China Resources' Jiangzhong Pharma Acquires 70% Stake in Jingcheng Huiyao for RMB 70.78 Million Amid High-Premium Deal

On October 11, Jiangzhong Pharmaceutical Co., Ltd. (JZJT), a subsidiary of China Resources, announced that it had signed an equity transfer agreement with Bengbu Investment Group to acquire a 70% stake in Anhui Jingcheng Huiyao Pharmaceutical Co., Ltd. (hereinafter referred to as “Jingcheng Huiyao”). According to the announcement posted on the website of the Bengbu Public Resource Trading Center on September 29, the transfer price for this transaction was RMB 70.78393 million.

The transfer announcement shows that Jingcheng Huiyao was established in November 2013, currently has 149 employees, and a registered capital of RMB 51 million. Prior to the transfer, its sole shareholder was Anhui Peitian Investment Group Co., Ltd. (hereinafter referred to as “Anhui Peitian Investment Group”), a wholly-owned subsidiary of Bengbu Investment Group, a state-owned enterprise. Financial statements indicate that its net assets amounted to only RMB 41.9824 million, while the assessed value reached RMB 101.1199 million, representing an assessment premium rate of 140.86%.

Jingcheng Huiyao, formerly known as Bengbu Traditional Chinese Medicine Factory and Fukang Pharmaceutical established in 1968, is a national high-tech enterprise primarily engaged in the research and development, production, and sales of proprietary Chinese medicines. It was wholly acquired by Shenzhen Fupi Peitian Investment Group Co., Ltd. in May 2015. On October 22, 2021, it was listed on the Specialized, Refined, Differential, and Innovative Board of the Anhui Equity Custody and Trading Center, exerting a certain degree of regional influence.

Focusing on TCM-based OTC tonic products, the portfolio covers proprietary Chinese medicines, TCM decoction pieces, health supplements, functional health foods, and in-hospital preparations. The company operates three major production lines for liquid formulations, pills, solid dosage forms, and TCM decoction pieces. Core offerings include exclusive products such as Liuwei Dihuang Oral Liquid, Naolijing Syrup/Capsules, Zaoshen Mixture, and Shenling Gejie Mixture. Its flagship products have a market presence across China, as well as in overseas markets including the Middle East, Africa, South Asia, Southeast Asia, and Oceania.

(Core product categories publicly disclosed in 2023 by the WeChat official account “Huiyao Big Health” of Jingcheng Huiyao)

According to reports from the Anhui Equity Trading Center, Gao Ji, then General Manager of Jingcheng Huiyao, stated that in 2016, the company invested RMB 50 million in technological upgrades for its plant facilities and production line equipment to advance automation. Prior to the upgrades, Jingcheng Huiyao’s annual production capacity was 60 million units; following the upgrades, single-shift output value reached RMB 300 million, while double-shift 24-hour operations achieved an output value of RMB 600 million.

Since 2021Medicine-Food Homology ProductsExpand into the health food sector. Sales revenue has increased nearly fivefold in recent years. Meanwhile, Jingcheng Huiyao proposed a new concept of developing the “broad-spectrum healthcare and pharmaceutical industry,” exploring a new sales model with the broad-spectrum healthcare industry as the main line and the traditional Chinese medicine (TCM) industry at its core.

This shift in product logic is traceable. A notice released in July by the Anhui Provincial Medical Products Administration showed that Jingcheng Huiyao’sThe production line for traditional Chinese medicine decoction pieces was voluntarily shut down in early August 2020.。

On June 7, 2024, the Yuhui District People’s Court of Bengbu City lawfully ruled on Anhui Peitian Investment Group, Anhui Tianxin Heavy Industry Technology Co., Ltd., Anhui Dafu Heavy Industry Machinery Co., Ltd., and Bengbu Dafu Rongchang Communication Technology Co., Ltd.,Jingcheng Huiyao5 CompaniesConsolidated Bankruptcy Reorganization Case. Anhui Peitian Investment Group is the shareholder of the latter four companies. In the same year, Jingcheng Huiyao’s net profit grew rapidly, primarily due to debt forgiveness by its shareholders.

Anhui Peitian Investment Group is the controlling shareholder of Dashen Technology, a company listed on the ChiNext board. According to Dashen Technology’s 2024 annual report, the cumulative number of shares pledged by its controlling shareholder or largest shareholder and their parties acting in concert reached 80% of their total shareholding in the company. Anhui Peitian Investment Group has provided guarantees for the remaining debts in the restructuring, with the current total outstanding balance of various borrowings amounting to approximately RMB 3.14 billion.

In October 2024, Bengbu Investment Group Co., Ltd., under the supervision of the State-owned Assets Supervision and Administration Commission of Bengbu City, acquired a 100% equity stake in Anhui Peitian Investment Group. On August 6, 2025, the shareholders of Jingcheng Huiyao were changed, with Anhui Peitian Investment Group becoming the sole shareholder of Jingcheng Huiyao.

According to the transfer announcement, Jingcheng Huiyao currently has a book value of RMB 57.0689 million and total liabilities of RMB 15.0865 million (excluding joint and several guarantee liabilities provided to shareholders). In addition, the equity interests in Jingcheng Huiyao and its subsidiaries, as well as its land use rights and fixed assets, have been pledged or mortgaged to secure the debts of Anhui Peitian Investment Group; Jingcheng Huiyao also provides joint and several liability guarantees for Anhui Peitian Investment Group.

