Liuzhou Pharmaceutical Aims at Becoming an Integrated Provider of Medicine Logistics Services & JD C


Recently, Guangxi Liuzhou Pharmaceutical Co., Ltd. (603368) announced the plan to raise a fund of no more than 1.65 billion yuan through private placement to seven subscribers including Zhu Chaoyang, ESOP (Phase I) of Liuzhou Pharmaceutical, JT Asset Management and China Life, with an offering price of 55.59 yuan per share. JT Asset Management, subsidiary of JD Capital, took increasing stakes of Liuzhou Pharmaceutical by subscribing an aggregate of around 7.2 million shares worthy of 400 million yuan. 

Liuzhou Pharmaceutical, listed for trading on the Shanghai Stock Exchange (SSE) on December 4, 2014, is mainly engaged in the wholesale and retail of medical apparatus and instruments, with its operating revenue growing at a compound annual growth rate of nearly 30% since its reform in 2002. Liuzhou Pharmaceutical has forged a pharmaceutical business system featuring “one core (selling business with above-scale hospitals) + two wings (drugstore retail and the third terminal business) + supplements (drug distribution, etc.)” over its sixty years’ involvement in the distribution of Guangxi medicine. “Liuzhou Pharmaceutical” has become a well-recognized brand among its peers. Taking up around 20% market share in Guangxi in 2014, Liuzhou Pharmaceutical is now a provincial bellwether in the field of medicine distribution.

According to the National Program for the Development of Medicine Distribution Industry (2011~2015) issued by the Ministry of Commerce, the global medicine market is estimated to maintain the rapidly expanding momentum in the upcoming five years, with the medicine market in China enjoying the greatest growth potential. Under this context, Liuzhou Pharmaceutical launched this private placement to seize market and avail policy opportunities. According to the announcement, it would work to expand services along the hospital supply chain, strengthen the sustainable and stable cooperation with above-scale hospitals, boost its market share and implement strategic transformation with funds raised from this private placement. To add fresh revenue engines, it would also start a program to forge a network platform for the distribution of medical apparatus and consumables. Besides, Liuzhou Pharmaceutical would optimize its capital structure and improve its financial state with the funds.

Statistics shows that, JD Capital has taken stakes of Liuzhou Pharmaceutical as early as 2010 and could have fetched profits ten times its investment. Instead of cashing out and existing anxiously after the initial public offering as many PE firms had done before, JD Capital continues to invest in the company. This indicates that Liuzhou Pharmaceutical enjoys promising outlook and this private placement will fuel its earnings growth.  

Insiders believe that Liuzhou Pharmaceutical’s development into a provider of comprehensive medicine logistics service through this private offering will help boost its internal value. As of May 6, Liuzhou Pharmaceutical closed at 78 yuan per share, up 40% based on this offering price.