Group 1: E-commerce Development - The company plans to invest 200 million in e-commerce, with over 80 million already spent on information technology [2] - The primary model is O2O (Online to Offline), with practices already implemented in some stores [2] - The company has partnered with SAP Hybris and Infosys Lodestone to advance its e-commerce projects [2] Group 2: Store Development and Profitability - As of September 30, 2014, the company operates 2,480 direct chain stores, with 1,915 in Yunnan and 141 in Sichuan [3] - New stores are expected to achieve profitability within 12 months and recover initial losses by the 26th month [3] - Historical data indicates a consistent growth rate for new stores over a six-year period, although the growth rate may vary by location [3] Group 3: Gross Margin Growth - The company’s core business is pharmaceutical retail and wholesale, with retail being the primary revenue source [4] - Currently, 60% of sales come from direct purchases from manufacturers, while 40% come from wholesalers, contributing to improved gross margins [5] - The company is establishing a national procurement network to optimize purchasing prices across different channels [5] - Different procurement methods yield varying gross margins, with direct purchases from manufacturers providing higher margins [5]

Company Overview - Yunnan Hongxiang Yixintang Pharmaceutical (Group) Co., Ltd. was established on November 8, 2000, and transformed into a joint-stock company on May 10, 2009, with a net asset base of ¥176,666,248.19 [2] - The company was listed on the Shenzhen Stock Exchange on July 2, 2014 [2] - As of September 30, 2014, the company operated 2,480 direct chain stores, with 1,915 in Yunnan and others in Sichuan, Guangxi, Chongqing, Shanxi, and Guizhou [2] Business Performance - The company has ranked among the top ten in China's chain pharmacy rankings for seven consecutive years since 2007 and has been the top-ranked in Yunnan [2] - In 2010, the company was ranked second in the comprehensive competitiveness ranking of China's retail pharmaceutical market [2] - The company has received multiple awards, including "Most Influential Chain Pharmacy" and "Top 10 Retail Chain Enterprises" [2] Medical Insurance Stores - As of September 30, 2014, the company had 1,943 medical insurance stores, which are expected to positively impact sales due to the expansion of personal medical insurance accounts [4] - Medical insurance revenue and the proportion of sales from medical insurance stores have shown a steady increase from 2011 to 2014: - 2011: 993 stores, ¥74,611.89 (37.08%) - 2012: 1,218 stores, ¥100,382.46 (38.91%) - 2013: 1,616 stores, ¥129,038.04 (39.56%) - 2014 (Jan-Sep): 1,943 stores, ¥122,099.04 (40.63%) [5] Rural Store Development - The government’s increased investment in rural healthcare is expected to boost the rural pharmaceutical market, which is a key area for the company [6] - Sales and gross profit from rural stores have been on a continuous rise since the implementation of new healthcare reforms [6] - The company focuses on three- to four-tier cities and rural areas, which are projected to see significant population shifts and increased health spending [6] Supplier Brand Co-construction - Collaborations with suppliers are crucial for enhancing product gross margins, with various sales models impacting profitability [7] - The company has adopted direct purchasing from manufacturers and marketing responsibilities to increase profit margins [7] E-commerce Development - The company is building a comprehensive O2O (Online to Offline) marketing network, supported by significant investments in information technology [8] - Key milestones in IT development include: - 2007: Initiation of SAP Phase I - 2008: SAP system operational - 2013: Implementation of SAP HANA for data management [8] - The company has established an online presence through its official website and third-party platforms like Tmall, enhancing its e-commerce capabilities [9] - A total investment of ¥120 million is planned for the e-commerce project over two years [9] Future Plans - The company aims to leverage big data for consumer behavior analysis and improve customer relationship management [9] - Plans include enhancing logistics capabilities and integrating online and offline sales channels to strengthen market competitiveness [9]

