Huaren Health to Acquire Three Regional Pharmacy Chains for RMB 326 Million in Strategic East China Expansion

On May 21, Anhui Huaren Health Pharmaceutical Co., Ltd. announced that it plans to acquire three companies—Fujian Yangzu Huimin Pharmaceutical Chain Co., Ltd. (“Yangzu Huimin”), Fujian Haihua Pharmaceutical Chain Co., Ltd. (“Haihua Pharmaceutical”), and Tonglu Yishengtang Pharmacy Chain Co., Ltd. (“Tonglu Yishengtang”)—held by Ningbo Minzhehui Investment Partnership (Limited Partnership) for a total cash consideration of approximately RMB 326 million.

According to the announcement, Anhui Huaren Health Pharmaceutical Co., Ltd. purchased a 46.01% equity stake in Yangzu Huimin for RMB 133 million, a 46.01% equity stake in Haihua Pharmaceutical for RMB 125 million, and a 70.01% equity stake in Tonglu Yishengtang for RMB 68.2598 million. Upon completion of these acquisitions, Huaren Health will hold a 51% equity stake in Yangzu Huimin, a 54.557% equity stake in Haihua Pharmaceutical, and a 100% equity stake in Tonglu Yishengtang.

Furthermore, Anhui Huaren Health Pharmaceutical Co., Ltd. has entered into performance commitment agreements with Yangzu Huimin and other entities targeted for acquisition. Specifically, Yangzu Huimin has committed to achieving annual sales revenues of no less than RMB 295 million, RMB 310 million, and RMB 325 million in 2025, 2026, and 2027, respectively, with net profits attributable to parent company shareholders of no less than RMB 13.6 million, RMB 14.28 million, and RMB 14.99 million, respectively. Haihua Pharmaceutical has committed to achieving annual sales revenues of no less than RMB 289 million and RMB 304 million in 2025 and 2026, respectively, with net profits attributable to parent company shareholders of no less than RMB 14.4703 million and RMB 15.1938 million, respectively.

This acquisition represents a highly strategic move for Huaren Health, underpinned by multiple motivations and value propositions.

The announcement stated that this acquisition is a significant measure for Anhui Huaren Health Pharmaceutical Co., Ltd.’s pharmaceutical retail business to implement its development strategy of “deepening presence in Anhui, focusing on East China, and radiating to surrounding areas,” fully reflecting the company’s strategic positioning and scientific layout in regional expansion and market development.

From the perspective of market expansion, Yangzu Huimin and Haihua Pharmaceutical hold significant positions in Fujian’s pharmaceutical retail market, while Tonglu Yishengtang enjoys high brand recognition in Hangzhou. By acquiring these three leading local pharmacy chains, Anhui Huaren Health Pharmaceutical Co., Ltd. can rapidly enter the Fujian market, further consolidate its foundation in Zhejiang, and accelerate its network layout in East China.

Meanwhile, the acquired enterprise possesses a well-established operational system, a mature management framework, and a solid customer base with an extensive marketing network. Anhui Huaren Health Pharmaceutical Co., Ltd. can fully leverage these resources to integrate the strengths of both parties, thereby achieving synergies in store networks, brand awareness, and customer resources. This will help optimize the supply chain, improve operational efficiency, and reduce procurement costs, ultimately enhancing the company’s profitability.

In terms of financial performance, Yangzu Huimin achieved operating revenue of RMB 294 million, net profit of RMB 5.61 million, total assets of RMB 208 million, and total liabilities of RMB 179 million in 2024, with 197 stores under its brand. Haihua Pharmaceutical recorded operating revenue of RMB 270 million, net profit of RMB 11.06 million, total assets of RMB 114 million, and total liabilities of RMB 89.63 million in 2024, operating 91 stores. This acquisition not only realizes a strategic layout in the Fujian market but also fully leverages the localized advantages of both enterprises to rapidly expand market presence.

Tonglu Yishengtang is a well-known pharmaceutical chain brand in Hangzhou, with a solid customer base and marketing network. In 2024, Tonglu Yishengtang achieved revenue of RMB 96.46 million, net profit of RMB 264,000, total assets of RMB 51.14 million, and total liabilities of RMB 47.15 million. The company operates 58 retail stores and one clinic. Prior to this acquisition, Anhui Huaren Health Pharmaceutical Co., Ltd. had already established a presence in the Zhoushan and Huzhou markets of Zhejiang Province. This entry into the Hangzhou market represents a strategic move to further consolidate the company’s position in Zhejiang and accelerate its network expansion.

