China Fund News reporter Zhao Xinliang
On the evening of April 29, Guangyuyuan (600771. SH) announced its 2023 annual report and first quarterly report. According to the annual report, in 2023, Guangyuyuan will achieve an operating income of 1.284 billion yuan, a year-on-year increase of 13.56%, and a net profit attributable to the parent company of 90.0786 million yuan, successfully turning losses into profits.
In the first quarter of 2024, the performance continued to improve, and the net profit after deducting non-attributable to the parent company reached 48.494 million yuan, a year-on-year increase of 76.13%.
In the whole year of 2023, Guangyuyuan will deeply implement the development strategy of "building high-quality traditional Chinese medicine in the whole industry chain", pay close attention to the work of "three strong, two reductions and one control", and promote sales growth through the three major measures of "strengthening the middle platform, strengthening academics, and strengthening dynamic sales", and the operating income will increase by 13.56% over the same period of last year; cost reduction and efficiency increase" action, so that the gross profit margin of the product increased to 72.94%, a year-on-year increase of 5.42 percentage points. As of the end of the reporting period, the balance of accounts receivable decreased by 362 million yuan or 34.23% compared with the beginning of the period.
The revenue of high-quality Chinese medicine increased by 22.44%
Founded in the 20th year of Jiajing in the Ming Dynasty (1541 AD), Guangyuyuan is the oldest existing Chinese medicine enterprise and pharmaceutical brand with the longest existing history in China, and is also the first batch of "China Time-honored Brand" enterprises of the Ministry of Commerce. After hundreds of years of inheritance, Guangyuyuan has a total of more than 100 kinds of traditional Chinese medicine approval numbers, such as unique ancient processing technology, national secret varieties and intangible cultural heritage.
The production skills of the core products of Guangyuyuan, Gui Ling Ji, Dingkun Dan and Angong Niuhuang Pill have been selected into the national intangible cultural heritage list, among which Dingkun Dan and Angong Niuhuang Pill have been recognized as the first batch of "Shanxi Boutique", and Gui Lingji is the living specimen of the most complete compound refining technology in China, and is also known as the "living fossil of traditional Chinese medicine". As of 2023, the operating income of high-quality Chinese medicine will be 281 million yuan, a year-on-year increase of 22.44%.
In fact, the revenue of high-quality traditional Chinese medicine has increased to a certain extent, benefiting from the product strategy of "high-quality traction", at present, the total number of high-quality terminal stores has reached 398, with 103 new stores and 80 optimized during the reporting period. Not only that, Guangyuyuan actively builds the corporate brand image, participates in 16 national exhibitions and 14 brand culture promotion activities throughout the year, participates in various high-end brand summits, forums and tastings, and has been successfully selected as the top 30 in China's proprietary Chinese medicine industry.
In fact, it is not uncommon for high-end products to drive the sales of low-end products in the market, and the company's traditional Chinese medicine will also create an operating income of 894 million yuan in 2023, a year-on-year increase of 15.77%.
Gross profit, expenses, and accounts receivable decreased simultaneously, and the governance effect initially appeared
Under the standardized governance of state-owned assets, in addition to the increase in operating income, the decline in gross profit margin and expenses of products also benefited from the effective implementation of various management measures by Guangyuyuan.
On the one hand, traditional Chinese medicine and high-quality Chinese medicine have benefited from the dilution of costs caused by the increase in operating income, and on the other hand, the actions to reduce costs and increase efficiency have also effectively increased the gross profit of products. As of 2023, the gross profit margin of traditional Chinese medicine was 74.21%, an increase of 5.23% year-on-year, the gross profit margin of high-quality Chinese medicine was 83.28%, an increase of 3.95% year-on-year, and the comprehensive gross profit margin remained at 72.94%. In the first quarter of 2024, its gross profit margin further improved to 75.86%.
In terms of information management, in recent years, Guangyuyuan has continued to strengthen the work deployment of the "digital and intelligent platform construction" of the operation system, strictly controlled the expense rate, and gradually improved the quality and efficiency of its marketing management, and in 2023, Guangyuyuan's sales expenses were 643 million yuan, accounting for 50.11% of the operating income, a decrease of 149 million yuan from the same period last year, and a significant decrease of 18.84% in sales expenses. In the first quarter of 2024, the sales rate decreased further to 46.2%
Guangyuyuan said that the company deepened the management of the flow of commercial and downstream customers through the implementation of the direct flow system to prevent unreasonable expenses, and at the same time further expanded the market of high-quality Chinese medicine with a lower expense rate, and the market share gradually increased, resulting in a decrease in sales expenses during the reporting period.
In terms of accounts receivable, in 2022 and 2023, we will also carry out the special action of "reducing receivables" for two consecutive years, improve and optimize customer credit management, and promote a substantial increase in operating cash flow and a continuous reduction in the scale of interest-bearing liabilities through measures such as "old account collection" and "cash delivery".
Combined with the perspective of operating cash flow, Guangyuyuan received 1.535 billion yuan in cash from the sale of goods and the provision of labor services in 2023 and 427 million yuan in the first quarter of 2024, all of which broke through the best level in history, reflecting the sharp decline in its accounts receivable, and the steady improvement of profitability and cash acquisition ability.
At present, a number of financial indicators of Guangyuyuan have improved, internal control management capabilities and operation management capabilities have been significantly improved, and the annual report performance has turned losses into profits and also demonstrated its business resilience.
It is worth mentioning that recently, Guangyuyuan released its marketing strategy for 2024 and announced the launch of the "Dragon and Phoenix" 10 million single product growth plan, which revolves around Guangyuyuan's core competitiveness products Turtle Lingji and Dingkun Dan. Guangyuyuan will also fully explore 9 exclusive ancient recipes and 104 classic recipes, innovate and launch more products, and achieve common development of multiple categories. In addition, on March 23, the "Guangyuyuan" high-speed rail title special train was launched, and the operation scope of the special train effectively covered the key markets and potential markets of Guangyuyuan. Guangyuyuan continues to strengthen product marketing and effectively enhance brand influence.
Scraping bones to cure poison and remediate internal control, and the historical risks are cleared
From December 28, 2023 to April 10, 2023, the CSRC received the "Administrative Penalty Decision", after more than 3 months of investigation and self-help, the curtain finally came to an end, and the historical risks were fully cleared.
In the error announcement issued by the company on January 30, the company also made it clear that it will not have an impact on the financial report of the parent company, and after adjustment, it will not lead to a change in the nature of profit and loss in the company's disclosed annual financial statements.
At present, the company strictly implements the management requirements of non-quality problems and does not allow returns and implements cash delivery, which can ensure that the revenue is recognized when the control of the goods is substantially transferred after the commercial company signs for the receipt of the goods. With the internal management on the right track, the 500-year-old important time-honored enterprises will be reborn.