Public (Shenzhen 000545)

Company Facts:

JiLin Pharmaceutical Limited Company (JPLC) is a leading pharmaceutical company in China (mainland), which is located in JiLin province, North-east of China. The company is mainly engaged in manufacturing and selling of medical raw material, medical intermediate material, Chinese and Western medicine, chemical industrial products and health care products.

JPLC was known as JiLin City Pharmaceutical Factory, established in 1962, and got approved by the People’s Republic of China Economical Structure Reform Committee in 1992, JiLin Pharmaceutical Limited Company was officially established after transferring company’s ownership from national owned to shareholders. Consequently, JiLin Pharmaceutical Limited Company launched its shares to the public in Shenzhen Stock Exchange Market in 1993.

The company has a long history in pharmaceutical industry with marginal, 178 categories of Chinese and Western medicine with a yearly production capacity of over 1.7 billion tablets out of which some being manufactured over a ton on yearly basis naming aspirin, acetyl aniline, anlagen and chemical raw material like aminophenazone.

JPLC’s main product aspirin, which grips more than 90% of its production exports to European and American market. Recently, the company won the anti-dumping court case in the USA, and started enjoying a zero anti-dumping tax on bulk packed aspirin. This has ensured the company’s main product’ market shares in the US market.

Financial Overview

Related companies (Subsidiaries/Shareholder/collaboration) of Beijing Hualian Department Store Co. Ltd.

KongYang Zhang, Individual indirect shareholder, percentage of rights and interests: 17.33%

JiLin JinQuan BaoShan Pharmaceutical Group Co. Ltd. Holding Company, Percentage of ownership: 25.51%

JiLin Province HengHe Weikang Pharmaceutical Co. Ltd. Holding shareholder, percentage of ownership: 99.9%

HuBei Province Jindi Pharmaceutical Co. Ltd.  Co. Ltd. Holding subsidiaries, Percentage of ownership: 40.06%

ShouBin Zhang (President, GM), Actual Holding Individual

HuBei Province Jindi Pharmaceutical Co. Ltd., received capital investment from same investor.

Dalian Jinquan Baoshan Bio Engineering Co. Ltd., received capital investment from same investor.

Stock Health

As on 16-Jul-2008

Open: 9.58    High: 9.58     Low: 9.58       Close: 9.58    Vol.: 522,269

Key Stats & Ratios

        Unit: RMB 10,000 Yuan

                                   
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Note: Because of declaring of some important changes in main shareholder and company’s main business, stock got closed after 28th April, and reopened on 16th July with continuously surged limited on 16th and 17th, for 2 trading days.

Comparation: GPLC against Industrial Average Performance

Pharmaceutical industry is regarded as highly growing industry in China (mainland) thanks to the stable improvement in people’s living standard and it is assumed that the profit margin increase rate of this industry will reach 50% in year 2008. Chinese government’s pharmaceutical revolution has also pumped up the industrial stock to a great deal, this very reason will largely increase government investments in the industry in order to improve social health care, in future.

Pharmaceutical stocks are unlikely to be shacked by emergency events, such as HV71 type feet-and-mouth disease occurred in March, and the earthquake in May. It seems to be a safe choice for investors to buy in pharmaceutical sector stocks and can rightly expect marginal gain on Return on Investment (ROI).

However, from the lights of the above statistics it is not difficult to make out that JPLC’s below industrial average performance has led to 2 years continuous loss in 2005 and 2006, thus, as a result, JPLC was once ST (Special Treatment) stock and only after year 2007’s financial report which showed profits again, it got back to regular stock sector in the market. Therefore, JPLC stock is exclusive exception in the pharmaceutical sector, and investors should stay alert.

On 16th July, the company announced to launch additional shares of quantity not more than 900,000 shares on price of RMB 8.3 Yuan per share. Thereafter, JiLin Pharmaceutical Limited Company will transfer its total assets, liability, businesses and business related liability to JiLin JinQuan BaoShan Pharmaceutical Group Co. Ltd., at the same time, will purchase 100% rights and interests of Bindi Potassium Fertilizer Co. Ltd. and its full rights in mineral exploration and usage of the land.

Till then, actually, JPLC is stepping out from pharmaceutical industry and entering mineral industry. Therefore, investors have to pay close attention to this stock’s future performance and are suggested to rather hold their funds than immediately buying this stock as it is rather unpredictable and ambiguous. Existing shareholders probably should sell holding stocks partially, at least to reduce the future risks.