Yixintang Announces RMB 150 Million Acquisition of 60 Pharmacies in Sichuan Following Recent RMB 126 Million Deal

On December 13, 2016, Yunnan Hongxiang Yixintang Pharmaceutical (Group) Co., Ltd. issued three consecutive announcements concerning three acquisitions, announcingSichuan Yixintang Pharmaceutical Chain Co., Ltd.It will acquire Guangyuan Laobaixing Pharmacy Chain Co., Ltd., Mianyang Laobaixing Pharmacy Chain Co., Ltd., as well as the store assets and inventory of Mr. Zeng Lichun’s individually operated pharmacies. The respective acquisition amounts are RMB 83.71 million, RMB 56.89 million, and RMB 17.54 million, with a cumulative total exceeding RMB 150 million.

Sichuan Yixintang plans to acquire 26 directly operated stores of Mianyang Laobaixing, with the stores distributed across various areas within Mianyang City.Districts and counties: The average store area is approximately 144.41 square meters, as detailed below:

Sichuan Yixintang plans to acquire 26 directly operated stores of Guangyuan Laobaixing, with the stores distributed across various areas within Guangyuan City.Districts and counties: The average store area is approximately 223.07 square meters. Details are as follows:

Yixintang of Sichuan plans to acquire a total of 8 stores from Mr. Zeng Lichun's individually operated pharmacies, with the stores distributed across MianWithin the districts and counties of Yang City, the average store area is approximately 165.32 square meters. Details are as follows:

Through the acquisition of Mianyang Laobaixing stores,Guangyuan Laobaixing Store andMr. Zeng Lichun, an individual pharmacy operator, will help Yixintang strengthen and consolidate its presence in the Sichuan market and expand the company’s coverage.scope, comprehensively enhance the company's competitiveness.

ProjectedMianyang Common PeopleThe store's operating revenue in 2017 was RMB 48.3957 million, with a net profit increase of RMB 3.6472 million;EstimatedGuangyuan Laobaixing StoreIn 2017, the operating revenue was RMB 61.4735 million, with a net profit increase of RMB 3.4115 million; the operating revenue of Mr. Zeng Lichun’s individually owned pharmacy in 2017 is projected to be RMB 21.3386 million, with a net profit increase of RMB 1.7886 million.

On November 15 this year, Yixintang issued an announcement stating that its wholly-owned subsidiary, Guangxi Hongxiang Yixintang, intends to acquire the assets and inventory of 130 stores held by Guangxi Fanglue for no more than RMB 45.77 million; meanwhile, another wholly-owned subsidiary, Sichuan Yixintang, plans to acquire the assets and inventory of 42 stores held by Sichuan Beierkang for no more than RMB 79.79 million. Combined, the two transactions involve a total of RMB 126 million and 172 stores. Yixintang pointed out that the respective acquisitions will help strengthen and consolidate its market presence in Guangxi and Sichuan, expand coverage, and comprehensively enhance competitiveness.

According to the data disclosed in its third-quarter report, as of September 30, 2016, Yixintang and its wholly-owned subsidiaries operated a total of 3,877 directly-owned chain stores. These included 2,697 in Yunnan Province, 334 in Guangxi Zhuang Autonomous Region, 240 in Sichuan Province, 212 in Shanxi Province, 154 in Guizhou Province, 154 in Hainan Province, 58 in Chongqing Municipality, and 28 in other provinces and municipalities directly under the central government.

Industry insiders point out that for Yixintang, the expansion of its marketing network and the increase in the number of stores can certainly drive revenue growth, but they also bring pressures in areas such as capital allocation and store management. If management capabilities fail to meet requirements, the company may experience issues such as declining sales, brand dilution, and disruptions in its supply chain, ultimately leading to a reduction in operating profits.