For 8 consecutive years of financial report fraud, Guangyuyuan and then chairman Zhang Bin and other relevant responsible persons were heavily fined

On April 10, Guangyuyuan (600771. SH) announced that the company and its then-chairman Zhang Bin and other parties received the "Administrative Penalty Decision" and "Market Ban Decision" from the Shanxi Supervision Bureau of the China Securities Regulatory Commission.

For more than 7 consecutive years of financial fraud, the price of the core product Angong Niuhuang Pill has increased many times, but it has not made Guangyuyuan "outstanding results". Financial data show that Guangyuyuan's net profit continued to decline, accompanied by high sales expenses, and it has suffered continuous losses in the past two years. In January, the company said that it expects a net profit of 100 million yuan to 120 million yuan last year, an increase of 499 million yuan to 519 million yuan compared with the same period last year, and to turn losses into profits. However, in response to the 2023 annual report after the financial fraud, the company did not give corresponding corrections and responses.

For 8 consecutive years, the inflated revenue exceeded 900 million yuan, and the inflated profit exceeded 1 billion yuan

The announcement said that the disclosure of the "buyout sales" model of Guangyuyuan Co., Ltd.'s annual report from 2016 to 2021 was untrue, and in the case of the subsidiary Shanxi Guangyuyuan and some downstream commercial companies having an agreement that "the product is unsalable and close to the expiration date, it can be returned unconditionally" Accounting policy, recognize sales revenue in advance, and at the same time, the treatment of sales expenses is incorrect, and some sales expenses have inaccurate attribution periods or accounting treatment does not comply with the provisions of the accounting standards for business enterprises.

The above situation has led to false records in the annual report and 2023 semi-annual report of Guangyuyuan Co., Ltd. from 2016 to 2022, with a total of inflated operating income of 967 million yuan and inflated profit of 1.142 billion yuan. Titanium Media App is sorted out as follows:

In 2016, Guangyuyuan inflated its operating income by 70.7481 million yuan, accounting for 7.55% of the disclosed operating income in the current period, and inflated its profit by 43.8283 million yuan, accounting for 23.39% of the total disclosed profit in the current period;

In 2017, the inflated operating income was 132 million yuan, accounting for 11.26% of the disclosed operating income in the current period, and the inflated profit was 201 million yuan, accounting for 66.18% of the total disclosed profit in the current period.

In 2018, the inflated operating income was 324 million yuan, accounting for 20.04% of the disclosed operating income in the current period, and the inflated profit was 334 million yuan, accounting for 73.95% of the total disclosed profit in the current period;

In 2019, the inflated operating income was 14.195 million yuan, accounting for 1.17% of the disclosed operating income in the current period, and the inflated profit was 73.3803 million yuan, accounting for 46.45% of the total disclosed profit in the current period;

In 2020, the inflated operating income was 21.5924 million yuan, accounting for 1.95% of the disclosed operating income in the current period, and the inflated profit was 21.0623 million yuan, accounting for 120.29% of the total disclosed profit in the current period;

In 2021, the inflated operating income was 239 million yuan, accounting for 27.96% of the disclosed operating income in the current period, and the inflated profit was 270 million yuan, accounting for 76.66% of the absolute value of the total disclosed profit in the current period;

In 2022, the inflated operating income will be 136 million yuan, accounting for 13.68% of the disclosed operating income in the current period, and the inflated profit will be 155 million yuan, accounting for 36.87% of the absolute value of the total disclosed profit in the current period.

The most recent one is in the first half of 2023, Guangyuyuan has reduced its operating income by 29.7093 million yuan, accounting for 4.48% of the disclosed operating income in the current period, and its inflated profit is 44.0847 million yuan, accounting for 269.86% of the total disclosed profit in the current period.

In this regard, the Shanxi Supervision Bureau decided to give a warning to Guangyuyuan shares and imposed a fine of 8 million yuan, and the then chairman Zhang Bin and others were warned and fined.

Due to the seriousness of Zhang Bin's violation, the Shanxi Supervision Bureau imposed a 10-year ban on him from entering the securities market. During the prohibition period, in addition to continuing to serve as a director, supervisor or senior manager of the original securities issuer, they are also prohibited from engaging in securities business, securities service business or serving as a director, supervisor or senior manager of another securities issuer in any other institution.

In addition, the Shanxi Securities Regulatory Bureau plans to decide to give warnings to Zhang Zhengzhi, Yang Hongfei, Li Zhong, and Zhao Xuanxuan, and impose fines of 2.5 million yuan, 800,000 yuan, 800,000 yuan, and 500,000 yuan respectively. Among them, Zhang Zhengzhi was the supervisor of Guangyuyuan at that time, and successively served as the medical director and general manager of Shanxi Guangyuyuan Classic Chinese Medicine Division, Yang Hongfei was the director, general manager and deputy general manager of Guangyuyuan, Li Zhong was the deputy general manager in charge of Guangyuyuan's Classic Chinese Medicine Division, and Zhao Xuanyuan was an independent director of Guangyuyuan at that time and the convener of the audit committee of the board of directors at that time. According to the statistics of Titanium Media App, the total amount of the above-mentioned proposed fines is 21.1 million yuan.

