The two-day 20CM drop limit, Puli Pharmaceutical, which was deeply involved in the "fraud" storm, faced the risk of forced delisting
"China Science and Technology Investment" Li Xiaona, He Ziyan
On the evening of July 5, Puli Pharmaceutical (300630. SZ) finally disclosed its 2023 annual report on the expiration of two months of the suspension period. This belated 2023 financial report not only set the worst performance record since the listing of Puli Pharmaceutical, but also issued a "non-standard" audit opinion by an intermediary. The night before the resumption of trading, Puli Pharmaceutical received the Notice of Case Filing from the China Securities Regulatory Commission (hereinafter referred to as the "CSRC") and the Advance Notice of Administrative Penalty from the Hainan Supervision Bureau of the China Securities Regulatory Commission (hereinafter referred to as the "Hainan CSRC") on suspicion of illegal information disclosure.
On July 8, the resumption of trading of Puli Pharmaceutical and "Puli Convertible Bonds" were affected by the above-mentioned negative impacts, ushering in a double kill of stocks and bonds, among them, "Puli Convertible Bonds" fell by more than 19%, and Puli Pharmaceutical shares hit the 20CM drop limit at the opening and closed at 9.88 yuan / share. Once upon a time, Puli Pharmaceutical's share price was 112 yuan per share, but now not only the performance has hit a new low, but the stock price has also fallen below the issue price, hitting a new low since listing. In addition, in recent years, Puli Pharmaceutical's liquidity has become more and more under pressure, and for generic drug companies with R&D and innovation as the core, in addition to the relatively slow growth of R&D expenses, other expenses have increased significantly.
Involved in financial fraud, the resumption of stock trading is the fall limit
On April 16, Puli Pharmaceutical announced that the Hainan Securities Regulatory Bureau found inaccurate disclosure of financial information such as operating income and profit in Puli Pharmaceutical's 2021 and 2022 annual reports during on-site inspections, and took corrective measures against it. Subsequently, Puli Pharmaceutical issued several announcements announcing the delay in the disclosure of the 2023 annual report. Puli Pharmaceutical's shares and convertible bonds were also suspended on May 6.
According to the provisions of the GEM Stock Listing Rules, if a listed company fails to disclose its annual report or semi-annual report within the statutory time limit, and the company fails to disclose its shares within two months of the suspension thereafter, the company's shares will be subject to a delisting risk warning after the expiration of the two-month suspension. On the evening of July 5, Puli Pharmaceutical disclosed its 2023 annual report at the expiration of two months, avoiding the risk of the company's shares being "ST".
After self-examination, error correction and retrospective adjustment of the financial data in 2021 and 2022, the 2023 annual report shows that Puli Pharmaceutical's operating income in 2021 was adjusted to 1.299 billion yuan, a decrease of 210 million yuan, the net profit attributable to the parent company was 304 million yuan, a decrease of 113 million yuan, and the operating income in 2022 was 1.619 billion yuan, a decrease of 187 million yuan, and the net profit was 295 million yuan, a decrease of 126 million yuan. Puli Pharmaceutical said that the reasons for the company's performance errors involved revenue recognition problems, revenue accounting problems in trading business, inaccurate accounts receivable accounting, and defects in the company's internal sales and collection processes. Tianjian Certified Public Accountants (Special General Partnership) (hereinafter referred to as "Tianjian") issued a qualified opinion on Puli Pharmaceutical's 2023 annual financial report, because the company failed to provide a complete basis for the correction of the error correction in the previous period, and Tianjian could not confirm whether the correction of the error in the previous period was complete and whether the correction amount was accurate.
