--- title: "660 million yuan to acquire a northern pharmaceutical company! The target's performance expectations are not high, what does Yunnan Baiyao want?" type: "Topics" locale: "en" url: "https://longbridge.com/en/topics/33117995.md" description: "The wind of mergers and acquisitions in the traditional Chinese medicine sector is still blowing. Recently, the "top traditional Chinese medicine company" Yunnan Baiyao announced that its wholly-owned subsidiary, Yunnan Baiyao Group Traditional Chinese Medicine Resources Co., Ltd. (hereinafter referred to as "Traditional Chinese Medicine Resources Company"), will acquire 100% equity of Anguo Juyaotang Pharmaceutical Co., Ltd. (hereinafter referred to as "Juyaotang") in cash, with a total equity transfer consideration of RMB 660 million. It is reported that Juyaotang is a company specializing in the production and sales of traditional Chinese medicine decoction pieces, toxic traditional Chinese medicine decoction pieces, direct oral traditional Chinese medicine decoction pieces, and formula granules, which has considerable synergy with Yunnan Baiyao's business. As the acquirer..." datetime: "2025-08-19T13:34:43.000Z" locales: - [en](https://longbridge.com/en/topics/33117995.md) - [zh-CN](https://longbridge.com/zh-CN/topics/33117995.md) - [zh-HK](https://longbridge.com/zh-HK/topics/33117995.md) author: "[医药研究社](https://longbridge.com/en/profiles/15545088.md)" --- # 660 million yuan to acquire a northern pharmaceutical company! The target's performance expectations are not high, what does Yunnan Baiyao want? The wind of mergers and acquisitions in the traditional Chinese medicine sector is still blowing. Recently, Yunnan Baiyao, the "top player in traditional Chinese medicine," announced that its wholly-owned subsidiary, Yunnan Baiyao Group Traditional Chinese Medicine Resources Co., Ltd. (hereinafter referred to as "Traditional Chinese Medicine Resources Company"), will acquire 100% equity of Anguo Juyaotang Pharmaceutical Co., Ltd. (hereinafter referred to as "Juyaotang") in cash, with a total equity transfer consideration of RMB 660 million. It is reported that Juyaotang is a company specializing in the production and sales of traditional Chinese medicine decoction pieces, toxic traditional Chinese medicine decoction pieces, direct oral traditional Chinese medicine decoction pieces, and formula granules, which aligns well with Yunnan Baiyao's business. As the acquirer, Yunnan Baiyao plans to continuously strengthen its product and channel capabilities through Juyaotang. However, judging from the latter's relatively conservative performance commitments, the current acquisition benefits are likely to be potential rather than immediate. **Industrial Demand for "Scaling Up and Strengthening"** Regarding the rationale behind this acquisition, Yunnan Baiyao stated in the announcement: "In response to the Yunnan Provincial Government's call for high-quality development of the traditional Chinese medicine industry, and in line with the company's own strategic development goals, to better drive the sales of traditional Chinese medicines in Yunnan Province, accelerate the nationwide layout of Yunnan Baiyao's related businesses, achieve scale expansion, and improve the synergistic efficiency of the traditional Chinese medicine industry chain..." It can be seen that, at the macro level, this acquisition by Yunnan Baiyao is responding to policy calls. The "Three-Year Action Plan for High-Quality Development of Yunnan's Traditional Chinese Medicine Industry (2025-2027)" mentions that by 2027, the scale of the province's traditional Chinese medicine industry will remain the largest in the country, with a planting area of over 10 million mu, an annual output of over 1.5 million tons, and a total industry chain output value of over RMB 200 billion. The goal is to basically build the largest, most diverse, and highest-quality production base for genuine medicinal materials in the country and an international development demonstration zone for the traditional Chinese medicine industry, turning the traditional Chinese medicine industry into a model of plateau-specific modern agriculture integrating ecological agriculture, facility agriculture, efficient agriculture, and shared agriculture. As a leading pharmaceutical company in Yunnan Province, Yunnan Baiyao shoulders the major responsibility of industrial construction. More importantly, the regional industrial development goals are highly aligned with the company's strategic needs. Currently, scaling up and strengthening is also the core goal of Yunnan Baiyao. The company is interested in Juyaotang mainly because the latter has a "solid foundation" in products, channels, and other aspects. According to the announcement, Juyaotang has 1,567 varieties of decoction pieces (over 4,000 specifications), making it one of the most comprehensive companies in the decoction piece industry. It has also registered 240 national standard formula granule varieties. Additionally, Juyaotang's production scale for decoction pieces and formula granules ranks among the top in the country: the full-load annual production capacity for traditional Chinese medicine decoction pieces is 25,000 tons, and the annual production capacity for formula granules is 1,500 tons. In terms of sales model, Juyaotang conducts B2B online sales through its self-developed app, with 