[Yestar Healthcare 2393.HK] Yestar Healthcare Announces 2017 Annual Results: Revenue Increased by 30.0% and Profit for the Year Surged by 29.9% yoy (16 Mar 2018)

【For Immediate Release】 16 March 2018 Yestar Healthcare Holdings Company Limited (Stock code: 2393.HK)

Announces 2017 Annual Results

Revenue Increased by 30.0% to RMB3,927 Million Profit for the Year Surged by 29.9% yoy to RMB351 Million (Hong Kong - 16 March 2018) Yestar Healthcare Holdings Company Limited ("Yestar" or the "Company" together with its subsidiaries, the "Group", stock code: 2393.HK) was pleased to announce itsannual results for year ended 31 December 2017 (the "Year") on 15 March 2018  .

During the Period, the Group has once again recorded another set of outstanding results. Benefiting from the consolidated financial results of the acquired subsidiaries for the last few years as well as the increasing average demand of IVD products, the Group achieved an overall revenue of approximately RMB3,926.9 million for the Year, representing approximately 30.0% year-on-year ("yoy") increase when comparing with the corresponding period of last year (2016: approximately RMB3,021.8 million). Due to the increase in bargaining power in procurement, gross profit also surged by approximately 44.3% yoy to approximately RMB1,105.8 million (2016: approximately RMB766.3 million), with gross profit margin rising by approximately 2.8 p.p. to approximately 28.2% (2016: approximately 25.4%), As a result of the outstanding performance of our IVD business and the consolidation of financial information of the previous acquired companies, despite the amortization expenses arising from acquisitions and interest expenses from the issuance of Senior Notes, profit attributable to the owners of the parents rose by 24.3% to RMB250.0 million as compared to RMB201.0 million in 2016. Earnings per share was RMB11.5 cents (2016: RMB9.2 cents). The Board of Directors recommends a final dividend of HK5.5 cents per share for the Year, with a dividend payout ratio at approximately 40.0%

Horizontal Expansion into the Northern China Market through the Acquisition of Beijing Kaihongda

During the Year, the Group has maintained its network expansion through merger and acquisitions ("M&A"). On 20 September 2017, the Group announced the acquisition of 70% equity interest of Beijing Kaihongda Technology Company Limited ("Beijing Kaihongda"), a primary distributor of Rosche Diagnostics Products with well-established sales network in Beijing Municipality and the Hebei Province in the PRC, at a cash consideration of RMB105.0 million. Pursuant to the sale and purchase agreement, an accumulated profit guarantee from Beijing Kaihongda for the three calendar years from 2017 to 2019 for a total of RMB54.6 million net profit after tax was made. The acquisition has been completed in October 2017, and the guaranteed net profit of RMB15.0 million to the Group's financial results for the Year was also acheived. Upon the completion of the acquisition, Yestar is now equipped with an IVD distribution network covering all the top first-tier cities (Beijing, Shanghai, Guangzhou and Shenzhen) in China, where citizens have a doubled average disposable income than the national average, and the Group was able to leverage on such sales network to further drive sales of IVD products and medical film products to local hospitals, while solidifying the Group's position as one of the leading and largest distributors for Roche Diagnostic Products.

Vertical Expansion into the Downstream Independent Clinical Laboratory Market through Investment in Shanghai Zhongkerunda According to industry experts' analysis report, the China Independent Clinical Laboratory ("ICL") market is forecasted to maintain a 22% CARG growth from Year 2015, reaching RMB74 billion by Year 2025. In order to capture this enormous growing opportunity, in May 2017, Shanghai Emphasis Investment Management Consulting Co., Ltd. ("Emphasis Investment"), a wholly owned subsidiary of the Company jointed hands with Shanghai Runda Medical Technology Co., Ltd. and Chinese Academy of Sciences to establish a medical and clinical laboratory, Shanghai ZhongkeRunda Medical Laboratory Testing Co., Ltd. (the "Laboratory"), in Shanghai, the PRC. The Laboratory principal engages in the operation of a complex comprising an integrated medical laboratory, a quality control management centre and an information technology service centre. Such investment in ICL marks a significant milestone in the Group venture into the growing market, and with Yestar holding a 39% interest in the Laboratory, the Group will be entitled to a share profit of associates in the future.

