Recently, Kangmei Pharmaceutical, once known as the “leading Chinese medicine stock,” announced the transfer of 100% equity and related assets of its subsidiary, Shanghai Dedatang Guoyao, at a price of 1 yuan. This transaction has been interpreted as a “capital game”.
According to the announcement made by Kangmei Pharmaceutical Co., Ltd. in early April, the company plans to transfer its wholly-owned subsidiary, Shanghai Dedatang Guoyao Co., Ltd. (referred to as “Dedatang Guoyao”), in its entirety to Shanghai Kangmei Pharmaceutical Co., Ltd., at a price of 1 yuan. In addition to the equity transfer, the assets to be transferred include accounts receivable from the subsidiary and some equipment. The transferee will also have the obligation to assume more than 60 million yuan in actual capital contributions.
This transaction is directly related to the company’s past bankruptcy reorganization. During the restructuring in 2021, Dedatang Guoyao was previously transferred within the Kangmei Pharmaceutical system for 1 yuan and after the completion of the restructuring, Shanghai Kangmei was incorporated into a trust platform, no longer constituting an affiliated relationship with the listed company. Years later, the same asset is being transferred for a symbolic price.
From the operational perspective, Dedatang Guoyao has been suffering from severe losses. Financial reports show that in 2025, the company’s revenue was around 21.67 million yuan, a decrease of over 60% compared to the previous year, with a net loss of about 29.42 million yuan, more than three times larger than before. By the end of 2025, its net assets were at -110 million yuan, indicating that its liabilities exceed its assets.
At the same time, quality issues have frequently arisen. In 2025, Dedatang Guoyao failed multiple rounds of inspections organized by the Shanghai Food and Drug Administration, with Chinese medicinal slices like dandelion, turmeric, and mimosa not meeting standards.
Regarding this transaction, Kangmei Pharmaceutical stated that the purpose is to “optimize resource allocation,” and after the completion of the transaction, this subsidiary will no longer be included in the consolidated financial statements.
However, there are different interpretations of the nature of the transaction in the market. According to reports from mainland media, some believe that this transaction resembles “passing the buck,” essentially divesting the continuous loss-making and over-indebted assets from the listed company system. Others view it as a form of “capital operation,” indicating that under the circumstances of low-price transfer, debt assumption, and historical relationships, the arrangement may involve asset transfers and risk isolation. The reports also mention that although the transferee, Shanghai Kangmei, is legally unrelated to the listed company, Dedatang Guoyao still leases its operating premises to them, a transaction structure often seen as dealing with non-performing assets within compliance framework.
Public records indicate that Kangmei Pharmaceutical was established in 1997 and was investigated for financial fraud at the end of 2018. Regulators found that between 2016 and 2018, the company fraudulently inflated monetary funds by 88.6 billion yuan, revenue by 29.128 billion yuan, and profits by 4.1 billion yuan, making it one of the largest financial fraud cases in A-share history.
In 2021, led by the Guangzhou Pharmaceutical Group, the company completed bankruptcy reorganization. Since then, the operation has gradually recovered, achieved profit turnaround in 2023, but mainly relying on non-recurring gains and losses. In 2024, the company’s traditional Chinese medicine segment generated revenue of 2.75 billion yuan, a 17.94% year-on-year increase, although the gross profit margin slightly declined.
As of April 3rd closing, Kangmei Pharmaceutical was trading at 1.75 yuan per share, a decrease of 4.37% on that day, with a total market value of approximately 24.2 billion yuan.