Click to read the original article for details. Image source: NBD reporter Zhang Xiaoqing Recently, Beijing Wantai Biological Pharmacy Enterprise Co., Ltd. (hereinafter referred to as Wantai BioPharm) updated its "Initial Public Offering Prospectus" (draft) on the CSRC official website. In fact, as early as June 2016, Wantai BioPharm submitted its prospectus (draft) to the CSRC, and updated it in November 2018. It is worth noting that the disclosure also revealed the "true face" of the business empire of the company's actual controller, Zhong Shanshan. "High-profile brands, low-profile entrepreneur." This seems to be the deepest impression Zhong Shanshan has left on the outside world. Since founding Yangshengtang Co., Ltd. (hereinafter referred to as Yangshengtang) in 1993, this industry "big shot," who grew mushrooms and worked as a journalist before starting his business, is rumored to have personally crafted the well-known slogan "Nongfu Spring is a little sweet," yet he is "sparing with words" in public and has never appeared on any wealth list. Revenue growth has slowed significantly in the past three years The latest prospectus (draft) shows that Wantai BioPharm is an enterprise engaged in the R&D, production, and sales of in vitro diagnostic reagents, in vitro diagnostic instruments, and vaccines. In the field of in vitro diagnostics, the company's main products include HIV diagnostic reagents and hepatitis B diagnostic reagents; in the vaccine field, it mainly has cervical cancer vaccines. According to data from the China National Institutes for Food and Drug Control's "Annual Report on Biological Products Batch Release," the batch release volumes of the six products listed in the national batch release catalog by Wantai BioPharm all rank first or second in the country for individual product batch release volumes. In addition, Wantai BioPharm has consistently ranked in the top three in the blood source screening diagnostic reagent market and holds the first domestically produced cervical cancer (HPV) vaccine to be submitted for listing. It is understood that Beijing Wantai Biological Pharmacy Co., Ltd. (hereinafter referred to as Wantai Co., Ltd.), established in 1991, was originally a Sino-foreign joint venture and was later acquired by a Hong Kong-funded enterprise. In September 2001, Zhong Shanshan learned that the Hong Kong company intended to transfer its equity in Wantai Co., Ltd., and through Yangshengtang, he purchased 95% of Wantai Co., Ltd.'s equity for 17.1 million yuan. At the end of 2007, Wantai BioPharm was established through the overall conversion of Wantai Co., Ltd. With intensifying industry competition and product upgrades, the company's revenue growth has been notably sluggish in the past two years. From 2016 to 2018, Wantai BioPharm achieved revenues of 844 million yuan, 950 million yuan, and 983 million yuan, respectively, with a clear slowdown in revenue growth; during the same period, net profits attributable to parent company shareholders after deducting non-recurring gains and losses were 133 million yuan, 111 million yuan, and 119 million yuan, respectively. Wantai BioPharm explained the above performance changes, stating that due to the company's further optimization of product structure and vigorous promotion of chemiluminescence diagnostic instruments and supporting reagents, the sales of its advantageous products, enzyme-linked immunosorbent assay diagnostic reagents and colloidal gold rapid diagnostic reagents, were adversely affected to a certain extent. In addition, the large amount of construction in progress being transferred to fixed assets for the biomedical project of subsidiary Wantai Canghai led to a significant increase in depreciation expenses, affecting the company's profit level. A reporter from the National Business Daily noted that just before the update of the above prospectus (draft), in late May, Wantai BioPharm disclosed the feedback opinions on its IPO application documents, in which the CSRC raised 66 major questions, including 32 normative issues, 28 information disclosure aspects, 5 financial accounting data-related issues, and 1 other issue. Among them, regarding the product quality, technology, and service advantages mentioned by Wantai BioPharm, the CSRC issuance examination committee required: (1) to explain its competitive position in the in vitro diagnostics market by comparing its main products with similar products from other domestic manufacturers in terms of technical level, price, market share, customer coverage, etc.; (2) to explain the starting time in the in vitro diagnostics field, technology accumulation, whether all are independently developed, the time of sales realization, the reasons why domestic manufacturers started late in this field, and how the issuer's core competitive advantages are reflected; the sponsor institution is requested to verify and issue clear opinions. The actual controller's core platform controls 79 companies In fact, with Wantai BioPharm updating its prospectus (draft), the latest operating conditions of the various sectors under its actual controller Zhong Shanshan have been exposed. As the founder of Nongfu Spring and the developer of many well-known brands and products such as Yangshengtang Turtle and Turtle Pills, Duo'er Capsules, Growth Joy, Qingzui, Nongfu Orchard, Scream, and Mother's Beef Sticks, Zhong Shanshan himself seems somewhat obscure. The prospectus (draft) shows that Zhong Shanshan's core holding platform enterprise is Yangshengtang, in which Zhong Shanshan directly