100,000 registered users and 53,000 cumulative trading customers. Its clients are mainly B-end customers such as pharmacies, clinics, and traditional Chinese medicine centers, operating primarily on a "payment before delivery" model. The sales region is mainly in the north, complementing Yunnan Baiyao's current coverage areas. Yunnan Baiyao believes that acquiring Juyaotang could effectively supplement its product pipeline, further activate online sales channels and its vast B-end customer resources, improve the synergistic efficiency of the traditional Chinese medicine industry chain, and ultimately open up more significant growth space. However, the strategic synergy between the two still faces some practical challenges. **Potential Concerns in the Acquisition** In fact, behind the need to enrich its product matrix and expand sales channels, Yunnan Baiyao has long been troubled by the phenomenon of "slight revenue growth but significant profit growth." Financial reports show that in 2024, Yunnan Baiyao achieved operating revenue of RMB 40.033 billion, a year-on-year increase of only 2.36%; net profit attributable to shareholders was RMB 4.749 billion, a year-on-year increase of 16.02%; and net profit attributable to shareholders after deducting non-recurring gains and losses was RMB 4.523 billion, a year-on-year increase of 20.18%. This phenomenon persisted in the first quarter of 2025, with the company achieving operating revenue of RMB 10.841 billion, a year-on-year increase of 0.62%; net profit attributable to shareholders was RMB 1.935 billion, a year-on-year increase of 13.67%; and net profit attributable to shareholders after deducting non-recurring gains and losses was RMB 1.887 billion, a year-on-year increase of 11.65%. The relatively slow revenue growth reflects insufficient business momentum. It is reported that Yunnan Baiyao has four major business groups: pharmaceuticals, health products, traditional Chinese medicine resources, and Yunnan Pharmaceutical Company. In 2024, the pharmaceutical business group achieved operating revenue of RMB 6.924 billion, a year-on-year increase of 11.8%; the health products business group achieved operating revenue of RMB 6.526 billion, a year-on-year increase of 1.6%; the traditional Chinese medicine resources business group achieved external revenue of RMB 1.751 billion, a year-on-year increase of about 3.13%; and the provincial pharmaceutical company achieved operating revenue of RMB 24.607 billion, a year-on-year increase of 0.48%. It can be seen that only the pharmaceutical business achieved double-digit revenue growth, while other businesses faced certain challenges. In this context, how did profits surge? Cost control likely played a significant role. According to the financial report, in 2024, Yunnan Baiyao's sales expenses decreased by 2.26% year-on-year, and R&D investment totaled RMB 348 million, accounting for only 0.87% of operating revenue, with a year-on-year increase of only 1.14%, far below the industry average. In the first quarter of this year, except for R&D expenses, Yunnan Baiyao's sales, management, and financial expenses all decreased to varying degrees. From this perspective, a significant portion of Yunnan Baiyao's current profits was "squeezed out." To further improve performance, Yunnan Baiyao has set the overall goal of "growth, efficiency, and value-added" this year, and the acquisition of Juyaotang is clearly a key part of achieving this goal. However, Juyaotang also has some development risks. Financial data shows that in 2024, Juyaotang achieved operating revenue of approximately RMB 632 million and net profit of approximately RMB 69.33 million. In the first quarter of this year, Juyaotang achieved operating revenue of approximately RMB 140 million and net profit of approximately RMB 11.49 million. Additionally, in this acquisition transaction, Juyaotang made performance commitments: for 2025-2027, the committed operating revenues are approximately RMB 624 million, RMB 616 million, and RMB 666 million, respectively; the committed net profits are approximately RMB 66 million, RMB 59.7 million, and RMB 63.9 million, respectively. It is not difficult to see that Juyaotang's growth projections for future business are not high, especially as the committed net profits are mostly lower than last year's levels. Furthermore, as of March 31 this year, Juyaotang's total assets were approximately RMB 747 million, total liabilities were approximately RMB 426 million, and the asset-liability ratio was approximately 57.02%, posing certain risks for Yunnan Baiyao's acquisition. However, for a long-established pharmaceutical company, managing risks is a basic capability. Moreover, from a financial perspective, neither the acquisition nor business expansion is likely to put too much pressure on Yunnan Baiyao. As of the end of March this year, Yunnan Baiyao had cash and cash equivalents of RMB 11.062 billion. From 2022 to 2024, the company distributed a total of RMB 10.7 billion in cash dividends, with a dividend payout ratio exceeding 90% for three consecutive years. In this context, actively promoting business integration and looking forward to the prospects of the merger may be what Yunnan Baiyao considers more valuable. $Yunnan Baiyao(000538.SZ) Source: Pharmaceutical Research Society ### Related Stocks - [000538.CN](https://longbridge.com/en/quote/000538.CN.md)