Jianzhijia's Renewed IPO Attempt: Can This Yunnan-Based Pharmacy Retailer Succeed?

VCBeat has learned that on July 28, 2020, Yunnan Jianzhijia Health Chain Store Co., Ltd. applied for an initial public offering (IPO) on the Main Board of the Shanghai Stock Exchange. This marks Jianzhijia’s second attempt to list on the SSE Main Board, following its previous application in 2017.

2017May 15,Jianzhijia submitted its initial prospectus for its IPO application, and later in October of the same yearThe package insert was revised and resubmitted. However, by January 2018,The CSRC announced the termination of its review of Jianzhijia’s IPO application.

After two failed attempts, Jianzhijia did not give up on its IPO; from 2018 to 2019, there were frequent reports that the company was undergoing pre-listing tutoring.June 17, 2019,Hongta Securities submitted the “Summary Report on Tutoring Work for the Initial Public Offering of Yunnan Jianzhijia Health Chain Store Co., Ltd.” to the Yunnan Bureau of the China Securities Regulatory Commission (CSRC). The report stated that the tutoring work had achieved significant results. Based on a comprehensive assessment by the tutoring team, Jianzhijia has met the listing requirements and is qualified to submit its application for an initial public offering of A-shares to the CSRC.

Data disclosed in Jianzhijia’s latest prospectus also reveals that the company is firmly rooted in Southwest China, continuously expanding its coverage through an integrated online-and-offline model. Moreover, its revenue and net profit have maintained sustained growth in recent years.

So, can Jianzhijia ride the wave of IPOs in the healthcare industry and ultimately achieve a successful listing?

Jianzhijia is primarily engaged in the chain retail of health products, including pharmaceuticals, health supplements, personal care items, home health supplies, convenience foods, and daily consumables, while also providing related professional services. Through years of gradual development and accumulation, the company has expanded from its origins in Kunming to establish a strong presence in Yunnan, extending its coverage to Chongqing, Sichuan, Guangxi, and other regions. With a focus on deepening its roots in Southwest China, it leverages a well-established chain retail network and professional pharmaceutical service capabilities to build core competitive advantages. This has shaped a strategic trajectory for steady nationwide expansion. The company has developed a business model centered on direct-operated chain pharmacy stores for physical retail, with pharmaceutical sales as the primary driver, complemented by health care and convenience product sales, and organically integrated with e-commerce operations. It has also cultivated a diversified community health service ecosystem, emerging as a nationally recognized health chain retail enterprise with strong regional competitiveness.

Leveraging three core pillars—industry-leading operational management capabilities, an efficient logistics network, and a continuously optimized information system—and integrating e-commerce tools such as Jia E Gou, its mobile app, WeChat mini-store, official website, and third-party platforms, Jianzhijia has established a member-centric omnichannel marketing platform. This initiative fosters a diversified community health service ecosystem encompassing professional convenience pharmacies, traditional Chinese medicine (TCM) clinics, community clinics, health examination centers, and convenience stores.

In the “Top 100 Pharmaceutical Retail Enterprises by Total Sales in 2018” list published by the Department of Market Order under the Ministry of Commerce, Jianzhijia ranked 13th; in the “2018–2019 China Pharmacy Value Top 100” list released by China Pharmacy magazine, it ranked 15th.

As of December 31, 2019, Jianzhijia operated 1,539 directly-owned community professional convenience pharmacies, 4 directly-owned traditional Chinese medicine (TCM) clinics, 2 directly-owned community clinics, 1 directly-owned medical examination center, 206 directly-owned convenience stores, and 20 franchised convenience stores. The total operating area of its directly-owned stores amounted to 253,400 square meters, with a membership base exceeding 10 million. In 2019, member spending accounted for over 70% of Jianzhijia’s total sales revenue.

In the past two years, Jianzhijia has continued to expand its offline store network, with the pace of expansion gradually accelerating. In 2017, 2018, and 2019, the company saw a net increase of 121, 201, and 246 stores, respectively, reflecting robust growth momentum.

