Presentation to investors_mar_2012_final

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  • 1. China Nepstar Chain Drugstore Ltd. NYSE:NPD Presentation to Investors March 2013HK000NM6_Eng
  • 2. Safe Harbor This presentation contains forward-looking statements. These statementsconstitute “forward-looking” statements within the meaning of Section 21E of theSecurities Exchange Act of 1934, as amended, and as defined in the U.S. PrivateSecurities Litigation Reform Act of 1995. These forward-looking statements can beidentified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,”“plans,” “believes,” “estimates” and similar statements. Among other things, thequotations from management in this press release and the Company’s strategicoperational plans, contain forward-looking statements. Such statements involvecertain risks and uncertainties that could cause actual results to differ materially fromthose i th fth in the forward-looking statements. F th i f d l ki t t t Further information regarding th ti di these and other d thrisks is included in the Company’s filings with the U.S. Securities and ExchangeCommission, including its annual report on Form 20-F. The Company does notundertake any obligation to update any forward looking statement as a result of new forward-lookinginformation, future events or otherwise, except as required under applicable law. 1
  • 3. Company Overview p y We are China’s largest drugstore chain by the number of China s directly operated stores Who We Are Awarded "Best Drugstore Chain of 2007 in China" by China Drugstore magazine Our Retail Nepstar has a total of 2,132 stores in operation National presence in 73 cities Network* N t k (*As of December 31, 2012) Neighborhood drugstore of 80-120sqm in size 80 120sqmOur Business Directly operated stores to ensure consistent service standard Model Optimized product offerings including private label products Broaden product offerings and bring convenience to customers Our Grow store productivity to drive customer spending per visitPropositioning p g Improve operation efficiency and service quality 2
  • 4. Leading Brand with National Footprint g p Qingdao #1 Tianijn 104 Dalian 78 197 Beijing #1 Suzhou S h 11 Nanjing 78 Dalian 68 Tianjin Beijing Shanghai Qingdao #1 Ningbo Nanjing Suzhou 59 Shanghai 141 Ningbo #1 Sichuan Nepstar Chengdu Changsha a g ou Hangzhou Hangzhou Fuzhou Chengdu Dongguan 158 Guangzhou 77 HQ: Shenzhen gg Dongguan Guangzhou G h #1 Shenzhen 81 City Name 132 No. of Stores 344 Province of below 99 stores Province of between 100 and 199 stores Province of above 200 Stores Regional Nepstar Company Key CitiesNote: No. of stores as of December 31, 2012 3
  • 5. 2012 Income Statement Highlights g g Twelve-Month Period Ended (in Millions of RMB, except % analysis) December 31, 2012 December 31, 2011 Revenue 2,550 2,491 Gross Margin 46.3% 47.7% Income from Operations I f O ti 46.9 46 9 38.6 38 6 Interest Income 16.4 23.2 Net Income 90.1 35.9 Income from disposal of an equity method investee was RMB68.4 million(US$11.0million) from the gain of disposal of the Company’s 40%equity interests in Yunnan Jianzhijia Chain Drugstore Ltd(“JZJ”). 4
  • 6. Strong Balance Sheet and Cash Position gCash, cash equivalents, restricted cash and short-term and long-term bank timedeposits: RMB664.4MN (US$106.6MN);Total shareholder’s equity: RMB1.03 billion (US$164.7MN); (*Balance Sheet, as of December 31, 2012)Weighted average number of ordinary shares: 197.4 MN shares for the fiscal year2012.Operating cash flow of RMB52.6MN (US$8.4MN) for the fiscal year 2012; p g ( $ ) y ;No Debt. 5
  • 7. Unique Operation Environment q pHospital pharmacy still dominates the market; policies moving towardsseparating drug prescribing from drug dispensingPharmaceutical retailing industry is highly fragmented as well as crowdedLong industry value chain with manufacturing and wholesaling bothfragmentedPharmaceuticals are mostly paid out-of-pocketFront-end sales gradually tie in with the growth of retail pharmacyHigh entry barriers for foreign players 6
  • 8. Overall Business Strategy gy Stage One-reengineer procurement Expand store Higher margin and network and wider product consolidate offerings the market Explore customer need Maximize customer value From pharmacy to Higher store drugstore of one productivity y stop convenience and customer for day to day loyalty needs Stage Two-Improve store productivity 7
  • 9. Reengineer Procurement g Stage One – Reengineer Procurement Optimizing supply chain management to realize high margin through central procurement and private labeling 8
  • 10. Reengineer Procurement g 2012 Private Label Contribution Current product mix Revenue 100.0%Contribution 90.0% 21.4% 20.9% 26.8% 80.0% 4.0% 3.9% 70.0% 18.1% 18 1% 15.7% 73.2% 60.0% 50.0% 40.0% 36.6% 39.1% Private labels  Pi t l b l non‐private labels i t l b l 30.0%Gross Profit 20.0%Contribution 10.0% 19.9% 20.4% 38.0% 0.0% 2011 2012 62.0% Prescription drugs Over‐the‐counter drugs Nutritional supplements Herbal products Other product sales Private labels non‐private labels 9
  • 11. Improve Store Productivity Stage Two – Improve Store Productivity Expand offerings in nutritional supplements, household medical pp , devices, personal care and household consumables to address broader needs of consumers 10
  • 12. Address a Broader Needs of CustomersNepstar, with established store footprint, proven central procurement, and developedlogistics network, is well positioned to deliver the value of broader healthcare shopping. network shopping Community Customers’ Needs Hospital Super Traditional Beauty pharmacy markets pharmacy shops Quality assurance Wide range of pharmaceutical products Professional healthcare assistance Wide selection of healthcare related products and consumables Accessibility and convenience 11
  • 13. Initiatives Implemented Continue to optimize and broaden the product offerings Improve display of the stores Adopt active marketing campaigns to communicate with consumers Upgrade the logistics systems to match the offering changes 12
  • 14. Meet the Challenges this Year g Grow single store productivity Challenging operational through optimization of product environment offerings and daily operation ff i d d il ti ► Increasing pressure on management operation expenses driven by inflation and drastic y minimum wage increase mandated; Closing underperforming stores with no sign of turnaround ► Increasing revenue and gross margin erosion for pharmaceutical products Adopt stringent cost control due to the disruption from measures t d f d the to defend th the healthcare reform inflation policies. 13
  • 15. Long-term Business Outlook g Adapt to the evolving operational environment, enhance store profitability, and further strengthen leading position in China Expand store network organically and through synergetic acquisition Leverage on procurement scale to maintain high gross margin Address broader needs of community customers to realize high store productivity 14
  • 16. China Nepstar Chain Drugstore Ltd Ltd. 15