holds 98.38% of the shares, and the remaining 1.62% is held by Hangzhou Youfu, which is wholly owned by him. The company is mainly engaged in investments in the field of big health. As of the end of 2018, Yangshengtang had total assets of 2.877 billion yuan and net assets of 2.688 billion yuan, achieving a net profit of 453 million yuan that year. As of March 31, 2019, Yangshengtang controlled 79 companies, with businesses involving beverages and drinking water, snack foods, cosmetics, health and wellness products, and pharmaceuticals. Its first-level subsidiaries include Nongfu Spring Co., Ltd. (hereinafter referred to as Nongfu Spring), Yangshengtang Pharmaceutical Co., Ltd., Yangshengtang Zhejiang Food Co., Ltd., Duo'er (Beijing) Women's Daily Products, Yangshengtang (Anji) Smart Living Co., Ltd., Beijing Wantai Biological Pharmacy Enterprise Co., Ltd., Zhejiang Rainbow Fish Technology Co., Ltd., and Zhejiang Olive Tree Real Estate Development Co., Ltd. Among them, Yangshengtang Pharmaceutical was established in 1993 and once developed the well-known "Yangshengtang Fish and Turtle Pills." To this day, Yangshengtang Pharmaceutical is also a relatively large industrial sector besides Wantai BioPharm and Nongfu Spring. As of the end of 2018, Yangshengtang Pharmaceutical had unaudited total assets of 896 million yuan and net assets of 617 million yuan. The company achieved a net profit of 169 million yuan in 2018. A reporter from the National Business Daily noted that looking at the equity structure of Yangshengtang's "family members," it is obvious that Zhong Shanshan dominates. Except for Wantai BioPharm and Nongfu Spring, other companies in the Yangshengtang system are wholly owned by Zhong Shanshan directly or through Yangshengtang. As of the end of March 2019, the company's actual controller Zhong Shanshan directly held 20.21% of Wantai BioPharm's equity and indirectly held 63.35% through Yangshengtang, so Zhong Shanshan controlled a total of 83.56% of Wantai BioPharm's equity, holding an absolute controlling position. In addition, Yangshengtang's more core asset is Nongfu Spring. Zhong Shanshan holds nearly 80% of the company's shares through direct and indirect means. It is worth mentioning that neither in the shareholder lists of Nongfu Spring nor Wantai BioPharm do investment institutions appear. Yangshengtang has also had intersections with the A-share market. Hengyi Petrochemical's 2018 third-quarter report showed that Yangshengtang became a new eighth-largest shareholder, holding 22.18 million shares; but by the end of March this year, Yangshengtang had withdrawn from the top ten shareholders of Hengyi Petrochemical. The "trump card" asset terminated IPO counseling In contrast, Yangshengtang's more core asset, Nongfu Spring, has higher market recognition. As early as May 2008, Nongfu Spring signed an IPO counseling agreement with CITIC Securities, but on December 29, 2018, ten years later, Nongfu Spring terminated its IPO counseling, stating that "the company currently has ample cash flow and has no listing plan." According to the "2018 Top 500 Zhejiang Entrepreneurs List" published by Zhejiang Business Magazine, from 2013 to 2017, Nongfu Spring's revenues were 9 billion yuan, 9.09 billion yuan, 12.6 billion yuan, 15 billion yuan, and 16.25 billion yuan, respectively. The Wantai BioPharm prospectus (draft) shows that Nongfu Spring Co., Ltd., the operating entity of "Nongfu Spring," was established on September 26, 1996, with a registered capital of 360 million yuan. From the equity structure, Yangshengtang holds 65.5223%, Zhong Shanshan holds 13.9937%, and other shareholders hold 20.4840%. The company's business scope includes the production (limited to branches) and sales of natural water, beverages, and packaging bottles. As of the end of 2018, Nongfu Spring had unaudited total assets of 20.075 billion yuan and net assets of 14.411 billion yuan. In 2018, the company achieved a net profit of 3.616 billion yuan. In horizontal comparison, listed peer Tingyi (Master Kong) had a net profit of 2.463 billion yuan in 2018, and Uni-President had a net profit of 1.029 billion yuan in 2018. In terms of net profit performance, Nongfu Spring is more profitable. According to the 2019 China Bottled Water Brand Power Index Ranking, Nongfu Spring topped the list with a brand power of 568.8, while Master Kong ranked second with a brand power index of 537.8. Zhu Danpeng, a Chinese food industry analyst, said in an interview with a National Business Daily reporter that the beverage industry to which Nongfu Spring belongs is inherently a high gross margin industry. After the original bottled water achieved a certain scale effect, Nongfu Spring can continuously create high-margin beverage products with precise positioning, such as Oriental Leaf and Tea π, based on consumer demand, combined with industry trends and its own channel, brand, and scale advantages, forming a virtuous cycle. This is also the reason why Nongfu Spring has outstanding profitability and a better input-output ratio. As for the fact that Nongfu Spring started IPO counseling early but ultimately terminated it, a relevant Hangzhou local securities professional told reporters that the food and beverage consumer industry is highly competitive. Nongfu Spring's previous IPO counseling can be seen as a filing, but in recent years, with its leading market share, high-quality marketing channels, stable team, and most importantly, no pressure on cash flow, the need for listing has become less obvious. Source: National Business Daily