Jianzhijia’s offline stores are concentrated in the four southwestern provinces, particularly in Yunnan, where it has essentially achieved comprehensive coverage. However, this overly concentrated business layout also poses certain risks to Jianzhijia’s future expansion.

As of December 31, 2019, the number of directly operated stores in Yunnan Province accounted for 84.30% of Jianzhijia’s total number of directly operated stores; revenue from Yunnan Province represented 84.53% of its total operating revenue. In terms of both store scale and revenue-generating capacity, Yunnan Province is the core region of its operations. Compared with Yunnan, Jianzhijia’s operational regions such as Guangxi, Sichuan, and Chongqing are still in the development stage, with relatively low numbers of directly operated stores and market share. There is a certain gap in geographic coverage compared to peer companies in the same industry.

Jianzhijia primarily conducts retail sales of pharmaceuticals, health supplements, personal care products, household health items, daily consumables, and convenience foods through its directly operated stores, providing consumers with healthy, professional, and convenient services. Additionally, the company develops its e-commerce business through multiple channels, including its official online mall, flagship stores on e-commerce platforms, WeChat official accounts, and mobile apps, while simultaneously exploring and advancing pharmaceutical e-commerce business models.

Offline:Currently, Jianzhijia’s chain stores are primarily distributed across Yunnan, Chongqing, Guangxi, and Sichuan, encompassing diverse business formats such as community-focused professional convenience pharmacies, traditional Chinese medicine (TCM) clinics, community clinics, health examination centers, and convenience stores. Meanwhile, the company leverages its offline physical stores to attract a broad membership base, providing customers with personalized services and comprehensive health solutions.

Online B2C:With the development of the pharmaceutical chain industry and e-commerce formats, Jianzhijia has established its own online platform, the Jianzhijia Health Pharmacy Website, and opened flagship stores on third-party platforms such as JD.com, Tmall, Suning.com, and Pinduoduo to cater to modern consumers’ online shopping demands. Its B2C business fully leverages existing resource advantages while expanding its business coverage.

Mobile:In recent years, Jianzhijia has expanded its pharmaceutical sales channels to include mobile shopping. Consumers can shop via the mobile mall embedded in the "Jianzhijia Health Pharmacy" WeChat official account and enjoy membership benefits shared with offline physical stores.

O2O：To enable interactions across online and offline channels, mobile platforms, and third-party e-commerce platforms, and to facilitate marketing, customer acquisition, membership services, information sharing, product transactions, payment processing, and mobile healthcare

Certainly, from the perspective of overall business proportion, offline store sales remain the primary revenue channel for Jianzhijia. In 2019, online platforms accounted for only 5.98% of its total business, indicating that it was still in the early stages of development.

From a revenue perspective, Jianzhijia’s overall revenue maintained continuous growth from 2017 to 2019. Moreover, the growth rate reached 27.6% in the 2018–2019 period. Alongside revenue growth, Jianzhijia’s operating profit also remained on a steady upward trajectory. In 2019, its net profit exceeded RMB 166 million.

However, on the other hand, Jianzhijia’s high debt ratio has also brought certain hidden risks to the company’s future development. As of December 31, 2017, December 31, 2018, and December 31, 2019, the company’s asset-liability ratio (parent company) reached 62.89%, 62.51%, and 67.23%, respectively. With the continuous expansion of the company’s business scale, if banks reduce the company’s credit facilities, it will exert pressure on the company’s fund management and expose the company to certain debt repayment risks.

Jianzhijia’s IPO is expected to raise approximately RMB 920 million. Opening new stores remains the company’s primary strategic focus going forward. Additionally, a portion of the funds will be allocated to the digital upgrade of its overall business operations, including the development of digital systems (the Pharmaceutical Chain Information Service Project) and the establishment of an e-commerce platform (the Multi-Channel, Multi-Format Marketing Platform Construction Project).