龚毓昊，李思佳，郭萌萌，吴稀
温州理工学院 325035
1.Introduction
Founded in 1970 and listed on the Shanghai Stock Exchange in 2000, Hengrui Pharmaceutical Co., Ltd is a pharmaceutical and health enterprise engaged in pharmaceutical innovation and the research and development, production and distribution of high-quality drugs. The aim of this research paper is to conduct a financial research and analysis of listed companies through the case study of Hengrui Pharmaceutical Co., Ltd, analyzing its key financial indicators, namely, growth capacity, operating capacity and solvency capacity.
2.Financial analysis
2.1 Growth capacity
From the perspective of profitability index, Hengrui Pharmaceutical Co., Ltd demonstrated a strong level of profitability from 2015 to 2019. As shown in table 2-1, the gross profit margin of Hengrui exceeded 85% starting from 2015. In comparison, the company’s net profit margin was on average 23% with merely slight fluctuation in the five years. Meantime, the return on equity and net profit on total assets exceeded 21.53% and 21.34% respectively, higher than the average indexes of the pharmaceutical industry, revealing an impelling competitiveness of the company's products.[ GUI Beilei. Financial statement analysis of Jiangsu Hengrui Pharmaceutical Co., Ltd. [J]. Time honored brand marketing, 2019 (07): 55-57] Based on its key profitability index, the paper contends that Hengrui maintains a good momentum of growth with high-quality assets, stable profit level and high return for investors. By gaining a leading position in the industry competition, Hengrui does not only guarantee excellent business performance and efficient management performance in its overall operation, but also ensure a better financial stability and return for its investors and creditors.
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2.2 Operating capacity
From 2015 to 2019, both of the turnover rate of fixed assets and accounts receivable of Hengrui were in the phase of slow growth, which reveals that the liquidity of the enterprise's assets was well-performed. The inventory turnover rate decreased continuously from 2015 to 2017 and rebounded to level off starting from 2018, indicating an acceleration in the company’s inventory turnover. However, both the total asset turnover and the current asset turnover of enterprises were on the sluggish decline, which suggests that the company needs to improve its turnover efficiency of assets and make full use of its capital in the years to come.
Table 2-2 Turnover Rate of Hengrui Pharmaceutical Co., Ltd from 2015 to 2019
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From 2015 to 2019, the company's revenue and profit remained stable, and the indicators in the growth capacity shown a high level of growth. The relatively high growth rate of the main business indicates the company's profitable yields and steady growth rates. All growth rates were relatively stable and sustainable without remarkable fluctuations, which reflects the effective management strategies of the company, leaving great potential for upward mobility in the management of Hengrui Pharmaceutical Co., Ltd’s liquid assets. The company's net asset growth rate was maintained at a rate above 20%, which demonstrates the company's strong return on assets. The industry in which Hengrui Pharmaceutical Co., Ltd operates has a bright prospect and the company's products are highly competitive.
Table 2-3 Growth Rate of Hengrui Pharmaceutical Co., Ltd in 2015-2019
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2.3 Solvency capacity
From a current ratio perspective, Hengrui Pharmaceutical Co., Ltd achieved a high level of performance. Although the company experienced a downward trend from 2015 to 2017, its current ratio eventually revived starting from 2017 and in overall well above the industry average of 1.63:1. [ Liu Jing. Financial statement analysis of Hengrui medicine under Harvard framework [D]. Jilin University, 2019]Hengri’s quick ratio demonstrates a similar moving trend as its current ratio with slight fluctuations, accounting for a large proportion of current assets. Meanwhile, the debt ratio of Hengrui remained lower than that of its rivals in the pharmaceutical industries, with the gearing ratio hovering around 10% for the past several years. The low debt ratio is a strong indictor showing that the company's capital structure is characterized by low risk. Nevertheless, the current ratio and quick ratio both dwindled and higher than the average of the pharmaceutical industry. This might be attributable to the company’s excessive cash or excessive inventory. Whereas a high quick ratio represents the company’s low utilization of capital, a high cash ratio represents a lack of effective utilization of the company's liquidity.
Table 2-4 Miscellaneous Financial Indicators of Hengrui Pharmaceutical Co., Ltd from 2015 to 2019
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3.Summary
Based on the above case analysis of Hengrui Pharmaceutical Co., Ltd. via a series of key financial indicators, namely, the company’s growth capacity, operating capacity and solvency capacity starting from 2015 to 2019, the paper concludes that the company’s overall financial situation is sound with steady and speedy profit growth, low debt ratio and fully utilized capital. Yet, the financial analysis also demonstrates two noticeable issues that might jeopardize the development of the company and cannot simply be ignored. Firstly, Hengrui should attach more importance to its working capital management through the monitoring of its current assets and liabilities, given the fact that both its utilization rate of cash assets and current assts turnover rate are on the low side. Secondly, considering its current high overheads, Hengrui should ensure its efficient operation and high-level of profitability by re-adjusting its procurement channels. Against the backdrop of globalization, Hengrui Pharmaceutical Co., Ltd should adopt various innovative and international strategies in an effort to gain footing in the international markets, improving its efficient operation and creating more returns to its investors.
Reference
[1] GUI Beilei. Financial statement analysis of Jiangsu Hengrui Pharmaceutical Co., Ltd. [J]. Time honored brand marketing, 2019 (07): 55-57
[2] Liu Jing. Financial statement analysis of Hengrui medicine under Harvard framework [D]. Jilin University, 2019