The inquiry letter shows that Zhendong Pharmaceutical's top five service fee suppliers in 2019 have all been cancelled, and the registered addresses of the top five service fee suppliers in 2020 are all in one place, and 3 of them have also been cancelled
Yu Fei, a researcher at Investment Times
Since the release of its annual report in April this year, Shanxi Zhendong Pharmaceutical Co., Ltd. (hereinafter referred to as Zhendong Pharmaceutical, 300158.SZ) has received two annual report inquiry letters issued by the Shenzhen Stock Exchange.
On May 17, the Shenzhen Stock Exchange issued the first annual report inquiry letter to Zhendong Pharmaceutical, asking the company to explain the issues of prepayment, sales expenses and impairment of goodwill. The company's response to the inquiry letter did not quell the many questions in the annual report. A month later, a second annual report inquiry letter followed.
The content of the inquiry letter shows that the top five service fee suppliers of Zhendong Pharmaceutical have more doubts. Not only are the names of the suppliers in the two years different, but the ten suppliers have been established in the past three years, except for one who has not announced the number of insured persons, the remaining 9 insured people are 0 people.
Moreover, the company's top five service fee suppliers in 2019 have all been cancelled, and the top five service fee providers in 2020 have all registered addresses, and 3 of them have been cancelled.
The researchers of the Investment Times noted that in the inquiry letter of the Shenzhen Stock Exchange, it was also mentioned that in 2019 and 2020, Zhendong Pharmaceutical and its subsidiaries were subject to administrative penalties by the tax bureau for fabricating false tax calculation basis. The problem of invoice violations superimposed on the mystery of the top five service fee suppliers, and the authenticity of the financial data of Zhendong Pharmaceutical's annual report is debatable.
Where did the high service charges go?
Zhendong Pharmaceutical, which landed on the Growth Enterprise Market of the Shenzhen Stock Exchange in 2011, is mainly engaged in the research and development, production and sales of vitamins, mineral preparations, traditional Chinese medicines, innovative drugs and other products. On April 24, Zhendong Pharmaceutical disclosed the company's 2020 performance report. According to the data, the company achieved revenue of 4.847 billion yuan during the reporting period, an increase of 10.21% year-on-year; and achieved a net profit of 262 million yuan, an increase of 83.54% year-on-year.
It is this financial report with double growth in revenue and net profit, which has continuously attracted inquiry letters from the Shenzhen Stock Exchange due to many problems.
According to the annual report data, in 2019 and 2020, the sales expenses of Zhendong Pharmaceutical reached 2.173 billion yuan and 2.222 billion yuan respectively, accounting for 49% and 46% of the operating income, of which "office expenses, conference fees, training fees, service fees, consulting fees" and "market operation fees" accounted for about 20% of the operating income.
Such high selling expenses have become the focus of regulatory attention. In the first annual report inquiry letter, the Shenzhen Stock Exchange asked Zhendong Pharmaceutical to explain the reasons and rationality of the company's high proportion of sales expenses.
According to the requirements of the inquiry letter, Zhendong Pharmaceutical added the name, amount, service main content and related relationship of the top five payment objects of the company's "office fees, conference fees, training fees, service fees, consulting fees" and "market operation fees" in the past two years.
It should be noted that the service fee accounts for a relatively high proportion of the sales cost of Zhendong Pharmaceutical. In 2019 and 2020, the company's service fees were as high as 757 million yuan and 875 million yuan, accounting for 17% and 18% of the operating income of the year, respectively.
In addition, the content of Zhendong Pharmaceutical's reply to the inquiry letter shows that its top five service fee suppliers are quite strange.
In 2019, the top five suppliers of the company's service fees were Shanghai Haoyuan, Shanghai Ouchang, Shanghai Shengqian, Fushun Shuaitong, and Xinbin Zheng'ao, with a total payment of 118 million yuan; in 2020, the top five suppliers of the company's service fees were Shanghai HanQiao, Shanghai Zhenshan, Fushun Kunzhuo, Shanghai Gucheng, and Shenyang Runhongrui, with a total payment of 72.63 million yuan.
Inquiring about industrial and commercial information can be found that the above 10 suppliers have been established in the past three years, 9 insured people are 0 people, and the remaining one Fushun Shuaitong has not announced the number of insured people.
At the same time, Zhendong Pharmaceutical's top five service fee suppliers in 2019 have been cancelled, and shanghai Zhenshan, Fushun Kunzhuo and Shanghai Gucheng have been cancelled among the top five service fee suppliers in 2020. Moreover, the registered addresses of Shanghai Haoyuan, Shanghai Shengqian, Shanghai Hanshuang, Shanghai Zhenshan and Shanghai Gucheng are all in one address.
Some industry analysts believe that the top five service fee suppliers of Zhendong Pharmaceutical are most likely shell companies, and their purpose is likely to cover up the flow of service fees.
For the service fee supplier, the regulator requires the listed company to explain the reasons for the frequent replacement of service fee suppliers, the company's criteria for screening service fee suppliers, and whether to review their legal compliance and operational stability.
At the same time, the inquiry letter also requires the annual audit accountant of Zhendong Pharmaceutical to explain the audit measures taken for the authenticity and accuracy of the company's service fees and the flow of related funds, and to express clear opinions on the authenticity and accuracy of the company's service fees and whether there is capital occupation.
Zhendong Pharmaceutical's sales expenses in recent years
Penalties for fabricating false tax calculation grounds
In addition to the doubts of the service fee provider, the prepayment of Zhendong Pharmaceutical is also worthy of attention. According to the financial report data, Zhendong Pharmaceutical's prepayment at the end of 2020 increased by 91% compared with the beginning of 2020, and the prepayment at the end of the first quarter of 2021 increased by 40% compared with the beginning of 2021.
Among the top ten prepayment units listed by the company, two major planting professional cooperatives have emerged. Among them, Pingshun Meihai Planting Professional Cooperative and Pingshun County Longshuo Planting Professional Cooperative are the first and second largest advance payment objects of Zhendong Pharmaceutical, respectively. As of the end of 2020, the company's advance payment to it was 26 million yuan and 14 million yuan respectively.
Coincidentally, the two cooperatives are not only located in Pingshun County, but also established on October 12, 2019, with a registered capital of 300,000 yuan.
In response to the coincidence of suppliers, the inquiry letter asked Zhendong Pharmaceutical to explain the reasons why the cooperative had become the company's top supplier after its establishment time, and whether the aforementioned cooperatives were related to each other and with the company.
At the same time, according to the requirements, the annual audit accountant of Zhendong Pharmaceutical needs to express a clear opinion on the authenticity and accuracy of the advance payment, as well as whether it is in line with the commercial substance and whether there is any capital occupation, etc., and explain the audit procedures it has performed in the above aspects.
In addition, zhendong pharmaceutical and its subsidiary Shanxi Zhendong Pharmaceutical Co., Ltd. were also mentioned in the annual report inquiry letter for being punished by the tax bureau in 2019 and 2020 for fabricating false tax calculation basis.
According to the website of the Shanxi Provincial Taxation Bureau, Zhendong Pharmaceutical and its subsidiary Shanxi Zhendong Pharmaceutical Co., Ltd. were fined an administrative penalty for invoice violations. However, in the disclosed information of Zhendong Pharmaceutical, there is no relevant penalty information.
In this regard, the inquiry letter also requires Zhendong Pharmaceutical to explain the reasons for the punishment, the amount involved in the case and the amount of the penalty, whether it is an undisclosed matter that should be disclosed, and whether it is suspected of inflating income.