2020A n n u a l R e s u l t s
All For Health Health For All
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Contents
Chapter III Business Highlights and Future Strategies
Chapter I Annual Performance Review
Chapter II Macro Economy and Industrial Policies
Q & A
2
Annual Performance
Review
3
The Business Achieved Sustainable Growth with The Growth Rate Above The Industry Average Level
Net Profit Attributable to Parent CompanyRevenue
Quarterly Accumulated Revenue Growth
Unit: RMB million
Note: The disclosed but unaudited figures for the first quarter and the firstthree quarters are prepared in accordance with the PRC accountingstandards, while the disclosed but unaudited semi-annual data which isprepared in accordance with Hong Kong Accounting Standards.
425,272.73
456,414.61
2019 2020
7.32%
6,252.54
7187.28
2019 2020
14.95%
8.83% 8.83%
Gross Margin
1.47%
1.57%
Net Profit Margin
95,179
201,665
312,688
425,272
94,400
203,765
327,610456,415
3Ms 6Ms 9Ms 12Ms
2019 2020
-0.82%
1.04%
4.77%
7.32%
Quarterly Accumulated Revenue Growth Ratio
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Main Profit Indicators
2020 2019 Change
Gross Margin 8.83% 8.83% 0
Selling Expenses Ratio 3.10% 2.95% +0.15P.P
Administrative Expenses Ratio 1.54% 1.63% -0.09P.P
Loss Ratio on Disposal of Financial Assets Measured at Amortised Cost 0.28% 0.46% -0.18P.P
Operating Margin 3.89% 3.79% +0.10P.P
Finance Costs Ratio 0.65% 0.74% -0.09P.P
Net Profit Margin 2.65% 2.50% +0.15P.P
Profit Margin Attributable to Owners of the Parent 1.57% 1.47% +0.1P.P
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Other Financial Indicators
Operating Indicators 2020 2019 Change
Trade receivables turnover days 107 98 +9
Inventory turnover days 39 36 +3
Trade payables turnover days 92 85 +7
Cash collection days 54 49 +5
Cash Flow Indicators
Net cash from operating activities (RMB million) 11,154.61 18,777.10 -7,622.49
Net cash from investing activities (RMB million) -2,202.76 -6,795.97 +4,593.21
Net cash from financing activities (RMB million) 2,025.85 -13,084.57 +15,110.42
Other Indicators
Closing gearing ratio 71.10% 71.49% -0.39P.P
Capital expenditure (RMB million) 4,585.24 4,867.89 -5.81%
EPS(RMB) 2.31 2.11 +9.48%
DPS (RMB) 0.69(Taxed) 0.6(Taxed) +15.00% 6
Constant Optimization of Business Structure
2015
2020
Net Profit Doubled
CAGR16.26%
Source: The figures of the revenue and net profit of the year disclosed in the annual report for that year.
Revenue Doubled
Unit: RMB million
CAGR14.98%
The 13th Five-Year Plan Came to A Successful Conclusion
227,069 258,388 277,717
344,526 425,273
456,415
2015 2016 2017 2018 2019 2020
5,696 6,892 7,868
9,404 10,620
12,097
2015 2016 2017 2018 2019 2020
94.13%
3.81%
2.06% PharmaceuticalDistributionRetailPharmacyOthers
74.18%
5.15%
19.04%1.63% Pharmaceutical
DistributionRetail Pharmacy
Medical Devices
Others
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Macro Economy and Industrial Policies
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Orderly Macroeconomic Recovery and Steady Recovery of Economic Growth
-6.8%
3.2%4.9%
6.5%
-8.0%-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%
Q1 Q2 Q3 Q4
Year-on-year Growth Ratio of GDP for Each Quarter of 2020
Year-on-year Growth Ratio of GDP for Each Quarter of 2020
In 2020,China actively coordinated the prevention and control of the pandemic, promoted the resumption of work andproduction in an orderly manner and took a series of relief measures. Leveraging on its structural advantages and strongresilience, China’s economy became the only major economy in the world to achieve positive growth that year.In 2020, China’s GDP reached RMB101.6 trillion with continuous improvement in various economic indicators and steadyrecovery of the economic growth rate. The completion of the main objectives of economic and social development taskswas better than expected.
Source: National Bureau of Statistics 9
Medical Reform Policies Continued to Advance with The Advantages of The Leading Enterprises Emerging
In 2020, after the pandemic prevention and control became normalized, the pharmaceutical industry showed a significantrecovery with the rebound of China’s economy. The growth of the entire medical and health care industry continues tofaster than that of the macroeconomic. The continuous reform of the medical insurance system and the development ofinnovative technologies have brought new opportunities and challenges for the pharmaceutical industry.
Volume-based Procurement of Drug and high-value consumables
Negotiation for Medical Insurance Catalog Diagnosis Related Groups (DRGs)
• The market concentration has improved continuously and the competitive advantages of the leading enterprises have further emerged;
• Promote the channel reconstruction and service transformation of the distribution industry;
• The growing demand for innovative services have brought new opportunities and challenges.