However, Jingcheng Huiyao's business continues to generate revenue.The transfer announcement shows that Jingcheng Huiyao's financial statements for July 2025 (with no reporting period specified) indicate operating revenue of RMB 27.3895 million and net profit of RMB 2.8072 million.The net profit for the year 2024 was RMB 64.7825 million.

(Key Financial Indicators, Sourced from the Tender Announcement)

Prior to this equity transfer, JZJT had existing cooperative dealings with Jingcheng Huiyao. According to a report by China Business News, the official website of China Resources Limited shows thatOn August 12, Jingcheng Huiyao, as the supplier, and JZJT, as the purchaser, conducted a negotiated procurement project for the 2025 Liuwei Dihuang Oral Liquid & Naolijing Syrup.

This equity acquisition is a significant move by JZJT to further expand into the health supplement sector by integrating high-quality resources across the traditional Chinese medicine (TCM) industry chain.In addition to its sustained profitability, Jingcheng Huiyao holds exclusive rights to at least two proprietary products and serves as the national general distributor for four other product lines. This positions the company to capitalize on the potential market for blockbuster traditional Chinese medicine (TCM) products and to explore untapped opportunities in the health consumer segment focused on tonic supplements.

Notably, within the transfer conditions, the transferor has the right to stipulate that the transferee must ensure that the drug approval numbers for certain proprietary Chinese medicines—including Liuwei Dihuang Oral Liquid, Naolijing Capsules, Shengmai Yin, Shedan Chuanbei Liquid, Zaoshen Mixture, and Shenling Gejie Mixture—shall not be transferred out of Bengbu City through changes in marketing authorization holder status or other means. In particular, data from the National Medical Products Administration shows that among the aforementioned products subject to transfer restrictions,Zao Shen Mixture and Shen Ling Ge Jie Mixture are exclusive products of Jingcheng Huiyao.

It is reported that Jingcheng Huiyao has signed national general agency agreements for four product varieties: Shenling Gejie Mixture (contract valid until December 31, 2027), Zaoshen Mixture (contract valid until December 31, 2029), Liuwei Dihuang Oral Liquid (contract valid until December 31, 2030), and Naolijing Syrup (contract valid until December 31, 2030).

Another factor is that JZJT faces the dilemma of a year-on-year slowdown in revenue and net profit growth, making it an imperative to expand its market for exclusive categories and blockbuster products.In the first half of 2025, JZJT reported operating revenue of RMB 2.141 billion, a year-on-year decrease of 5.79%; net profit attributable to shareholders of the parent company amounted to RMB 522 million, representing a year-on-year increase of 5.80%; basic earnings per share were RMB 0.82; and selling expenses were reduced by 19.25% year on year.

Based on performance during the same period in previous years, JZJT’s interim revenue has declined for two consecutive years, with a year-on-year decrease of 3.78% in the first half of 2024. Meanwhile, its net profit growth rate during the same period has continued to slow down, dropping from 27.96% in the first half of 2022 to 5.8% in the first half of 2025.

(JZJT's Key Financial Data for the First Half of 2025)

OTC products constitute the majority of the company's core business revenue, reaching RMB 1.55 billion with a gross profit margin of 76.14%. However, the segment faces significant growth pressure, as revenue declined by 10.14% year-on-year. Key products include Jianwei Xiaoshi Tablets, Lactobacillus Tablets, Bifidobacterium Triple Viable Enteric-coated Capsules (Beifeida), Compound Caoshanhu Lozenges, Compound Fresh Bamboo Juice Liquid, Chuanbei Pipa Capsules, Niuhuang Shedan Chuanbei Liquid, Compound Guazijin Granules, and Paracetamol, Caffeine, Artificial Cow-bezoar and Chlorphenamine Maleate Oral Solution.

The interim report shows that its core OTC business adheres to the development path of “blockbuster products and strong categories,” consolidating its advantages in the “spleen, stomach, and intestinal” categories, while expanding into the “throat, cough, and asthma” as well as “tonics, vitamins, and minerals” sectors.

Notably, in the first half of 2025, JZJT’s health consumer products segment achieved operating revenue of RMB 228 million, representing a year-on-year increase of 17.35%. The strategic plan emphasizes developing health consumer products by building product clusters centered on Shenlingcao in the tonic category, the Chuyuan series in the rehabilitation category, probiotics in the gastrointestinal category, and Ganchun tablets in the liver health category.

In fact, the health consumer goods business has become a second growth curve for large-scale traditional Chinese medicine (TCM) enterprises, enabling them to navigate volume-based procurement (VBP) and break through growth ceilings. While traditional TCM products are largely confined to the “disease treatment” scenario, health consumer goods extend into “daily prevention,” “wellness,” and “health maintenance,” thereby broadening consumption scenarios and enhancing e-commerce reach. This strategy transforms low-frequency medication use into high-frequency fast-moving consumer goods (FMCG), boosts repurchase rates, and ultimately expands business growth points characterized by high gross margins and short cash conversion cycles.

From this perspective, Jingcheng Huiyao’s core products—Liuwei Dihuang Oral Liquid, Naolijing, Zaoshen Mixture, and Shenling Gejie Mixture—not only fill the gap in tonifying OTC products but also lay out potential growth points in the health consumer goods sector.For JZJT, which started with OTC products and expanded into a series of food therapy products, this path is not unfamiliar.