Medical Consumable Business - Accounting for 84.4% of overall revenue Contributed by the previous acquisitions and the increasing in average demand of IVD products, the medical consumable business recorded a strong revenue growth of approximately 43.7% yoy to approximately RMB3,329.6 million (2016: approximately RMB2,317.4 million). Segment gross profit margin also rose by 2.6p.p. to approximately 30.2% (2016: approximately 27.6%). The surge was mainly due to the Group has achieved economies of scale, the increased bargaining power in procurement, and reduce in logistic cost brought by the Group's enlarged distribution and servicing network.

Other Business - Accounting for 15.2% of overall revenue During the Year, revenue of other businesses of the Group recorded a decrease of approximately 15.2% yoy to approximately RMB597.3 million (2016: approximately RMB704.5 million). Segment gross profit margin also remained stable at approximately 17.0% for the Year (2016: approximately 18.0%). In the long run, medical segment is still the key focus of the Group. However, as the market of color photographic paper and industrial imaging products remain stable, which brings in positive and stable cash inflow to the Group, the Group will continue with the existing business operation and strengthen its relationship with Fujifilm.

Prospects With the flourishing demand of IVD products in the China market, the Group remains upbeat with its future development. The National Bureau of Statistics of China announced that the population of civilians with age over 60 has reached approximately 241 million, accounting for 17.3% of the overall population in 2017. The growing aging population would triggers more frequent medical check-up on cancer screening and chronic disease. The Ministry of Human Resources and Social Security also announced that the coverage of basic medical insurance in 2017 has increased by 58.2% to 1,177 million people when comparing with 2016. The average basic medical insurance for urban and rural residents of 2017 also increased by RMB30 yoy to RMB450 per person. Besides, according to the research conducted by Research and Markets, the annual consumption per capita of the PRC's in-vitro diagnostic products was USD4.6 in 2017, which has enjoyed a cumulative increase of 206.7% as compared to the expenditure in 2013. In view of above-mentioned facts, the Group is optimistic that the industry has a vast potential to grow.

Mr. James Hartono, the Chairman of Yestar Healthcare, stated, "The demographic trend and favoruable government policy will stimulate the demand for IVD products and bring a positive outlook of Yestar's furture business growth. In view of the PRC's IVD industry has experienced dramatic growth in the past few years and believed to continue its strong growth momentum, the Group will continue to solidify its IVD distribution platform through channel expansion and look for vertical upstream expansion opportunities. The Group is exploring IVD research and production targets that are complementary to Roche's product and service portfolio and continuing to focus on product diversification and value creation in order to enrich our platform. Meanwhile, the Group further diversified into the downstream ICL market. With Roche Diagnostic as the solid backup, Yestar is able to build stronger relations with hospitals by providing a wider range of services."Mr. Hartono continued, "Looking forward to 2018, Yestar will continue to solidify its IVD distribution platform through channel expansion, in which the Group will actively seek for M&A opportunities to expand into new regions such as Northeast and Central China. The Group will also look for further opportunities to diversity its position along the IVD industry value chain. At the same time, leverage on the solid and long-term partnership with Roche, the Group is confident that Yestar can extend its dominance in the IVD market, while bringing better services and values to the civilians and creating greater, long-term value to its shareholders. "

- End -About Yestar Healthcare Holdings Company Limited Yestar Healthcare Holdings Company Limited (formerly known as Yestar International Holdings Company Limited) is the largest distributor of Fujifilm products in the PRC and have been transformed itself into a high margin medical consumables manufacturer and distributor in the PRC since 2014. Targeting the booming domestic healthcare industry, the core business of the Group focuses on high margin and fast-moving healthcare consumables namely, IVD products and medical imaging products.

This press release is issued by DLK Advisory Limited on behalf of Yestar Healthcare Holdings Company Limited.

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