• The health care industry has been transformed and upgraded;
• The competition across the industry has been gradually diversified. It became a new development trend in the industry to seek win-win cooperation in competition.
Innovative Technologies Contributed to Industry Growth
Medical Reform Policies Promoted The Industry Transformation
Internet+
Artificial intelligence
Internet + medicine + drug + insurance
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Business Highlights and Future Strategies
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The Group followed the trend of the transformation to flattened network and downward extension of channels broughtby the medical insurance reform, continued to cover the distribution network at all levels of medical institutions,enhanced its intensive operation capabilities, and actively undertook the market share of volume-based procurementrelated products,thereby promoting the continuous growth in the distribution segment.
Leading Position in Distribution Solidified, and Advantages in Network Emerged at A Faster Pace
医药分销业务收入增长情况
As of the end of 2020, the Group's pharmaceutical distribution business has continuously strengthened its leading advantages, and its regional competitiveness has emerged at a faster pace.
More than 500,000 terminals covered lower-tier market throughout provincial, municipal, and autonomous regional areas;
The proportion of direct sales business and the proportion of revenue derived from non-provincial capital cities continued to grow.
Unit: RMB million
337,316.63
348,294.38
2019 2020
3.25%
Revenue Growth of Pharmaceutical Distribution Business
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The transformation and upgrade of the distribution industry have further promoted the reconstruction of drug sales and distribution models with significant advantages of leading enterprises
Build Integrated Service Platforms, Adjust and Optimize The Product Structure
Under the environment of volume-based procurement policy, the Group’s position in the industry has been strengthened continuously
The acquisition rate of related varieties is still leading the industry
The market share and total distribution volume have increased significantly
The ability to obtain innovative drugs and medical devices products further emerged
Successfully Build Nationwide Integrated Marketing Service Platforms
Focus on The Adjustment and Optimization of Business Structure and Product Proportions
Strengthen its ability to undertake varieties under volume-based procurement and innovative drugs
Further enrich and optimize the product structure
Actively integrate existing nationwide network andbusiness resources, promote model innovation
Relying on the resources of upstream suppliers, theGroup has continued to develop marketing projectsfor innovative drugs in lower-tier market
Achieve horizontal derivation of business modeland service capabilities
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During the Reporting Period, the Group actively overcame the challenges posed by the outbreak of the pandemic andcontinued to promote the construction of the medical devices distribution network and the innovation of the businessmodel. At the year end, the sales revenue from the medical devices business increased rapidly, with the growth potentialof the medical devices segment emerging at a faster pace.
Medical Devices Business Grew Steadily and The Network Coverage Strengthened Continuously
Unit: RMB million
The volume-based procurement of high-value consumables was implemented, marking the transformation and reform of the medical devices industry entering the critical stage
The Group continued to improve its medical devices distribution network. During the Reporting Period, coverage over prefecture-level cities further increased to 76%
69,293.54
89,402.25
2019 2020
29.02%
Revenue Growth of The Medical Devices segment
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During the Reporting Period, the Group focused on promoting the innovation and upgrading of medical devices business models and supply chain service capabilities,continuously improving customer adhesion, expanding service models and driving rapid development of value-added business.
The Innovation and Upgrading of Service Capabilities and Rapid Development of Value-Added Services
Drug-device Synergic Development
Centralized Delivery
In-hospital Logistics Management
Value-Added Services and Technological Innovation of The Supply Chain
The number of centralized delivery projects and SPD projects amounted to 1,735
During the Reporting Period, centralized delivery and SPD projects grew rapidly, which demonstrated the strong strength of the Group in technological empowerment and technological innovation.
During the Reporting Period, the Group acquired preliminary production and manufacturing capabilities in the medical consumables category, with products sales quickly covering 31 major cities across the country, laying a solid foundation for the upstream extension of the medical devices segment.
Technological Empowerment
Business Synergy
Technological Innovation
Smart Logistics
Logistics Lean Management
Supply Chain Scenario Solution
Focus on The Development of Medical Device Manufacturing
729
1416216
319
2019 2020
SPD Projects Centralized Delivery Projects
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Continue to Improve Retail Network , and Further Promote Wholesale-Retail Integration
Growth of Retail Segment Business
14,803.90
19,803.29
24,164.34
2018 2019 2020
A Rapid Year-On-Year Increase in The Number of Retail Stores
Unit: RMB million
To align with the new development direction of the industry, the Group focused on implementing the developmentstrategies of “wholesale-retail integration” and “nation-wide integration” to continuously promote the high-qualitygrowth of the retail pharmacy segment. During the Reporting Period, the Group’s retail pharmacy business recordeda total revenue of RMB 24,164.34 million, representing a year-on-year increase of 22.02%.In 2020, the Group further optimized its network coverage retail pharmacy business through extended expansion and completed the merger and integration of retail business such as Chengda Fangyuan during the year, thereby strengthening its regional competitive advantage.
