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Charmacy Pharmaceutical Announces 2016 Annual Results

Net Profit Surges by 125.15% Y-o-Y

2016 Annual Results Highlights:

Net Profit was approximately RMB59.35 million, up 125.15% year-on-year;

Revenue increased by 8.00% year-on-year to approximately RMB3,669 million;

Basic and Diluted Earnings Per Share were RMB54.95 fen, representing an increase of 70.12% year-on-year;

The Board recommends paying a final dividend of RMB0.20 per Share for the year ended 31 December 2016.

(21 March 2017, Hong Kong) Charmacy Pharmaceutical Co., Ltd. (“Charmacy Pharmaceutical” or the “Company”, together with its subsidiaries collectively known as the “Group; HKSE: 2289) announced that the Group's net profit for the twelve months ended 31 December 2016 (the “Period”) reached RMB59.35 million, representing an increase of 125.15% year-on-year. Basic and diluted earnings per share were RMB54.95 fen, up 70.12% year-on-year. The remarkable improvement in its overall profitability from the previous year was mainly due to (i) the increase in turnover and gross profit and (ii) the absence of non-recurring listing expenses in 2016.

The Group’s revenue for 2016 increased by 8.00% year-on-year to approximately RMB3,668.93 million. Over 98% of the turnover derived from distributors and retail pharmacy stores. For the twelve months ended 31 December 2016, turnover from distributors was approximately RMB2,547.67 million, up 6.13% year-on-year mainly on the Group’s continued efforts to expand its distribution network and the number of distributors in Southern China. Moreover, as a primary distributor, it increased the number of products sold. Turnover from retail pharmacy stores increased by 11.79% year-on-year to approximately RMB1,026.16 million, mainly due to the Group’s development of B2B E-commerce business and its expansion in retail pharmaceutical market which led to higher sales to retail pharmacy stores.

During the Period, the Group's gross profit reached RMB180.30 million, representing an increase of 9.47% year-on-year. Gross profit margin was 4.91%, up 0.06 percentage points from the previous year. Net profit margin was 1.62%, representing an increase of 0.84 percentage points from the previous year. Meanwhile, total expense ratio was 3.06%, down 0.73 percentage points from the previous year.

During the Period, the Company further cultivated the Southern China market and expanded its core businesses. As at the end of the Period, its distribution network covered 5,674 customers, representing an increase of 429 customers from the previous year. While it stepped up efforts to expand business with retail pharmacy stores, the number of customers from retail pharmacy stores increased to 240. As the primary distributor in China, the Company increased the number of products it sold from 3,794 in 2015 to 4,509 in 2016 and received greater purchase discount from suppliers. As a result, its profitability remarkably improved in the Period.


Looking ahead, the Company’s management commented, “Given the acceleration in the aging of China’s population, the implementation of two-child policy and steady growth in residents’ income, demand for pharmaceutical and healthcare services are expected to climb further. According to the government’s policy, patients will have the right to choose where to get medicine after consultation. The pharmaceutical distribution market in Southern China will therefore have great potential to grow. In the face of new opportunities and challenges, the Company will adhere to the strategy of ‘promoting end-user transactions and developing integrated services platform in the Southern China region, with a primary focus on the development of free-market. We will further utilize our advantages in the regional market, introduce more high-margin new products, and expand our product mix and combination to satisfy customers’ diverse needs. Meanwhile, we will extend the coverage of the regional market, develop logistics and distribution centers and identify suitable acquisition targets. The Company has signed an agreement with Zhuhai Hengxiang Pharmaceutical Limited. Pursuant to it, we will invest RMB18 million to boost our stake in Zhuhai Hengxiang to 70%, thereby becoming its controlling shareholder. This investment will enable us to further penetrate into the pharmaceutical distribution market in Zhuhai and hence expand our customer base and product range. Besides, we will fully upgrade our IT system and B2B E-commerce management platform, which will allow us to reinforce our operating efficiency, lower transaction costs and deliver better returns to investors.”



About Charmacy Pharmaceutical Co., LTD.

Charmacy Pharmaceutical Co., Ltd. (“Charmacy PHAR” or the “Company”) is one of the leading pharmaceutical distributors in Southern China with well-established distribution networks covering Southern China region, Fujian Province and other surrounding regions. The Company distributes a variety of medicinal products to pharmaceutical distributors, retail pharmacy stores, hospitals, clinics and health centers. It offers various products, including western medicines, Chinese proprietary medicine, healthcare products, Chinese medicine materials and decoction pieces, medical equipment and devices, and cosmetic products. In Shantou and Foshan, the Company has two large pharmaceutical logistics distribution centers as well as professional transportation teams, modern information systems and efficient operation mechanism, covering the entire pharmaceutical distribution supply chain, including procurement, sales, storage, transportation and delivery. At the same time, the Company operates self-developed B2B E-commerce platform, "Charmacy e-Medicine", for customers to make online shopping.

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