Modern Chinese Medicine Group Co., Ltd., which principally engages in the production of proprietary Chinese medicine and offer both OTC and prescribed medicines intended for use by the Middle-aged and the Elderly in the PRC, announces the details of its plan to list on the Main Board of The Stock Exchange of Hong Kong, S.A.R., China Limited.
A total of 150,000,000 shares (subject to the Over-allotment Option) will be offered under the Share Offer, of which 90%, or 135,000,000 shares (subject to reallocation and the Over-allotment Option), will be offered by way of International Placing; while the remaining 10%, or 15,000,000 Shares (subject to reallocation) will be offered under the Hong Kong, S.A.R., China Public Offering. The Offer Price per Offer Share is expected to be not less than HK$0.92 and not more than HK$1.47. The Hong Kong, S.A.R., China Public Offering will commence at 9:00 a.m. on 31 December 2020 (Thursday) and close at 12:00 noon on 7 January 2021 (Thursday). The final offer price and allotment results are expected to be announced on 14 January 2021 (Thursday). Dealings in shares of Modern Chinese Medicine on the Main Board of the SEHK are expected to commence on 15 January 2021 (Friday).
Assuming an Offer Price of HK$1.20 per Offer Share (being the mid-point of the Offer Price range), the aggregate net proceeds from the Share Offer, after deducting related expenses and assuming the Over-allotment Option is not exercised, will be approximately HK$120.0 million. Modern Chinese Medicine intends to use these net proceeds for the following purposes: 1) approximately 43.1% will be used for enhancing and expanding the production capacity to further produce the major prescribed medicine, in particular the major capsule products with the intended effect of treating/alleviating cardio-cerebrovascular condition; 2) approximately 16.4% will be used for broadening the distribution network in Huanan and Huadong; 3) approximately 10.0% will be used for raising the brand awareness through media marketing and promotion efforts; 4) approximately 19.5% will be used for further raising the R&D efforts, procuring quality management equipment and broadening the product portfolio; and 5) approximately 3.3% will be used for upgrading the IT system; and 6) approximately 7.7% will be used for working capital and other general corporate purposes.
Soochow Securities International Capital Limited is the Sole Sponsor. Soochow Securities International Brokerage Limited and Wealth Link Securities Limited are the Joint Global Coordinators, the Joint Bookrunners and the Joint Lead Managers.
Industry Overview
The proprietary Chinese medicine market in the PRC has experienced rapid growth from 2015 to 2019. According to the Euromonitor Report, it is estimated that the total market size of PCM in the PRC has increased from approximately RMB625.2 billion in 2015 to approximately RMB814.9 billion in 2019, representing a CAGR of approximately 6.8%. With further market expansion, the total market size of PCM is expected to increase at a CAGR of approximately 6.7% from 2020 to 2024.
There are a large number of PCM manufacturers producing various types of PCM in Northeast PRC. The manufacturers' sales value of PCM in Northeast increased from approximately RMB50.8 billion in 2015 to approximately RMB65.0 billion in 2019, witnessing a CAGR of 6.4%. In particular, the market size of Qi-deficiency and blood-stasis PCM increased at a CAGR of 11.0%, while that of cardio-cerebrovascular PCM in Northeast increased at a CAGR of 7.9% from 2015 to 2019. Based on the unlisted Qi-deficiency and blood-stasis PCM pills manufacturers market size in Northeast, the Group was ranked second and became one of the leading non-listed companies engaged in the production of PCM in 2019.
Looking forward, Chinese medicine industry in the PRC has a broad prospect. Major growth drivers include growing economy in the PRC and rising purchasing power of PRC citizens, growing awareness of personal health, growing proportion of Middle-aged and Elderly population in the PRC and increasing Government support and favourable national policies and healthcare reform plans.
Business Overview
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