Company Overview - Yunnan Hongxiang Yixintang Pharmaceutical (Group) Co., Ltd. was established on November 8, 2000, and transformed into a joint-stock company on May 10, 2009, with a net asset base of CNY 176,666,248.19 [1] - The company was listed on the Shenzhen Stock Exchange on July 2, 2014 [1] - As of September 30, 2014, the company operates 2,480 directly-operated stores, with 1,915 in Yunnan, 141 in Sichuan, 254 in Guangxi, 38 in Chongqing, 42 in Shanxi, and 90 in Guizhou [5] Market Position and Achievements - The company has ranked among the top ten in China's chain pharmacy rankings for seven consecutive years and has been the number one in Yunnan for the same period [2] - It achieved a comprehensive competitiveness ranking of second in the 2010 China Pharmaceutical Retail Market Competitiveness Ranking [2] - The company has received multiple awards, including "Most Influential Chain Pharmacy" in 2008 and "Top 10 Chain Pharmacies" in 2009 [2] Business Development Strategy - The company focuses on a high-density store strategy in specific regions, particularly in Yunnan, where it has established a strong brand presence [5] - The company plans to expand its presence in rural areas, capitalizing on government investments in rural healthcare, which is expected to increase personal healthcare spending among rural populations [4][6] Rural Store Development - The number of rural stores has increased from 160 in 2011 to 390 by September 2014, with retail revenue growing from CNY 13,276.25 million in 2011 to CNY 28,529.17 million in the first nine months of 2014 [3] - The government’s healthcare investments are anticipated to stimulate the rural pharmaceutical market, which is a key area for the company's growth [4] Future Store Expansion Plans - The company aims to maintain a "few regions with high-density points" strategy to enhance competitiveness and brand influence [4] - The company has a significant presence in lower-tier cities and towns, with plans to leverage urbanization trends to capture new market opportunities [5] Profit Margin Protection Strategies - The company optimizes profits through supply chain management and strategic partnerships with suppliers, having established relationships with 1,354 suppliers across 31 administrative regions [6] - The company employs various sales models, including direct procurement from manufacturers, to enhance profit margins [7] - Marketing strategies include collaboration with suppliers for product promotion and utilizing digital platforms for customer engagement [7]

Group 1: Investor Relations Activity - The activity involved a specific audience survey regarding the company's gross margin and future e-commerce business development plans [1]. Group 2: Event Details - The event took place on August 22, 2014, at 10:00 AM in the conference room of Yunnan Hongxiang Yixintang Pharmaceutical (Group) Co., Ltd. [1]. - Participants included Chen Danlin from Taida Hongli Fund and company representatives Tian Jun (Board Secretary) and Dai Sishun (Securities Affairs Representative) [1].

Group 1: Regional Development Strategy - The company's largest revenue comes from Yunnan, with Guangxi and Sichuan ranking second and third respectively. The strategy is to complete coverage in Yunnan and then expand to the Southwest region [1][2] - Current sales revenue in Guangxi is 130 million, with a projected increase of 16.5%. There are 253 stores in Guangxi. Sichuan's sales revenue is 96 million, with 141 stores [2] - The company has 383 rural stores, which are strategically valuable, especially in Guangxi and Sichuan. The sales revenue from these stores is approximately 480,000 (excluding tax) [5][6] Group 2: Brand and Product Strategy - The company has over 1,100 product varieties, with the top 100 disclosed. Key products include Dong'e Ejiao, Tongrentang protein powder, and Yunnan Baiyao aerosol [2] - The product strategy is divided into four tiers, including non-exclusive products, exclusive products, and private label products [2][3] Group 3: E-commerce and Sales Strategy - The company is focusing on integrating online and offline sales channels, with plans for a modern pharmaceutical system that includes e-commerce [4][5] - The online sales of pharmaceuticals in China are projected to reach 6 billion this year, accounting for about 2%-3% of total sales [6] - The company is conducting experiments to observe consumer behavior, which will influence future e-commerce strategies [6][8] Group 4: Regulatory and Market Challenges - Obtaining medical insurance qualifications for new stores can take about a year, with insured stores generating twice the revenue of non-insured ones [7] - The company faces challenges in entering new regions due to regulatory approvals and the need for a strong company image [6][7] Group 5: Future Expansion Plans - The company plans to expand through both acquisitions and new store openings, focusing on maintaining a positive customer experience [7] - The company believes that the transition to e-commerce will be gradual, with a continued focus on retail as the core business [8]