On the evening of July 7, the China Securities Regulatory Commission (CSRC) filed a case for investigation against Puli Pharmaceutical due to the inaccurate disclosure of financial information such as operating income and profit in the 2021 and 2022 annual reports of Puli Pharmaceutical, and the error correction and retrospective adjustment involved multiple fiscal years and the amount was large. To this end, Puli Pharmaceutical issued a relevant risk reminder, saying that if the company touches the situation of forced delisting due to major violations of the law after the facts determined by the administrative punishment of the China Securities Regulatory Commission, the company's shares will be subject to major illegal forced delisting. At the same time, due to the failure to disclose the 2023 annual report on time, Puli Pharmaceutical also received the "Prior Notice of Administrative Punishment" issued by the Hainan Securities Regulatory Commission that night, and the Hainan Securities Regulatory Commission ordered Puli Pharmaceutical to make corrections and gave a warning, imposed a fine of 1 million yuan, and fined Fan Minhua, then chairman and general manager, and Luo Tongning, then director, deputy general manager and chief financial officer of 400,000 yuan and 300,000 yuan respectively.
After the resumption of trading on July 8, Puli Pharmaceutical's stocks and bonds both fell sharply, and the stock fell 20% on the same day, closing in the fall limit; "Puli convertible bonds" fell by more than 19% at one time, and the next day, Puli Pharmaceutical's share price hit the 20CM drop limit at the opening, closing at 7.94 yuan per share on the same day, closing down 19.64%. Some time ago, due to the delay in the release of the 2023 annual report and the first quarter report of 2024, some fund companies also lowered the stock valuation of Puli Pharmaceutical. For example, the securities investment funds managed by Bodao Fund Management Co., Ltd. and Xingyin Fund Management Co., Ltd. have valued Puli Pharmaceutical shares at 8.65 yuan/share and 6.32 yuan/share respectively from June 25 to 26; Wells Fargo Fund Management Co., Ltd. and China Universal Fund Management Co., Ltd. have valued Puli Pharmaceutical's shares at 9.56 yuan/share and 9.12 yuan/share respectively from June 24-25.
It is worth noting that it is approaching the semi-annual report disclosure season, and Puli Pharmaceutical has not issued an announcement on the renewal of Tianjian. Puli Pharmaceutical announced on April 23, 2023 that the board of directors, the audit committee and the independent directors agreed to appoint Tianjian as the company's auditor in 2023 for a period of one year, effective from the date of deliberation and approval of the 2022 annual general meeting of shareholders. According to the public information found by the reporter, Tianjian has been providing audit services for Puli Pharmaceutical since 2017. On July 7, Puli Pharmaceutical issued an announcement on the selection and employment system of accounting firms. At present, no accounting firm has conducted a comprehensive audit of the corrected financial statements or conducted special assurance on the relevant corrections. Puli Pharma also announced that the disclosure of the above-mentioned special assurance or audit report will be postponed to August 31, 2024. It remains to be seen whether the postponement of the disclosure of the above-mentioned special assurance or audit report will affect the normal disclosure of the 2024 semi-annual report.
Both performance and liquidity were under pressure
According to the financial report, in 2023, Puli Pharmaceutical will achieve operating income of 1.304 billion yuan, a year-on-year decrease of 19.43%; the net profit attributable to the parent company was 85.9229 million yuan, a year-on-year decrease of 70.87%; There was a loss in non-net profit, which was -12.5674 million yuan, a year-on-year decrease of 104.61%. In 2023, Puli Pharmaceutical will record its worst performance since its listing, and its net profit attributable to the parent of 85.9229 million yuan is even lower than that of 98.4044 million yuan in 2017.
In addition to the pressure on performance, the expansion of production capacity and the gradual increase in accounts receivable also put pressure on the liquidity of Puli Pharmaceutical. In 2019, the total amount of funds raised by Puli Pharmaceutical through non-public issuance of shares will not exceed about 552 million yuan, which will be used to invest in the construction of the "Puli International High-end API and Innovative Preparation Manufacturing Base Project", and the production capacity of APIs will increase by 360 tons per year after completion. According to the 2023 annual report, as of the end of last year, the progress of Puli International's high-end production line expansion project was 73.32%. As an asset-heavy industry, the generic drug industry in which Puli Pharmaceutical operates requires extremely high investment costs, which also reflects the need for enterprises to have sufficient cash flow. According to the 2023 financial report, among its asset composition, the construction in progress has reached 1.77 billion yuan, accounting for 28.15% of the total assets, and the fixed assets are 1.331 billion yuan, accounting for 21.16% of the total assets. This means that nearly half of Puli Pharmaceutical's total assets of 6.287 billion yuan are non-current assets, which cannot be used for daily operations and capital turnover. At the end of 2023, Puli Pharmaceutical's short-term borrowings reached 385 million yuan, while the monetary funds were only 402 million yuan, of which 135 million yuan of monetary funds were restricted.
