Hunan Jingfeng Pharmaceutical Co., Ltd. officially entered judicial restructuring on October 21, becoming the seventh company in the A-share market this year to obtain a "restructuring permit." Although CSPC Pharma has provided a lifeline with a cash injection of 526 million yuan and support from state-owned Changde with 122 million yuan, the underlying operational, financial, governance, and integration risks cannot be overlooked.
Financial Black Hole Continues, Operational Viability In Doubt Although Hunan Jingfeng is expected to achieve a net asset recovery by the end of 2024 through debt exemption, thus temporarily avoiding delisting risks, its net profit after deducting non-recurring items has still incurred a loss of 76.12 million yuan, with liabilities reaching 101.61% of its assets, indicating that its debt repayment capacity has not fundamentally improved.
More severely, the company has reported five consecutive years of losses since 2019, with a cumulative net profit loss of nearly 2.4 billion yuan, facing frequent liquidity crises, and even being subjected to a pre-bankruptcy restructuring application due to its inability to pay 1.88 million yuan for goods. Even if restructuring is completed, if core operations do not revive, the company could again fall into a situation of insolvency.
Uncertainties Persist in Restructuring Execution Although the court has ruled to accept the restructuring, multiple hurdles remain: - Difficulty in implementing the restructuring plan: CSPC has submitted a pre-restructuring proposal, but uncertainties remain regarding its successful execution, creditor support, and asset stripping or injection. - Asset integration challenges: Core assets including Dalian Dezhe and its subsidiary Jingan Pharma have advantages in the erythromycin drug sector; however, the resumption of production for their production lines, patents, and facilities has been slow. They only recently repurchased relevant assets at a "friendship price," indicating that recovering operations will still take time. - Governance instability: Senior management from CSPC has taken over key positions on the board, while founder Ye Xiangwu has exited. The integration of the old and new management teams and potential cultural conflicts may affect stable operations.
Risks from Shrinking Core Business and Product Line Limitations Hunan Jingfeng once thrived on its traditional Chinese medicine injection business, but following the exclusion of its core products from the national medical insurance catalog in 2019, revenues experienced a drastic decline, with injection business revenues dropping by over 70%. The company has yet to establish an alternative product line, highlighting ongoing issues with a singular business structure and weak risk resistance.
Even with the resource injection from CSPC, whether the original business can revive under the pressures of centralized procurement and healthcare cost controls remains uncertain.
Concerns Over Asset Disposal and Related Transactions On the eve of restructuring, Hunan Jingfeng's subsidiary Dalian Dezhe executed a series of operations including profit distribution, capital reduction, and asset repurchases, channeling some funds back to shareholders. While these actions do not affect the consolidated financial statements in accounting terms, the fairness of these operations, potential profit transfer, and whether they harm the overall interests of the listed company are worthy of market vigilance.
Conclusion: Restructuring is not the end, but the beginning of risks For Hunan Jingfeng, obtaining the "restructuring permit" is merely the starting point of its fight for survival. CSPC's takeover, while providing capital and resources, still leaves the company facing multiple challenges, including business recovery, debt resolution, governance integration, and rebuilding market trust. Unless fundamental operational downturns are reversed and asset quality solidified, even if the company succeeds in removing its special treatment status, it will be hard to argue that it has truly been revived.