There are frequent changes in senior management, and the price of Angong Niuhuang Pill has increased many times

Titanium Media App combed the announcement and learned that in the more than 7 years of financial fraud in Guangyuyuan, there have been constant turmoil. Not only has it undergone many high-level changes, but its core product, Angong Niuhuang Pill, has also raised its price several times.

According to public information, Guangyuyuan was founded in 1541, with a history of nearly 500 years, and is one of the first batch of "China Time-honored Brand" traditional Chinese medicine enterprises of the Ministry of Commerce.

Gu Ling Ji, Dingkun Dan, Angong Niuhuang Pill and Niuhuang Qingxin Pill are the four core varieties of Guangyuyuan, especially Gu Lingji and Dingkun Dan are national secret formula varieties.

At the beginning of 2022, Chinese patent medicine ushered in a wave of price increases, and many companies, including Guangyuyuan, announced price increases for some products. Guangyuyuan's core product, Angong Niuhuang Pill, has also raised prices many times.

Among them, from January 15, 2022, Angong Niuhuang Pill (Double Natural Ordinary Pack, 3g/pill) will be priced at 880 yuan/pill. According to Guangyuyuan's 2021 annual report, the winning bid price of Angong Niuhuang Pill (3g/pill) is 398 yuan/pill-758 yuan/pill.

On March 11, 2022, Guangyuyuan replied to investors' questions on the SSE interactive platform, saying that from April 1, 2022, the retail price of Angong Niuhuang Pill (boutique series, iron box) will be adjusted to 980 yuan/pill, and the retail price of Angong Niuhuang Pill (boutique series, wooden box) will be adjusted to 1680 yuan/pill.

According to the annual report, in 2022, Guangyu Yuan'an Gong Niuhuang Pill (Double Natural) and Angong Niuhuang Pill (Body Training) will achieve sales of 778605 pills and 150331 pills respectively, an increase of 0.45% and 16.32% year-on-year, of which the production volume of Angong Niuhuang Pill (Double Natural) will increase by 32.77% compared with the previous year. If calculated according to this, the sales of Guangyu Yuan'an Gong Niuhuang Pill (Double Natural) after the price increase in 2022 have exceeded 700 million yuan.

As of the end of 2022, the inventory of Angong Niuhuang Pill (Double Natural) is 224435 pills. Guangyuyuan said that during the reporting period, Angong Niuhuang Pill was continuously included in the prevention and treatment plan by many provinces, and in order to meet market demand, the production of Angong Niuhuang Pill (Double Natural) was stepped up, resulting in an increase of 340.56% in the ending inventory compared with the same period last year.

On April 11, Titanium Media App saw in the official flagship store of Guangyuyuan on an e-commerce platform that the price of Angong Niuhuang Pill was 2,376 yuan for 3 pills in a box, and the price of a single pill was 792 yuan per pill. According to the customer service, these Angong Niuhuang Pills are all double natural, the difference between the different prices is the different grades of medicinal materials selected, the 3 pills of the square box of the single pill iron box are the general double natural, the 6 pills of the fine iron box, the 2 pills of the wooden box are all high-quality, and the 2 pills of the wooden box are of the highest grade of medicinal materials, and the effect is also the best.

In addition, Guangyuyuan announced on February 22 the reply announcement to the inquiry letter of the Shanghai Stock Exchange, in the division and processing of the responsibilities of the relevant responsible persons, said that the reason for the correction of the accounting error is mainly due to the early recognition of revenue and the postponement of the recognition of expenses in some businesses from 2016 to 2020, resulting in the digestion of inventory from 2021 to 2022, poor delivery, and more expenses in previous years.

In terms of senior executives, in January 2023, Yang Bo, who had previously worked in Fenjiu Group, replaced Ju Zhen as the chairman of Guangyuyuan, but after less than a year in office, Yang Bo resigned due to work adjustments.

In December of that year, Yang Bo resigned due to work adjustments, and Li Xiaojun of Shennong Group (Shanxi SASAC was the actual controller) became the company's new chairman.

Just two days before receiving the "Notice" on March 26, the "Guangyuyuan" high-speed rail title train had just held a ceremony for its debut from Taiyuan South Railway Station.

With the handover and straightening out of the old and new management systems, whether this time-honored brand can regain its original glory is obviously not a title of high-speed rail, but in the longer term, its real performance.

(This article was first published in Titanium Media APP, author|Guo Mengyi)