improving standards of living in the PRC, resulting in increasing household spending on pharmaceutical and healthcare products.  

This segment accounted for 50.6% of the Group's total revenue (1H 2014: 48.6%).

Pharmacy Chain Operation Segment

The Group has been operating pharmacy chains in Zhongshan under its brand ''Zeus'' for the sale of pharmaceutical products since 2001. In terms of revenue and number of outlets, the Group has been the largest self-operated retail pharmacy chain in Zhongshan, Guangdong. Segment revenue and gross profit of retail pharmacy chain operations grew by 15.9% and 12.0% to RMB171.5 million and RMB80.2 million, respectively. As of 30 June 2015, the Group boasted 201 self-operated chain pharmacies in Zhongshan (1H 2014: 196).

This segment accounted for 49.4% of the Group's total revenue (1H 2014: 51.4%).

Stepping into the second half of 2015, the patented modern decoction pieces granulation technique inventor has rolled out a series of business initiatives to archive its sales goals and further tap into the fast-growing Chinese healthcare industry that according to Ipsos, expected to grow at a CAGR of over 20% from 2014 to 2018.

Mr. Lai added that, "To date, we have successfully developed 258 types of decoction pieces (traditional and modern) and 60 types of Chinese patent medicines, both with relevant PRC production approvals obtained. Yet, only less than 200 types have been launched in the PRC market. We have a strong product pipeline for coming years." 

Among the strong product pipeline that focuses on health and wellness concept, the Group pilot launched its own-branded health food products in June 2015, namely, granulated siraitia grosvenorii, granulated rose petals and granulated Chinese hawthorn in its self-operated chain pharmacies in Zhongshan.

"There has been a tremendous growth and booming expansion in the Chinese healthcare sector, outlined by The Twelfth Five-Year Plan for the Chinese Food Industry and Opinions of the CPC Central Committee and the State Council on Deepening Health Care Reform. With the raised capital, we are well placed to deepen market penetration and enlarge our market share through careful network expansion, strengthen and upgrade our research and development as well as production capacities, hence our product portfolio. We are very confident of achieving a stellar result for the full year of 2015," Mr. Lai concluded.

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About Zhongzhi Pharmaceutical Holdings Limited (Stock code: 3737.HK)

Founded in 1993, Zhongzhi is a leading modern decoction pieces and Chinese patent medicines manufacturer and the largest self-operated retail pharmacy chain in Zhongshan, Guangdong. It is principally engaged in the research and  development, manufacturing, sales and marketing of Chinese decoction pieces (traditional and modern) and patent  medicines and under its three core brands of "Zeus", "Liumian*" and "Caojinghua". The Group sells and distributes its own-branded products through its 200 plus self-operated pharmacy chain in Zhongshan, Guangdong, and an extensive distribution network comprising more than 1,110 distributors and about 380 independent pharmacy chains across China.