5,021
1,183
7,660
1,317
01,0002,0003,0004,0005,0006,0007,0008,0009,000
Guoda Pharmacies Professional Pharmacies
As of the end of 2019 As of the end of 2020
52.6%
11.3%
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During the Reporting Period, the Group’s retail pharmacy segment has comprehensively promoted the integrateddevelopment of online and offline businesses. The Group actively responded to medical insurance reform policies, andtook a series of measures to consolidate the development potential and further strengthen the competitiveness of theGroup's retail pharmacy business.
Coordinated Development Achieved Through Resource Integration and The Potential Consolidated Through Technological Innovation
Improve the convenient community service model, expand the service radius and enhance service adhesion for Consumer
Improve professional pharmacy service capabilities such as in-store consultation and medication guidance
Promote the continuous growth of specialized pharmacies, such as pharmacies for severe and chronic diseases, medical insurance unification pharmacies and DTP pharmacies
Promote the “Internet +” technology applications and explore model innovation and technology upgrade
Promote the rapid development of internet hospitals
Carry out in-depth cooperation with medical institutions at all levels and undertake online prescription circulation
Deepen the connection with the medical insurance unification account payment channel
Focus on the development of innovative cooperation projects with commercial insurance companies
Implement the development strategies of “wholesale-retail integration” and “nation-wide integration”
Continuously deepen the coordination and collaboration of national procurement and logistics resources
Offline Pharmacies
Resource Integration
Technological Innovation
Channel Expansion
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Continued to Improve Headquarters’ Support Capabilities and Further PromoteIntegrated Construction
Focus on planning for the transformation to “nation-wide integration”, continue to improve headquarters' governance capabilities, integrate superior resources of the pharmaceutical distribution and retail pharmacy segments and promote the balanced development of core businesses.
Continue to Optimize The Synergy of Business
As of the end of Reporting Period, the Group has completed the construction of cross-field multi-dimensional pharmaceutical industry service platforms, which including specialty drug service platform, marketing service platform and retail e-commerce platform, thereby achieving the extension of service models.
Construct Cross-Field Service Platforms
Further promote data integration and optimization, and employ innovative technologies to accelerate the transformation of the overall business process to flatness and refinement.
Strengthen various expenses supervision measures and promote the sharing of the financial system to continuously promote cost optimization. In 2020, the financial expenses ratio of the Group was 0.65%, representing a year-on-year decrease of 0.09 percentage point.
Further Promote Digital Transformation
Consolidate and Optimize The Cost Management and Control
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Actively Fulfilled The Corporate Mission and Effectively Enhanced The Industry Influence
In 2020, the pharmaceutical distribution companies at all levels within the Groupresponded quickly and successfully completed the procurement, storage and allocation ofprotective materials, treatment equipment, and anti-epidemic drugs, exemplifyingSinopharm’s corporate philosophy of “All for Health, Health for All”, and fully reflecting theGroup’s efficient network operation and collaboration capabilities.
The performances of the Group during the pandemic havebeen highly recognized by relevant state ministries andcommissions, and have also received commendations from theMedical Materials Safeguard Team of the State Council’s NovelCoronavirus Pneumonia Epidemic Joint Prevention andControl Mechanism, and the State-owned Assets Supervisionand Administration Commission, which enhanced the Group'scorporate image and industry influence.
Based on the anti-epidemic results, the Group established the irreplaceable position in China'smedical and health emergency protection system. The Company will actively undertake theestablishment of the internet platform under the national medical and pharmaceuticalemergency protection system in future.
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Future Plan
Accelerate The Development of Medical Device
Network
Promote The Vertical Extension
of The Segment
Seize the opportunity arising from the concentration and expand network coverage
Focus on promoting drug-device synergic development to build a national integrated professional service system for medical institutions
Explore innovative application scenarios such as “retail channels, communities and families”
Promote the organic extension of the medical devices business to upstream manufacturing
Further Promote Digital
Transformation
Improve Business Operation Efficiency
Improve the management system and organizational structure of the Group through streamlining and rebuilding business processes and data assets, thereby laying the foundation for digital transformation
Strengthen the management and control of risks and expenses, and promote high-quality growth of the business
Consolidate The Leading Position
of Distribution
Strengthen The Coordination
And Integration of Resources
Strengthen The Establishment of
The Omni-Channel Professional
Service Platform
Continuously Expand The Retail
Network
Consolidate the coverage advantages of the existing network over medical institutions and undertake new business models such as hospital consortium and medical community
Explore business opportunities in innovative fields including Internet hospitals and elderly care institutions, and increase the Group's business share in the incremental market
Accelerate the integration of procurement and logistics resources across the country and strengthen the comprehensive service capabilities of channels
Explore multi-channel digital marketing strategies, promote Internet application scenarios and construct a differentiated professional pharmaceutical service model
Promote the professional pharmacy standardization construction, improve chain management capabilities and delivery service efficiency
Expand the service capabilities for chronic diseases, severe diseases, special diseases, serious diseases and other professional medication fields, so as to increase user adhesion
Deepen cross-field cooperation and comprehensively enhance the capabilities with online-offline coordination 20
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