In the case of insufficient liquidity, Puli Pharmaceutical's accounts receivable have been increasing. According to the corrected financial data, from 2021 to 2023, Puli Pharmaceutical's revenue growth rate will be 9.26%, 24.67%, and -19.43%, respectively, and Puli Pharmaceutical's accounts receivable will be 770 million yuan, 1.058 billion yuan, and 1.197 billion yuan, respectively, a year-on-year increase of 28.76%, 37.4%, and 13.14%, respectively, and the growth rate of its accounts receivable is much higher than the revenue growth. In addition, the proportion of accounts receivable to revenue of Puli Pharmaceutical has also continued to rise, and from 2021 to 2023, its accounts receivable to revenue ratios will be 59.28%, 65.35%, and 91.79% respectively. The peer companies close to the market value of Puli Pharmaceutical, such as Northeast Pharmaceutical (000597.SZ), Yuandong Biology (688513.SH), Jincheng Pharmaceutical (300233.SZ), Weixinkang (603676.SH), and Rundu (002923.SZ), will account for 22%, 10.74%, 17.18%, 13.53%, and 10.91% of revenue in 2023, respectively, all of which are below 30%. In the first quarter of 2024, Puli Pharmaceutical's accounts receivable was 1.335 billion yuan, an increase of 11.53% from the end of 2023. The continuous increase in accounts receivable makes the recovery of funds face greater uncertainty, and if overdue or bad debts occur, it will further increase the pressure on capital liquidity.
In addition, in 2023, Puli Pharmaceutical's sales, management, and financial expenses will increase by 31.17%, 46.03%, and 48.13% year-on-year, respectively, while the growth of R&D investment will slow down. In 2023, Puli Pharmaceutical's R&D expenses will only increase by 1.76% year-on-year, the number of R&D personnel will decrease by 6.18% year-on-year, and the proportion of R&D personnel will decrease by 3.21%. In the past three years, the number of R&D personnel of Puli Pharmaceutical has been decreasing year by year, respectively 37.26%, 36.18% and 32.97%. Selling expenses account for the largest proportion of expenses. In 2023, Puli Pharmaceutical's sales expenses will be 460 million yuan, of which marketing expenses will increase most significantly, from 279 million yuan in 2022 to 369 million yuan, and marketing expenses will even exceed 268 million yuan of research and development expenses. In recent years, the gap between Puli Pharmaceutical's sales expenses and R&D expenses has gradually widened, and it will become especially obvious in 2023. From 2020 to 2023, Puli Pharmaceutical's sales expenses will be 177 million yuan, 233 million yuan, 351 million yuan, and 460 million yuan respectively, and the sales rates will be 14.89%, 17.94%, 21.68%, and 35.28% respectively; R&D expenses were 191 million yuan, 229 million yuan, 263 million yuan and 268 million yuan respectively, and the R&D rates were 16.06%, 17.63%, 16.24% and 20.55% respectively.
In addition to the capital market, Puli Pharmaceutical's many products have received good news about marketing authorization at home and abroad this year, but it still has to face many operational challenges such as declining performance, financial pressure, and industry involution. At present, under the storm of financial fraud, Puli Pharmaceutical is not only facing the risk of forced delisting, but also facing the problem of how to restore market confidence.
The reporter sent a letter to Puli Pharmaceutical on issues such as the filing of the case by the China Securities Regulatory Commission, financial performance, and stock price performance, but has not received a reply as of press time.