Overall, through this acquisition, Anhui Huaren Health Pharmaceutical Co., Ltd. has successfully established its pharmaceutical retail presence in the four East China provinces of Anhui, Jiangsu, Zhejiang, and Fujian. Following the completion of the acquisition, the company’s pharmaceutical retail business will evolve from a local enterprise in Anhui into an influential regional pharmaceutical chain in East China, significantly enhancing its market share and brand influence in the region.

Amid widespread pressure on the pharmaceutical retail sector and a wave of store closures among chain pharmacies in many regions, Anhui Huaren Health Pharmaceutical Co., Ltd.’s counter-trend expansion is particularly noteworthy.

In recent years, small and medium-sized pharmacy chains have faced severe challenges due to the deepening reform of medical insurance policies, the impact of online pharmaceutical sales channels, and increased industry concentration. According to forecasts by Sinohealth CMH, approximately 39,000 retail pharmacies closed nationwide in China in 2024, with a closure rate of 5.7%, a significant increase from 3.8% in 2023.

However, leading enterprises are simultaneously accelerating their efforts to secure market share. Huaren Health’s latest acquisition represents a strategic move during a period of intensifying industry consolidation. By acquiring three mature companies with deep roots in regional markets, the company has not only rapidly gained access to a network of over 300 physical stores in core cities across Fujian and Zhejiang provinces but also extended its service reach into key commercial districts of major cities such as Hangzhou and Longyan. Leveraging the acquired companies’ established local operational expertise and stable customer bases, combined with its own strengths in supply chain management and digital infrastructure, Huaren Health is well-positioned to build stronger resilience against risks during this industry reshuffling phase.

In fact, since its listing on March 1, 2023, Anhui Huaren Health Pharmaceutical Co., Ltd. has engaged in aggressive mergers and acquisitions, leading to a surge in the number of its stores. In 2024, it completed three major acquisitions: Zhoushan Liken Pharmaceutical Chain Co., Ltd., Lu’an Guosheng Ping’an Pharmacy Chain Co., Ltd., and Anji County Baixingyuan Pharmacy Chain Co., Ltd., with individual transaction amounts ranging from RMB 83.64 million to over RMB 100 million.

According to the company’s annual report, Anhui Huaren Health Pharmaceutical Co., Ltd. (“Huaren Health”) achieved operating revenue of RMB 4.532 billion in 2024, a year-on-year increase of 19.34%. Net profit attributable to shareholders of the parent company amounted to RMB 138 million, representing a year-on-year growth of 20.09%. Through a strategy combining new store openings and mergers and acquisitions (M&A), Huaren Health added 440 new stores in 2024, including 70 self-built stores and 370 acquired stores, thereby entering new markets such as Zhoushan and Huzhou in Zhejiang Province. By the end of 2024, the total number of stores under Huaren Health reached 1,774. This figure stood at only 938 in 2022, indicating that Huaren Health rapidly expanded its store network by 836 locations within two years.

In previous earnings briefings, Anhui Huaren Health Pharmaceutical Co., Ltd. explicitly stated that it would continue to expand its store network in 2025 through a combination of new openings, mergers and acquisitions, and franchising, further consolidating its leading position in the Anhui market while accelerating expansion into East China and surrounding regions to increase regional market share.

It is worth noting that the high premiums in this acquisition have also raised market concerns about risks. The assessment appreciation rates for Yangzu Huimin, Haihua Pharmaceutical, and Tonglu Yishengtang reached 892.79%, 1029.4%, and 2350.84%, respectively. Such high premium rates may expose Anhui Huaren Health Pharmaceutical Co., Ltd. to significant goodwill impairment risks. If the future performance of the acquired companies fails to meet expectations, it could lead to goodwill impairment, thereby adversely affecting the company’s financial position and operating results.

Based on this, Anhui Huaren Health Pharmaceutical Co., Ltd. also included a risk warning in its announcement of the acquisition transaction: “Upon completion of this transaction, the target company will be included in the scope of the Company’s consolidated financial statements. The excess of the combined acquisition cost over the fair value of identifiable net assets will be recognized as goodwill. There is a risk that goodwill may become impaired due to factors such as unsuccessful future integration, macroeconomic conditions, and industry changes, which could adversely affect the Company’s profits and losses.” Meanwhile, the Company further clarified the performance commitment information.

In summary, this acquisition not only demonstrates Anhui Huaren Health Pharmaceutical Co., Ltd.’s confidence in deeply cultivating regional markets but also highlights its strategic planning to enhance operational efficiency through resource integration. This counter-cyclical layout strategy may enable the company to overtake competitors during the industry downturn, laying a critical foundation for its leap toward becoming a regional leader in East China. However, whether post-acquisition integration can proceed smoothly and whether the acquired entity can fulfill its performance commitments are crucial to Anhui Huaren Health’s long-term development amidst the wave of industry transformation. Its future success will still need to withstand the dual tests of time and the market.