PERFORMANCE HIGHLIGHTS

• Revenue increased by 8.8% to RMB171.8 million
• Gross profit increased by 10.4% to RMB78.6 million
• Profit after tax increased by 10.5% to approximately RMB44.1 million
• The increase in revenue was primarily driven by the surge in revenue generated from the sales of 3 major products, namely Vigour and Vitality Supplement Pill, Kidney Invigoration Pill and Circulation Enhancement Pill
• Northeast, the PRC remained as the largest contributor to the Group’s total revenue
• The selling and distribution expenses increased to promote the Group’s brand name

HONG KONG, Aug. 26, 2021 /PRNewswire/ — Modern Chinese Medicine Group Co., Ltd.  (“the Company” or “Modern Chinese Medicine”, together with its subsidiaries, the “Group”, HKEX stock code: 1643) announced its interim results for the six months ended 30 June 2021 (the “Period). The Group recorded a stable growth in both revenue and profit. Revenue increased by 8.8% as compared to the six months ended 30 June 2020 to approximately RMB171.8 million. The gross profit was approximately RMB78.6 million, representing an increase of approximately 10.4% while the overall gross profit margin increased slightly to approximately 45.7%. Profit after tax increased by 10.5% to approximately RMB44.1 million.

BUSINESS REVIEW

The Group is considered as one of the leading companies engaged in the production of proprietary Chinese medicine (“PCM”) in terms of the sales of Qi – deficiency and blood-stasis PCM pills and cardio cerebrovascular PCM capsules in Heilongjiang, Jilin and Liaoning provinces (collectively referred to as “Northeast, the PRC”). The Group has currently established a distribution network of over 80 distributors covering about 40 cities in the PRC which is believed to continue to support further development of the Group’s business operations in the foreseeable future. The shares of the Group (the “Shares”) were successfully listed on the Main Board of the Stock Exchange on 15 January 2021 which marked a significant milestone for the development of the Group. The Listing is considered as an important channel which would not only allow the Group to access the capital market for fund raising but would also enhance the credibility of the Group with its suppliers, distributors and other business partners, as well as the Group’s ability to recruit, motivate and retain key management personnel.

FINANCIAL REVIEW

The Group posted a consolidated revenue of approximately RMB171.8 million for the Period, representing an increase of approximately RMB13.8 million or 8.8% as compared to the six months ended 30 June 2020. The increase in revenue was primarily driven by the surge in revenue generated from the sales of three of the major products, namely Vigour and Vitality Supplement Pill, Kidney Invigoration Pill and Circulation Enhancement Pill due to the target marketing by the existing distributors. The increment of the sales of these three products has mitigated the effect of the drop of demands of those products which were believed to have an intended therapeutic effect for the treatment of the symptoms of COVID-19 and/or similar illness, namely Additional Ingredient Huoxiang ZhengQi Pill and Fever-removing and Detoxification Pill, during the Period. Among these three products, Vigour and Vitality Supplement Pill and Circulation Enhancement Pill were the two top selling products and contributed approximately 46.4% of the Group’s total revenue in the Period. Meanwhile, Northeast, the PRC remained as the largest contributor with over 50.0% contribution to the total revenue.

The Group manages the overall gross profit margin to ensure overall profitability while allowing flexible price adjustments for individual products. For the Period, the overall gross profit margin increased slightly to approximately 45.7% as compared to approximately 45.1% for the six months ended 31 June 2020.

In terms of expenses, selling and distribution expenses of the Group increased by approximately 168.3% from approximately RMB3.5 million for the six months ended 30 June 2020 to approximately RMB9.5 million for the Period. It was mainly due to the increase in advertisement expenses by approximately RMB5.5 million spent on multiple marketing campaign for promoting the Group’s brand name during the Period.

Profit after tax increased by approximately 10.5% from approximately RMB40.0 million for the six months ended 30 June 2020 to approximately RMB44.1 million for the Period.

OUTLOOK

Looking ahead, Mr. Xie Wei, Chairman, Executive Director and Ultimate Controlling Party of Modern Chinese Medicine Group Co., Ltd. said, “The industry overall is still experiencing solid growth with favourable support from various government policies of promoting PCM industry since the start of 2021. We believe that various supportive polices have been promulgated to foster new investments and consumption growth will bring opportunities to the PCM industry. On the other hand, with social activities having started to resume, the Group has confidence in the future prospects of the economy of the PRC. Leveraging on our product expertise, established brand name and seasoned management team, and through our experienced sales and marketing team, we will continue to implement our long-term growth strategies and seize all the developmental opportunities to further strengthen the brand image, creating greater value for our shareholders. “

About the Group

Modern Chinese Medicine principally engages in the production of proprietary Chinese medicine (“PCM”) and offers both over-the-counter and prescribed medicines intended for use by the Middle-aged and the Elderly in the PRC. According to the Euromonitor International Report, the Group was one of the leading non-listed companies engaged in the production of PCM in 2019 in terms of the sales of Qi-deficiency and blood-stasis PCM pills and cardio-cerebrovascular PCM capsules in Northeast, the PRC.