Zhitong Finance App News, Da Ren Tang (600329.SH) released investor research and reception records. The following are some of the main issues exchanged and a summary of the company's responses:

1. Question: Are there any measures to control accounts receivable, and will accounts receivable be relaxed in order to increase revenue?

A: Accounts receivable are as the scale of revenue increases. Most accounts receivable are within 6 months. Overall, it is within a healthy range. We strictly manage them house-to-house according to the account period. Our industry's receivables are quite benign. Some are also due to the impact of the pandemic and the impact of internal accounting periods for commercial businesses. We have credit limit management for our customers, we manage it information-based, and we will not ship out credit lines in order to exceed the scale.

2. Problem: The price of Chinese herbal medicines is rising, the cost of raw materials is rising, and the company's traditional Chinese medicine varieties are also sorting out the value chain. Please ask the leader to explain the situation.

A: Since last year, we have carried out a comprehensive value chain review of the entire range of traditional Chinese medicines. There is still a lot of room for efficiency gain in the production of our products. Beginning in the second half of last year, in the entire value chain, in conjunction with our predictions of the Chinese herbal medicine market, and more importantly, in conjunction with the country's strategy for the development of traditional Chinese medicine, we will lay out the work of Da Ren Tang. Da Ren Tang's overall value orientation is to provide cost-effective product value. Why is it called cost-effective? In the past, our products were underestimated in the market, and there was some inversion between the quality, efficacy, and price of the products, which led the market to think that our products were of poor quality. The construction of our current product quality system and curative effect must be appropriately matched with market value. This year, we sorted out the value of our varieties according to this cost performance ratio system. We must establish a value system that matches the cost and quality of our products, and return to due value.

Since last year, we have raised the quality of medicinal herbs to an unprecedented level. We built 3 GAP bases in the first half of this year and jointly built 11 GAP bases with the Yuntian Alliance. In the future, we will also vigorously promote the construction of dozens of GAP bases for the medicinal materials we need to ensure stable supply, guarantee quality, and help Da Rentang's traditional Chinese medicine varieties achieve high quality and high prices.

3. Question: May I ask about the company's current OTC share and current channel inventory situation.

A: We have many varieties, 599 varieties and 122 exclusive ones. The ratio of our main business in the medical and retail sectors is roughly 1:1, and the overall structure is reasonable. As channels sink, we are actively expanding the retail market and the three-terminal market, and embracing the Internet. After establishing our e-commerce department last year, we set up flagship stores such as Ali to promote online product sales and reach the C side. Our product inventory is normal, and we monitor the social inventory of products in our factory, sales, and market every month. It's a virtuous cycle.

4. Question: Just now, the leader also mentioned that the year-on-year growth in our pharmaceutical industry was close to 25% in the first half of this year. What is the situation of our core product, quick-acting reassuring pills? Which second-tier varieties have performed better, and what are the reasons?

A: Our industrial marketing increased 24% year on year in the first half of the year (excluding herbal tablets), close to 25%. The sales of the 13 major varieties we focused on monitoring were 1.5 billion yuan (1.5 billion yuan in the first half of 2022, 1.87 billion yuan in the first half of 2023), an increase of 24% over the previous year. These large varieties account for 75% of our overall industrial marketing, an increase of 370 million yuan over the previous year. The strategic results of the large variety are obvious. Quick-acting heart saving pills increased 27% year-on-year (sales volume) in the first half of the year, mainly because we have been sorting out channels since last year. Healthcare and retail are divided into two lines, standardized channels, prices on the B end and C end tend to be reasonable, prices on the B end and C end tend to be reasonable, and the products are recognized by doctors and consumers. Focusing on the cardiovascular system, we have done a lot of academic research work with the Chest Pain Center and Haihe Laboratory to further confirm that quick-acting heart saving pills are unique in terms of first aid. After doing in-depth research on first aid, we have done the work of changing the concept from regular supplies to long-term use. The instructions describe daily use and first aid administration.

Pharyngeal Dropping Pills We started the “China Voice Program” this year. Both coverage and brand growth have had good results. In the first half of the year, Qingpharyngeal Dropping Pills achieved a 96% (sales volume) increase. Yasumiya Niuhuang pills increased 46% year on year (sales volume), lung cleansing and anti-inflammatory pills increased 52% year on year (sales volume). The product hierarchy has been further improved. The strategy is mainly to shift from commercial marketing to pure sales to enhance brand power, product power, and academics. (The variety situation just mentioned is a year-on-year change in sales volume.)

5. Question: The company actively promoted e-commerce business in the first half of the year. Currently, what is our share of online sales? Will some varieties be made exclusively or more likely to be done online in the future?

A: Currently, the online share is still very small. We only set up an e-commerce department in June of last year. The first step was for Da Rentang to open a store and display the brand on platforms such as JD and Ali. In the future, our more important task is to retail our suitable products online. In the future, we will have divisions and distinctions in the sales categories of the entire new retail market, and determine its model based on the service population of different products. For example, our exclusive product, moisture relief pills, is suitable for obesity caused by moisture. Removing moisture and losing weight is its main function. Online sales data for dehumidification products is greater than offline, so we may be positioned to sell online in the future. Another innovative traditional Chinese medicine, Wuji Baifeng tablets, have 18 kinds of amino acids, which have a very good effect on endocrine regulation and ovarian maintenance. Consumer demand for improved health is also a new force in online consumption now, so this product will also be positioned online. We are not blind to new retail, and we are not pursuing all varieties online.

Recently, we have been thinking about a variety of gastrointestinal relief pills, such as promoting cooperation with Meituan in the future. When a huge number of food consumers have stomach problems, gastrointestinal relief pills can meet this demand. The starting point of our work is who our products serve, where are our clients, where we will place our consumption scenarios, and the same goes for our new retail construction path. Thank you.